Many people assume that once the real estate purchase contract is signed the hard part is done. Buyers and sellers, however, need to understand there are many common things that can happen during the transaction causing the deal to fall apart. When it comes to real estate transactions in Arizona, it is important to be aware of the potential issues that can arise and understand the process from start to finish in order to give yourself the best chance for a smooth and successful transaction. Having a knowledgeable real estate agent and experienced attorney to guide the process can help avoid and resolve common issues as well. Here are some of the most common things that can go wrong during an Arizona real estate transaction so you can be prepared in 2023.
Inspection Issues Lead to Disputes
The Arizona standard residential resale real estate purchase contract, used generally when real estate agents represent the buyer or seller, includes a 10 day inspection period. This provides the buyer the opportunity to hire a home inspector and any qualified specialists to review all details of the home before moving forward with the purchase. It is common for a buyer to find some issues with the home that impact their interest in buying the home and the ultimate price they are willing to pay. Common small issues will typically be resolved with the seller agreeing to repair the defect before closing or adjust the sale price so the buyer can resolve the matter after closing. Larger issues, like structural damage, mold or insect infestations, can often lead to a buyer deciding not to move forward with the purchase of the home. It is generally good practice for anyone involved in a real estate transaction to stay patient and allow the inspection professionals to do their job during this period before assuming the transaction will move forward. The results of the inspection will need to be considered by both parties and adjustments to the purchase contract and price are a normal part of an Arizona real estate transaction.
Title issues can be a major hurdle when it comes to completing a real estate transaction. Common title issues include unpaid taxes, liens, encumbrances, past due mortgages, or even recorded court judgments (please note the Arizona legislature recently amended Arizona statutory laws impacting the homestead exemption). These issues can create a cloud on title, making it difficult to transfer ownership of the property. Title issues can also make it difficult to secure financing, as lenders may not approve a loan if title issues are present. In some cases, title issues can even make it impossible to complete a transaction. Fortunately, there are solutions available to help resolve title issues. Great title companies have experienced professionals who can help identify title issues and find solutions. Additionally, title insurance can help protect buyers and lenders from potential losses due to title issues. Finally, in some cases, it may be possible to negotiate with the holder of the lien or mortgage to resolve the issue. By taking the time to identify and address title issues, buyers and sellers can resolve many title issues and still complete a successful real estate transaction. Some situations involving title issues warrant hiring real estate counsel to protect the client’s interests.
Buyer Runs Into Financing Challenges
Financing issues are common and can happen to buyers that have been pre-qualified for the purchase. Pre-approval letters issued by a lender do not mean that the buyer will be fully approved in the underwriting process. These financing issues can have a major impact on a transaction, causing delays, changes in terms, or even the cancellation of the transaction altogether. To avoid financing issues, both parties should have a clear understanding of the other’s financial situation and the terms of the transaction.
Financing issues can also arise if the home appraises for less than the purchase price. The lender will typically not approve a mortgage in these situations and both parties will have to negotiate a suitable path forward. Sellers should consider that lower-than-expected appraisals will impact other buyers’ ability to purchase the home as well. In a hot real estate market, some buyers might be willing to make up the difference in value with additional cash payment at closing. This is obviously dependent on the buyer’s ability to facilitate that payment and their desire to move forward with the transaction after finding out the appraised value.
If financing issues arise during the transaction, there are solutions available, such as extending the timeline, renegotiating the terms, or finding alternative sources of capital. The available solutions will often depend on both parties’ willingness to agree on a new timeline so the buyer has time to find new financing. Flexibility is advised if both parties genuinely want to complete the transaction.
Closing Issues at the Finish Line
Closing issues can have a significant impact on the successful completion of a real estate transaction. Common closing issues can include an unexpected lien on the property, title defects, a delay in obtaining insurance, or an issue with the buyer’s financing. It is important for all parties involved in a real estate transaction to be aware of potential closing issues and how they can impact the transaction. Depending on the nature of the issue, it is possible that the closing date may need to be pushed back or that the terms of the transaction may need to be adjusted. In the event of a dispute, it may be necessary to involve a third party such as a title company or an attorney to help resolve the issue. Solutions for closing issues will depend on the specific situation, but may include having the buyer or seller provide additional funds, having the buyer or seller withdraw from the transaction, or negotiating a new agreement. It is also essential to determine if any closing issues will affect the buyer’s ability to obtain a loan or insurance and adjust the terms of the transaction accordingly.
Finally, it is common for the buyer to discover issues post-closing, more commonly known as non-disclosure issues. Buyers are advised to seek qualified real estate counsel in these situations to get a complete assessment of their legal rights and options.
Expert Real Estate Attorneys Can Guide Transactions to a Successful Closing
Anyone looking to buy or sell real estate should be prepared for common issues to arise during a transaction. The purchase process is designed to allow both parties time to gather all the information necessary and resolve any potential issues. Working with licensed real estate agents and experienced real estate attorneys can help avoid common pitfalls and provide both parties with solutions to most common problems. The attorneys at Gottlieb Law have provided industry-leading representation to Arizona buyers and sellers in the real estate market for more than a decade. We can help avoid common issues and achieve your real estate goals. Contact us today at 602-899-8188 or schedule an initial consultation online.