Most people have heard stories from their friends and relatives about real estate closings that had gone bad or gotten cancelled. Here are a few common reasons for this and what you, as the seller, can do if it happens to you, especially if you don't want to put any money into the property.
Property doesn't meet the lender's requirements
Mortgage lenders have requirements that need to be met before they will lend money for real estate transactions. The reason for this is because they want to be sure the property is worth the money. A lender will send an inspector out to the property before closing to make sure there is no significant damage that could devalue the property.
One example of this is when an inspector sees a roof that is clearly in disrepair. The amount of hidden damage within the wall cavities and ceilings from a leaking roof can be costly to repair and can cause a lot of structural problems. The lender may ask the seller to repair the damage before they will approve the mortgage for the buyer.
If you don't want to spend any money fixing the roof, buyers will have a difficult time trying to get approved for mortgages. Therefore, you'll need to look for buyers who can pay cash. That way, there is no other entity determining whether or not your house can be sold. Most often, people who pay cash for properties like yours are investors who will make improvements to the properties and either sell them for profit or rent them out.
Buyer cannot obtain homeowner's insurance
Mortgage lenders require buyers to obtain homeowner's insurance before they will finalize the contract on closing day. However, sometimes buyers are not able to get insurance if they have a history of filing claims. The insurance industry keeps tabs on all filings of claims in what is called the Comprehensive Loss Underwriting Exchange (CLUE), which determines your insurance rating.
This is similar to a bad credit rating when you have too much bad credit. If you or a previous owner had filed insurance claims on the property, then it may also affect the ability of the buyer to get insurance. The reason for this is because repeated insurance claims may signify recurrent problems.
If potential buyers are having a difficult time getting homeowner's insurance and that is the reason closings have fallen through, you may want to investigate the CLUE report for the property. You can dispute discrepancies if you find any. However, since that can be time-consuming, it may be better to seek a buyer who will pay cash due to the fact that he or she will not have a mortgage lender requiring them to get homeowners insurance in order to buy your property.
Keep these things in mind if you are trying to sell house quickly or are afraid of having your closing be cancelled.