Friday, November 1, 2019 / by Gianfranco
You are excited that you sold your house and bought a new house and today is the closing and you are supposed to move into your new house and you are so excited until you get a call from your lawyer that the buyer cannot get mortgage (SMH)
Today we're going to talk about what buyers can really afford. Can the buyer who buys your house, can they really end up closing, can they ended up paying for it? Can they afford it? Or are they going to surprise you on the day of closing and tell you that they can't afford your house or ask for extensions and cost you all kind of nonsense, hassle and disaster.
This is huge, and this is overlooked quite often, because people are blinded by the purchase price. And this is really important to understand when you're selling your house to buyers. So, how can the sellers out there avoid this kind of nightmare? There's a variety of things that you need to look for when you're selling your home. You need to make sure that the buyer who's purchasing your home is qualified, because the last thing you want is to think you've sold your home and then to go purchase another property, and then closing date comes or close to closing date comes and guess what? The buyer can't buy your house, or worse, they've bought your house and they back out because they can't get finance. This is what you want to look for on an offer when you're selling your house.
The first thing to look for is a condition of finance. They can either have a condition of finance or not have a condition of finance. When they don't have a condition, they're basically saying to you, I've been approved by the bank, and I'm comfortable in purchasing this property for this amount. It's like coming and buying the house off you with a suitcase of money and just giving you the money that day. But that's not the only thing, because somebody may take off their finance condition, but they have an extremely low deposit, and this is a huge red flag, and we've seen this before and I had to question it.
So, what is the standard amount of deposit when they have to put in initially. The standard, there is no rule, but the standard is usually around five percent. The more, the better. So, if you're a buyer that's looking to purchase a property in a hot market, maybe you want to increase your deposit to strengthen your offer. But if the deposit on a million dollar house is $10,000, that's questionable. You and your agent need to question that, why? If this person's already approved, why do they have such a low deposit? Where is the rest of their money? Are they going to be able to close this property?
But the worst is having a low deposit and a condition of finance, because even if they're giving you a high price on the home, it doesn't matter. Anybody can pull a number out of a hat when they haven't even been approved, and they can really back out of the deal at any time if their bank just says, no, and with a really low deposit, that's the chance.
So, question low deposits if you're a seller. Question lengthy financing conditions. If they want five days, is basically the status quo, and if you want less, maybe give them three days. If they're trying to tell you that oh we're okay with financing, we just need to do this and that, then say, okay, then make it three days or two days. Because if you're in a heated market, five business days can be pretty lengthy. You've kind of lost all the potential buyers, and as the days-on-market increase on the listing, the less kind of appealing it becomes.
We've seen situations where, it was one of the other agents who was involved, they couldn't close, and unfortunately what happens for the families that are involved, it becomes a chain reaction of lawsuits and disasters and penalties. It's an ugly situation and you can avoid that, by just following these simple guidelines or having your agent make sure they educate you on these things.
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Watch the full video here: https://youtu.be/EoUTMwBzkVA