Buyer's remorse, in real estate, occurs when your buyer tells you he has changed his mind and no lon
Buyer's remorse, in real estate, occurs when your buyer tells you he has changed his mind and no longer wants to purchase your home. Often, the buyer will simply stop returning your calls and refuse to eak to you. Even worse, he may act as if all is well, string you along for weeks, and finally just not show up for the closing.
Usually this i ue occurs when the buyer realizes he can not afford your property. Or after signing a contract with you, he may also have continued sho ing and found another property he prefers.
Frequent excuses for not closing usually include a job tra fer that fell through, unexpected ousal separation, illne of a family member, didn't like the neighbors when he oke to them, and a myriad of other things that have gone wrong since he signed your sales contract. Even if his excuse is true, you now face the dilemma of having to resell your home and incur the additional expe es of carrying the property for several months or longer. Even if you are able to rapidly resell your home again, you will have been delayed by at least thirty days and have the lo of carrying your home longer.
Here are some ways to protect yourself from your closing being cancelled:
A frequent reason for a cancelled closing is a dramatic change in the buyer's FICO score. Usually this results from large purchases of furniture or an automobile just prior to closing. Inform the buyer of this po ible i ue by explaining to him that the lender will re-pull his credit report the day of closing and stop the closing if the buyer's debt ratio has changed too much. Ways to overcome this problem are credit re-scoring by the lender and quick fixes for your credit report, such as increasing the limits on your existing credit cards to adjust your debt ratios.
Your best protection from surprises is to put a ropriate penalty clauses in your contract; have alternative lenders available from your mortgage broker; be open-minded about doing a seller conce ion at closing; and be willing to co ider a small second mortgage to a ist with last minute financing shortfalls.
In summary, your best prevention is to proactively keep in touch with all the parties involved in your closing. Of particular importance, and on the front line of i ues that "pop up" is your closing agent's file proce or. Make friends with this person so you can call and find out about the progre of the lender, mortgage broker, the buyer and any i ues they may be having with the title work. As always, keep yourself informed by keeping open communication with all parties involved in the sale of your home.
Usually this i ue occurs when the buyer realizes he can not afford your property. Or after signing a contract with you, he may also have continued sho ing and found another property he prefers.
Frequent excuses for not closing usually include a job tra fer that fell through, unexpected ousal separation, illne of a family member, didn't like the neighbors when he oke to them, and a myriad of other things that have gone wrong since he signed your sales contract. Even if his excuse is true, you now face the dilemma of having to resell your home and incur the additional expe es of carrying the property for several months or longer. Even if you are able to rapidly resell your home again, you will have been delayed by at least thirty days and have the lo of carrying your home longer.
Here are some ways to protect yourself from your closing being cancelled:
- ) You should have your mortgage broker pre-qualify the pro ective buyer to be certain they can actually afford to buy your home and if they have enough money for closing. The closing cost i ue can be overcome by increasing the selling price and giving back the same amount as a seller conce ion at the closing.
- ) You should make certain that the buyer gets a Good Faith Estimate. Too often, the buyer's mortgage broker has the buyer sign a blank Good Faith Estimate. The buyer may get a huge surprise, often the day before or the day of closing, when he finds out how much he has to bring to the closing. You have an option, in this case, of reducing your sales price to accommodate the buyer or, even better, you can take back a small second mortgage at the closing to defer a portion of his closing costs.
- ) The best way to guard agai t these surprises is to be inquisitive about the buyer's funding status initially and i ert a clause in your sales contract that allows you to get information from the buyer's mortgage broker regarding the Good Faith Estimate and the status of the loan. You have a lot at stake when you sell your home and this is not too much to ask.
- ) Make certain that your sales contract has a non-refundable escrow deposit clause that encompa es any reason including the buyer's inability to get financing. Most real estate contracts have a provision for the buyer to get a full refund of their deposit if they are unable to get financing. The second most important part of this sales contract clause should include that any exte ion of the closing will cost the buyer a given rate per day and for a maximum of fifteen days.
A frequent reason for a cancelled closing is a dramatic change in the buyer's FICO score. Usually this results from large purchases of furniture or an automobile just prior to closing. Inform the buyer of this po ible i ue by explaining to him that the lender will re-pull his credit report the day of closing and stop the closing if the buyer's debt ratio has changed too much. Ways to overcome this problem are credit re-scoring by the lender and quick fixes for your credit report, such as increasing the limits on your existing credit cards to adjust your debt ratios.
Your best protection from surprises is to put a ropriate penalty clauses in your contract; have alternative lenders available from your mortgage broker; be open-minded about doing a seller conce ion at closing; and be willing to co ider a small second mortgage to a ist with last minute financing shortfalls.
In summary, your best prevention is to proactively keep in touch with all the parties involved in your closing. Of particular importance, and on the front line of i ues that "pop up" is your closing agent's file proce or. Make friends with this person so you can call and find out about the progre of the lender, mortgage broker, the buyer and any i ues they may be having with the title work. As always, keep yourself informed by keeping open communication with all parties involved in the sale of your home.
