8 Closing Nightmares and How to Manage Them

There are few experiences in life as exciting and stressful as buying a home. It’s a constant rollercoaster ride of thrills and fears, new experiences and cliffhangers that threaten to ruin all your dreams forever. By the time your inspections are over and your Realtor assures you there’s not much left to do but wait, you’re in desperate need of the emotional break — but sometimes that break doesn’t come because something goes terribly, terribly wrong.

Although they’re not common, closing nightmares happen to the best of us. Most of the time, your Realtor or lender won’t be able to prepare you because all indicators point to a clean transaction. However, in my nearly 10 years working in the real estate industry, I’ve seen some doozies. If you hit a bad spot in your transaction, just remember to breathe and trust that your experts are doing everything they can to help — after all, that’s really why you’re paying them.

Anybody can handle a smooth transaction, but it takes experience and fortitude to hang on through these 8 nightmare scenarios:

You’ve Just Learned Your Home is In a FEMA Flood Zone

OK, technically everybody’s house is in a FEMA Flood Zone, but when your banker, closer or Realtor calls to tell you that your home couldn’t be flood certified because it’s in a FEMA Flood Zone, they’re talking about a Special Flood Hazard Area (SFHA), also known as a 100-year flood zone. This isn’t a problem in and of itself, but there are a few programs, like USDA, that won’t loan on a property located in an SFHA.

You may be asking why no one caught this problem before you started trying to get all your loan paperwork hammered out — surely your agent or your banker should have known that you were headed for disaster. Unless either of those folks are in the habit of not getting paid (after all, their income is in part or wholly based on commissions), they believed your future home was clear of problems based on the information they had available.

Here’s where trouble starts. Every once in a while, the flood maps that Realtors and bankers have access to don’t line up with the current version of the maps FEMA is using to produce flood certificates. Usually, these properties have just a tiny, tiny bit of their lot inside the SFHA — but it’s enough that you’re considered to be “inside” a flood zone.

When this happens, don’t panic. Most loan programs will just require you buy flood insurance, which should cost about $500 per year. If you’re trying to borrow with a program that won’t loan on a property in a flood zone, your Realtor and banker can mount an appeal since the actual house isn’t affected by the flood zone. Even in the worst case scenario, you should be able to change loan programs without delaying closing too much.

Your Income to Debt Ratio Has Changed

There’s nothing that will get your lender’s panties in a twist as badly as if you change your income to debt ratio without discussing it with them first. See, when you were qualified for your loan, it was based on a lot of things — your income to debt being one of the most important. As we discussed in an earlier post, your income to debt ratio is exactly what it sound like it is: the ratio of your monthly debts to your monthly income. Simple, right?

So, we know it’s important and we know what it is — it should follow why making a change to this valuable number would cause problems. Most people understand that they shouldn’t touch their income to debt ratio while they’re trying to get a mortgage, but fewer understand what things will affect it, so let’s talk about that.

Your income to debt ratio goes up any time you borrow more money and it drops when you pay loans off. It can be tempting to open a credit card for all those purchases for your new house or to pay off existing debt, but don’t. Don’t do anything without calling your banker first. Believe it or not, every move you make right now will affect your loan underwriting.

If you do change your debt to income (for better or worse), one of two things may happen: your loan will fall through or your rate will change. Either of those things are really pretty bad, because your rate’s only going to go up — never down. A higher rate means a higher payment, which could further mess up your income to debt ratio.

Your lender checks your financial history before they initially approve you for a home loan, but they may take a peek up to two more times up to and on the day of closing. Make no changes, touch no credit, resist temptation until after you’ve signed all the paperwork at the closing table. If it’s too late to undo what you’ve done, a larger down payment or changing programs could get you back on track.

You Can’t Get Homeowner’s Insurance Coverage

Homeowner’s insurance is another one of those things that requires credit qualification, just like getting a mortgage or starting a cell phone contract. Just because you can get a mortgage doesn’t automatically mean every insurance company is going to go out of their way to offer you homeowner’s coverage, though. The credit algorithms for homeowner’s coverage are proprietary and vary widely from company to company, so even if you’re sitting pretty on your mortgage, you may be denied a homeowner’s policy.

When your insurance agent calls and tells you that you’ve been denied insurance in the weeks before closing, don’t panic. Unless you’ve personally had a lot of homeowner’s insurance claims or your house-to-be looks like it has been hit by a tornado (or actually has been hit by a tornado), you’ll be able to get coverage elsewhere. Always apply with more than one insurance company, that way you have a backup plan if necessary. A few phone calls to other agents with get your insurance bill and binder in time for closing.

Your Settlement Costs Have Changed Considerably

This is one of those last minute surprises that nobody likes. When you’re thinking about buying a home, you really need to have some savings, well and beyond what you think you’re going to need. Sometimes, things happen: taxes are higher than expected, you need extra inspections that cost extra money, your insurance is more costly than estimated — the list goes on and on.

In theory, your banker can give you a good feel for what it’s going to cost to close, but any number of things can change (and sometimes, a lot of things do at once). In the future, you’ll be able to view closing documents like your settlement statement electronically in the days before closing, but for now you’re still at the mercy of your closing agent.

At the point you find out that the settlement costs have increased, it’s going to be too late to back out of the deal and you’ll have too much money tied up to throw everything away over a few hundred dollars of miscalculated charges. As much as it pains me to advise this, all you can really do at that point is suck it up, cough up the dough and hope your friends and family will spot you some pizzas during your move.

You’d think agents and experienced buyers would be immune to this issue, but I can assure you that they’re not. I’ve had my own closings where the settlement statement wasn’t prepared until the morning before we signed on the dotted line — and although I always knew I could have to pay more than I expected, it still filled me with fear and angst when I was told to bring more than I had planned.

The Appraisal Came Back Too Low

There was a day when appraisals almost never came back low, but those days have long since passed. Today, some people do get this bad news in the week before closing and learn that their home didn’t appraise out. An appraisal isn’t a stab in the dark, it’s a very carefully determined calculation based on things like recent sales of similar homes, features of your home and the desirability of your neighborhood, so when they’re low, it’s not a joke or a suggestion. Your home simply isn’t worth the price you agreed to pay.

That might not bother you if you’re planning on living there a long time or have a major remodel in mind, but your lender is going to care a whole lot. A low appraisal can kill a deal, but once you’ve got it on paper, it can also save you money. Your Realtor will do everything they can to salvage the situation, in this case they’ll go back to the seller and ask for a price reduction with the appraisal as evidence that they’ve asked too much.

You’ll have to sign the paperwork and there may be some back and forth, but unless your seller is painfully close to not being able to sell their home for lack of funds, it’s in everybody’s best interest to see the deal to fruition. These deals usually have a way of working themselves out in the buyer’s favor.

The Sellers Can’t Actually Sell Their Home

Believe it or not, there are rare occasions when you’ll find that the house you’re trying to buy can’t be sold by the people who are trying to sell it. They may have a huge tax or mechanic’s lien, aren’t who they claim to be or don’t actually own the house. I know, it sounds like something out of a daytime drama, but these things really happen.

Liens aren’t something you can really get around — they must be satisfied before the home can be sold (they can be satisfied with proceeds from the sale, but only if there’s enough equity). If the seller won’t take care of their lien, the deal’s dead and buried. Trust my years of experience when I say these deals aren’t worth fighting for. Luckily, you’ve already got your loan documents mostly finished, so get back out there and find another house pronto.

Sellers who can’t sell their house because they can’t prove they own it or simply don’t own it, well that’s another matter. Usually, this happens when there has been a death in the family and an obvious heir like a child or sibling to a childless couple believe they have inherited the property when, in fact, it has to go through probate court first.

Being the obvious heir means that it’s likely these people will eventually inherit the property free and clear, but in the meantime, it’s in limbo — the ownership is undetermined. If you’re in no hurry to move, you can extend the contract to beyond the probate court hearing, but if you need to move sooner rather than later, you can (and should) walk away.

The seller is ultimately at fault for being unable to pass title in either of these cases, but you will lose whatever you’ve spent on inspections or appraisals. Sometimes, it’s much better to cut your losses — don’t be afraid to do so. You’re fully within your legal right in these situations. Find another house, go on your merry way and have a happy life and a stress-free closing.

The Sellers Haven’t Completed Their Agreed-Upon Repairs

As time to close draws nearer, you’re going to get antsy to see if the sellers have finished all those repairs you asked for after your home inspection. With an unoccupied home, it may be tempting to go visit and see what you can see — but really don’t, for your own sanity. When you do finally go looking around and discover that the seller hasn’t finished the repairs a few days before your walk-through, don’t panic yet — just hold tight and find a crossword puzzle to distract yourself.

Sometime things happen — contractors get busy, sellers have to go out of town suddenly because of family emergencies, or time simply gets away from them as they’re scrambling to find their own new home. Have your Realtor call their Realtor — the seller can usually escrow funds for repairs that won’t be done prior to closing. The sellers won’t get their check until the work is done, so you can be sure it will.

Your Walk-Through Was A Nightmare

Oh, boy, this one happens more than it should. I’m so, so sorry to have to be the one to say so. Walk-throughs are an opportunity to make sure that the house you’re buying is the same house you put an offer on all those weeks ago. Look around, make sure that things are reasonably close to how they should be and that everything you expected to be in the house are there. This includes stuff like appliances the seller agreed to leave, equipment for pools and fireplaces, fencing and landscape plants.

Don’t get me wrong, most of the time you’ll go into the house and everything will be exactly as it should be. But sometimes you’ll get into the house and discover problems that range from a bad dream caused by indigestion to a full-fledged night of screaming terror. I’ve been to walk-throughs where the carpets, light fixtures and everything that wasn’t nailed down had been removed and I’ve been in houses that were just the opposite — where sellers decided they were going to leave the buyer all their garbage in lots of untidy piles.

What’s a buyer to do if they’ve got a walk-through nightmare? Are you obligated to close? You’ll see how good of a Realtor you’ve got in this situation — because they’re either going to stick up for you or they’re going to try to force you to close so they can get paid. If your walk-through is a true disaster, you don’t have to close because the seller didn’t come through with their end of the bargain.

Sometimes, you’re better off to close anyway — even when things aren’t quite right. Think about how much money you’ve got in this transaction already, and compare that to what it’s going to cost to fix whatever is wrong. If you were going to replace those ugly carpets anyway or meant to repaint right away, don’t worry if the carpets are worn or the paint is banged up.

In the case that repairs remain uncompleted, you absolutely must ask the seller to escrow the funds for them. Some loan programs won’t let you close without at least having evidence of escrowed money, so stick to your guns on this one.

Bottom Line: Closings Can Be Painful, But Most of the Time You’ll Make It

I know all these scary scenarios are enough to make you never want to buy a house, but I promise they’re not common, they don’t happen often at all. If you do hit one of these absolutely worst case scenarios, there is hope on the horizon — especially if you already know what to do when the problem crops up. Just take a deep breath, be prepared for anything and trust your Realtor, lender and closing agent are doing everything they can to make sure your transaction goes as smoothly as it can.

279 responses to “8 Closing Nightmares and How to Manage Them

    1. It can. But, Joe, it usually doesn’t. I wrote this piece just to give everybody a sort of heads up in case they hit a bump in the process. I’d say that 90 percent of the homes I closed went along without a hitch — but if you’re in that 10 percent, better to be educated than to be stressed and blind.

      Best of luck in your home buying adventure!

      1. Hi, we are in the process of buying and closing is around the corner. Our agent came back and stated seller wanted us to change closing company. They will pay 500 for us to do so on closing if we agree. Any idea if we should or not?

  1. So it’s been 12 days since we closed on our house. Less than 24 hours before our closing time and possession, the upstairs flooded when the seller’s disconnected their washer. We did our final inspection an hour before we were supposed to take possession only to find out that the seller’s had JUST begun moving their stuff out. My relator told me repairs would be covered by the seller’s insurance company and they would be done in a week. Well I cannot deal with the seller’s insurance company, my relator is slow to respond and not sure she knows what she is doing, and we are going on 2 weeks and no progress on repairs (which are significant). I am a first time home buyer. Do you have any advice?

    1. Hi, Megan. I’m so sorry it took me this long to reply. How are things going on the house?

      If you’ve not yet found a resolution, I would recommend contacting the Broker at your agent’s office. The Managing Broker will be the person your agent is asking for help on a complicated issue like yours and should be familiar with your case already.

      I know this is probably cold comfort at this point, but your situation is incredibly unusual — please don’t let this experience taint your view of home ownership. I hope things are looking up when you find this message and thank you for reading our blog.


      1. my son is going thru the same thing. Appraisal on Monday everything fine, Inspection on Tuesday 2 water leaks with downstairs damage. drywall and vinyl flooring and maybe mold??

  2. Thank you for your consideration. We found a spot closer to where our family is staying. Your space is beautiful though, perhaps we will book in the future. Thank you for your time.

  3. I have a question, and any suggestions or insight is greatly appreciated. . We are in the process of closing on a house in a rural area and they are unable to clean out their entire house. The house is 1600 ft.². Does anybody have any ideas of how much it would cost to hire someone to clean out the entire house or any suggestions of the resources to do so? Furniture, clothes, belongings, the whole garage….

    1. I’m so sorry I didn’t see this question sooner, Carly. How did it go? In general, prices on cleaning out homes are very regional, so it’s hard to give a guestimate. In the rural areas you’ll often find someone who is willing to do the job for very little, such as a handyman or a general laborer.

      1. No problem!!! The seller ended up hiring someone to clean it out. We are still in escrow but we didn’t have to clean it !
        -Carly Lucille Castaneda

  4. I also have a question, the problem I am facing is that i am scheduled to close tomorrow but the seller has been reluctant to get the proper CO for her deck. The seller also did not have a CO for the pool, we worked with her for the past month to get the pool CO and found out over the past two weeks that there was no CO for the deck. She didn’t disclose any of this information when we went into contract. I feel as though her only options are to either get rid of the deck or build it to code and get the necessary permits. I want to get the house I originally paid for and I feel like if she has to get rid of the deck that I would like a reduction in price, who would I relate that information to, my lawyer? Also if she does nothing would i get my escrow funds back, she doesn’t seem like she is in a rush to solve any of the issues with the home.

    1. Hi, Samantha. A lot of what you’re asking is going to depend heavily on your local customs and the state law you’re under, but in general, if it were me, I’d be talking to my Realtor and refusing to move forward to close. Explain that you’re unwilling to take the house in the condition it’s being offered and you’re ready to find another one. This will either light a fire under the seller or kill the deal entirely.

      You may be able to sue her for damages because of the lack of disclosure, but if she honestly didn’t know there was a problem, it’s just one of those things. You can try to take her to court, but you’ll be tied up in a complicated case that may go on for years. In the long run, you’re better off either accepting the situation, renegotiating the price or walking away and leaving the lawyer out of it.

      Good luck, and let us know how it goes!

  5. Hello! We are the sellers of a 57-year-old home and the whole process has been a nightmare. The buyers of course had an inspection, and their realtor decided to cut and paste every thing that was found onto a 6 page document. Now mind you, one of the findings were the hardwood floors have wear and tear. Another was there are galvanized pipes in the basement, these are known to leak. It had statements like that throughout the document. We have gone back and forth for 2 weeks. We are scheduled to close on Friday. Then we just find out, there is an outstanding lein on the house from 2005, which is before I bought the property. We thought the deal was going to fall through as their real estate agent kept saying, they are ready to walk. So, at 9 a.m. yesterday, we find out, that their lender has put the closing on the books for Friday. We have asked for an extension and have been denied. If this first lien is not cleared up, wouldn’t I lose the money from the sale of the home, and how is it ethical to just come to an agreement on Saturday and expect that we can have the repairs done in 4 days?

    1. There are two different things going on in this thread, so let me break them out in case anybody else has the same question.

      1. The seller has discovered a lien from prior to their purchase.

      2. The seller has been asked to make repairs in order to close in a short window.

      Ok, one at a time, Teresa. 🙂

      1. This is going to be full of “ifs,” but I don’t know enough about the particular situation to be able to tell you for sure.

      IF you bought your house through a title company and IF you have mortgage insurance and IF the lien is in the name of the prior owner, it SHOULD be covered by your title insurance policy. So, there’s nothing to fear there. However, IF you purchased it in any non-traditional way that skirted a title search and title insurance, you’re not going to be able to close on time. You’ll need a lawyer to get that lien cleared up.

      2. As for the repairs, at this point you’ve got a couple of options, depending on the type of loan the buyer is using. Either A) you can close and put the repair money into escrow or B) you can close and offer the buyer a credit for the repairs. For you, these two things are more or less the same, but for the buyer it will depend heavily on their finances.

      What does your Realtor say about all of this? Also, what state are you in?


  6. Hi. We are “TRYING” to sell our house and came down to the CLOSING on Monday at 2. We rcvd a call at 1 saying something went wring on her end and it is out on hold. We have cleaned, packed an 11 room house and have been doing all the repairs requested. HER mortgage company messed up and has turned my life upside down. We were to do a dual closing due to it being a VA loan. Our life is messed up all the way around. What options do we have legally? How is it ok to set up closing and rcv the call one hour before?! HELP i am in tears!

    1. Hi, Alethia. I wish I had something to offer in the way of comfort, but unfortunately these domino closings are sometimes a real mess. For the moment, I’d not do anything rash, though I know it’s tempting. Call your Realtor, find out when the buyer is able to close and move forward from there. You’ll also need to speak to the seller of your new home and explain the situation.

      As long as your buyer will fund soon, you’ll be right as rain in a week or two. It’ll be a long week or two, probably spent eating take-out or Ramen, but I promise, this is sadly not unusual.

      What may have happened is that the HUD-1 was wrong, which is a common problem. Unfortunately, in my area at least, if it goes to closing wrong, the bank has to correct it and wait three full business days to attempt the closing again. I know it’s pretty awful to have to wait, but if your Realtor is certain the other side is intending to close, you’re going to be ok — and moving forward is much simpler and considerably less expensive and time consuming than trying to sue.

      Until then, unpack your toothbrush and pretend you’re camping for a few days. It’s nerve-wracking to deal with a domino closing, for every single person involved. When the dominoes don’t fall right, things like what you’re experiencing happen. As the seller, though, in this situation your best bet is to soldier on.

      All my best, and here’s to a speedy closing in the very near future. 🙂

      PS. Please keep us updated. I’m hoping that this was just a small confusion on the part of the bank and all will be well very soon.

    2. I feel your pain…I am a seller with a buyer from HELL, realtors that are STUPID-they both flunked contract writing 101 and the loan company has had to TEACH them what can and can’t be put in a contract-hello did either of these realtors attend the required class to be licensed??? The underwriters that can’t “decide” what the heck they need to fund a loan. There should be a list of documents needed, but they keep needing some other piece of paper every other day from the buyer. I have complied with EVERY thing on the inspectors STUPID evaluation, from the speed of my factory installed garage door opener, to small pitting on a piece of siding due to hail. My water pressure was deemed too high…it passed just fine when built and even the regional building dept says there is NOTHING wrong with the amount of pressure coming into my home. But the MORON inspector deemed it unacceptable. He also wrote up a document neither the claims adjuster nor the roofer can decipher. My roof sustained hail damage. It was disclosed in my seller’s form that it would be fixed and will be through a hail claim. But the inspector has written my 10 yr old house as being inadequately roofed. It is a rancher, nothing elaborate, and neither the insurance company, nor the regional building code dept., or the local roofing company of 35 yrs thinks there is anything WRONG, it just needs new shingles. But now the underwriter needs proof that the roof won’t be an issue. I HATE inspectors, they are wanna be’s, no true training, and FAR from experts at anything. But they hold you hostage with their reports that no true professional in the areas “cited” agree with. My home has a home warranty, it is not old, and it is maintained, I just fell victim to a retarded inspector that needs to prove his need for existence. And the loan company takes his word over proven professionals in the field. That say his “recommendations” are illogical. It makes NO sense.

  7. HI Kristi. Long story short…… Buyers walked 2 days before closing, decided they did not want to make this this area their home, no other explanation. We have met all terms of the contract (as the sellers). Do we have any legal recourse, and if so, is it worth it? We are now stuck with the mortgage AND a rental payment, as we had to secure a place to stay…. Spent a lot of time and money moving into a new place.

    1. I really wish I could tell you that this would be a slam dunk lawsuit, but the truth of the matter is that litigating a buyer is difficult and time consuming. In most states, it ties up your property until the matter is settled (which can be months or years), adding additional stress to the whole thing. In addition, if the buyers can get a letter from their lender saying they were no longer eligible for the mortgage (not being able to verify the down payment, the buyers not securing a local job and so forth are grounds for denial), your contract is null and void anyway.

      In the end, as a seller, the best thing you can do is get the property back on the market, make any repairs as noted by the buyer’s home inspection and hope for better results moving forward. I’m sorry this is the best I’ve got, but unfortunately today’s system is skewed in favor of the buyer.

      If you feel like it’s still worth pursuing these buyers through legal channels, please consult with a real estate attorney. As a former Realtor, I can only tell you what I’ve seen from my perspective — I am not a lawyer.

      Good luck selling your home to a deserving buyer in the future. The market’s getting healthier all the time and you may find that this little hiccup actually makes you a great deal of money come spring.

        1. No problem, Susan. Like I said, I wish it were better news, but hopefully this will just be a minor inconvenient blip on the radar in the grand scheme of things. I wonder if it’s too late to work something out with your landlord regarding your lease.

  8. We were suppose to close Monday but the lender needed some last min paperwork and now is delayed until Friday but seller said if we don’t close by Friday, he will take our down payment and no deal, it is not our fault that seller and the bank miscommunicated. I’m so horrified that he will take our money and end up with no house. Please help, can they even do that?

    1. Hi, Nikky. I can’t tell exactly what’s going on in your situation because of a lack of detail, but I will say this: in a typical scenario, you hold on to your downpayment until closing, at which time you give it to the closing agent. If you have a real estate company, a lawyer or a third party holding your earnest money in escrow, the seller will have a very hard time getting it (if this is what you actually mean by “down payment”). That being said, if you actually gave the seller your downpayment, the person who it’ll be due in the case of default is outlined in your contract — if it’s you, it may require you sue to get it back.

      Call your Realtor, call your lawyer, call whatever body is helping you through this transaction. They will be able to provide more guidance in your specific situation.

  9. This is ramdom but please help me out here. .i refinanced my home and closed last week 11/23. The agent who I’ve been taking to stated and i have emails to prove that I would not have to pay November s payment or December as long as we closed in November as we did. There was a out of pocket of $700 witch would cover some interest and other stuff (all to title company I imagine ). And now i get calls from the agent supervisor saying that i should have paid November s payment and after i told her i wouldn’t and that she needed to get with the agent and go over the emails voice messages and what he offered me to refiance..next day i get a call from the title company saying that they received a couple of papers from the lender (Carrington morgage ) that i needed to sign and fax back to them…something that was left out or needed updated. So I’m reading it and get angrier by the second..they changed the closing out pocket to $1100 more on top of the $700 and wanted me to sign it and return it..and I’m sure make me responsible for paying it to fix their problem. I’m not a lawyer but I am 45 years old and have closed or refinanced a few times before. .is that legal? ?my copy of the new loan has it clear as crystal that my first payment is not until 1/1/2016 ..i.got proof of the closing payment made and the emails from the agent about no payment for November or December . The emails from him promissing that and of course my writen copy of new loan paper work..can they do that?i know I could only cancel it within 3 business day…isn’t that the same for them?how do I go about fighting this? ?please any help is welcome

    1. Typically, you get to skip the first 1st of the month payment when you close like this, Tommy. So you’d skip December 1st and January 1st 2016 would be when the payment’s due. BUT, you should have either made your November payment OR financed it into the refinance, so that could be the root of this issue.

      As I understand it, once the loan documents are signed, that’s more or less the end of things. Sometimes you’ll be called into the closing office to sign a page or two where you might have missed a signature or an initial, but not to resign all new loan paperwork.

      What I’d do first is follow-up with the agent you were initially discussing this with, the one who told you that you were ok to skip November and December’s payment. Sometimes, the HUD document looks a lot more expensive than it really is, mortgage math isn’t like normal people math. 😉

      Anyway, start by calling your servicer, but don’t be on the defensive. The paperwork in question is probably ok and you’re probably ok, too. Just ask for clarification because you aren’t sure what’s going on at this point. And, by all means, keep us posted. 🙂

      Best of luck!

  10. Great article, I wish I had read it before we did one of the nightmares listed. We are scheduled to close on Dec. 18th, the bank & title company have been pushing to close earlier since all is ready and clear to go. We just are waiting to do our final walk through. The place is rural and we realized one car would not be enough so we found a deal on a used car and bought it yesterday. My real estate friend just told me why we shouldn’t have done that. It was after she informed us of this mistake that we realized we also opened a new credit card to purchase black Friday appliances since we don’t have a fridge or washer & dryer for our new home either. Out of ignorance we made these purchases but not that we are wise I am in a panic of how bad this is going to affect us in just a few weeks? We already paid off the new credit card is this big mistake salvageable?

    1. Heya, Suzu. I wish I could say they’ll have no impact, but I can’t do that without known a lot more about your situation. Where purchases on credit hurt you most is in increasing your income to debt limit. If you were already pretty set in that department, the new car and credit card might not have enough impact to derail your plans.

      That being said, opening a new credit card will typically reduce your credit score slightly for a few months, then more if you charge it up and leave it there. Again, if you were well within score range for your loan, you might still squeak out ok. You might also get off with just having to resign your loan paperwork and accepting a slightly higher interest rate.

      If everybody’s pushing you to close, I’d go ahead and do it if you can. The scores that the bank has on file (again, depends on the program) might be able to be used for your docs, and if not, you’re going to know pretty quickly. But, above all else, call your banker first thing tomorrow to tell them what’s going on. They’ll be your best bet for getting you back on track — a lot can be fixed in almost two weeks.

      I wish you the very best of luck!

      1. Thanks for your input. It really helped. Called my bank and started apologizing profusely before I told him what we did and he laughed. Said that we were okay and we just had to bring him the new paperwork. We will not close early, just on the day we planned on so I guess we really lucked out there. Two nights of no sleep so we learned our lesson. I had also called the car dealership and told them what was happening. Luckily they had a guy on staff who used to work on house loans and mortgages and he also helped us out, saying out credit bureau wouldn’t see anything for 3-4 weeks because of our payment plan was after our closing date and he also advised to call the bank asap.It also was a great lesson for my 9 year old about listening to others and admitting mistakes. Overall, a sigh of relief. Thank you again for the great article and the quick advice!

  11. My situation falls into the category of nobody can sign the closing documents on the sellers side. The title company is requiring a conservatorship and approval of sale from the court. Kind of complicated how we got to this point but basically this is going to extend closing for 30 days. The buyer is wanting credits to cover expenses. Am I obligated to provide that? Another family member entered into this sale and now it is going to fall on me to complete it. Or can the sale still be cancelled? Thanks!

    1. I’ve actually been on the buying side in a transaction like this. I need a little more detail before I can even begin to speculate. Did the house go through probate? Was there a will involved? How about a beneficiary deed and/or a person on title who should have automatically inherited the place?

      With that information, I can give you better advice. 🙂

  12. Hi ! I’m currently in the process of buying a home… Now the owner is saying he doesn’t want to sell the home because something in my tax information is wrong and it’s going to take two weeks to fix and he’s saying that it’s too long for him so now he’s backing out…. Can he do that? We signed a contract…..

    1. This is to address both your comments. Since I don’t know what kind of contract you have or what’s wrong in your tax info, I can’t say anything specific about your situation.

      What I can offer is this: If you’re still within your contracted window (every contract agrees to close within so many days or by a specific date), you’re able to close, everything is looking like it will close, a seller pulling out is both foolish and a violation of the contract.

      That being said, if you’ve moved the closing date several times, the seller has tried and tried to work with you but you’ve been a pain (for example, you beat them up on pricing then wanted a lot of repairs, etc) or the bank is telling the seller that there’s no way you’re going to be able to close, then they’re fully within their rights to move along, provided the contract has run out. It doesn’t matter how much you’ve spent.

      Now, the good news. If your appraisal is ok and the only issue you really have is a small paperwork thing, the seller’s agent would be doing him a disservice by advising him to pull out now. It can take months to resell a property after it has had the stigma of being under contract and subsequently released — a lot of people don’t want to touch relisted properties because they’re afraid there’s a big problem that’s not being disclosed.

      But, it still happens. My advice is to call whoever is taking care of the tax stuff and see if they can expedite it — if not, can they provide a written promise of when it will be fixed? The seller is clearly tired of waiting to close, the last thing you want is for him to be completely angry at the end of the deal.

      Another option, if your side and the seller’s side are still on reasonable terms, is to get possession prior to closing. Basically, you’ll agree to rent the property for the time it takes to get to closing, and accept it in the condition it’s in the day you take possession. This way the seller knows you’re serious about closing and everyone can move on. This generally only works with vacant homes, though.

      Good luck, and I hope it goes well for you. If you need more specific answers, please provide more specifics about your deal, as well as the state in which you live.

    1. On the seller side? Buyer? That’s not all that much for a failed transaction. If its the buyer, it’s the buyers fault, period. They don’t qualify or can’t substantiate their income or assets. If they picked a property with issues, well that’s something good that was caught in the appraisal or inspection. If its on the seller side, the seller has an unsaleable home. That’s their problem.

  13. I work at a real estate agency.I just had the worst nightmare closing and I’m still in the middle of it. We have the sellers , the property closed on friday, its monday now. The checks were cut and sent out and picked up, and just now cancelled by the lender. Then, the title company says this morning that it’s fallen through. (Even after we had clear to close from the lender and everyone signed the closing docs.) That on friday day of closing the lender reverified the buyers second job only to find out that he doesn’t work there anymore.The buyers got the keys friday and already pulled up the carpet and painted the ceilings.The loan was canceled after the closing docs were signed, and it funded. They just took the funds back. So our sellers are left with a house without carpet and no cash from all that hassle.

    1. OMG. That’s awful. Can the sellers consider a lease option until the buyers get their docs straight? Obviously they’re as invested in this as the sellers, at least at this point. Maybe they just need to be run through a different loan program to get it straightened out.

      Good luck with it. I don’t miss these situations from the good ole days. 😉

      1. They don’t want the buyers in the home now at all, and won’t do a lease back. (But that was before we found out that they did repairs.)The lender is now saying the buyer would have to start the whole process over again. But with one job down I don’t think he’ll qualify for a loan big enough, and his wife has bad credit.

        1. Oh man, what a mess. I’d be surprised if the sellers didn’t have a case against the lender since they let the loan go through to closing. Were they my sellers, though, I’d be trying very hard to strike a deal. Frankly, in my market, they would be better off to do something like a contract for deed for the buyers than to try to get that house back in sales ready condition without losing their shirt.

  14. I have a complete nightmare.. Worst situation that can happen applies… Please help me.. I need advise.. Here is the situation… My mother was killed in a car accident.. She owned multiple properties in 5 states. She died in Florida & probate has been opened only here so far.. The house that I was trying to sell is in ky.. Well I’ve never sold a property before.. I put all my $ into the remodeling of the house.. Carpet, paint, labor, materials etc. I did this to get more from the sell of the house to pay off its mortgage.. Well then I got a realtor.. We got a buyer, we had a closing date. The loan required that the swimming pool be fixed or filled. Well I didn’t have that $.. Id already spent what I had on improving it & it has been empty during this process , & remind u I have a mortgage.. Well I was behind & that was OK because I had a buyer locked in with a closing date.. Well the realtor suggested that her husband will do it & get paid out of closing.. He quoted 4000..she said he had all the materials like, dirt, equipment, & supplies already.. When I realized that one can be paid for labor at closing I told her I’d rather have my husband do it & get paid.. She suggested that instead of turning invoice in for 4000, to the bank, she would send in one for 7000 & her husband would do it & give me the difference. She said in text that he wouldn’t take over the 4000. I actually never spoke with her husband. She said he was doing this to ensure the closing.. I had a closing contract date & everything BUT he was military & one day before closing be got stationed at another base & could legally brake contract .. ONE DAY BEFORE! So being behind on mortgage I was facing foreclosure. I had to pay that.. Couldn’t risk more time of unforseen things with closing & selling so I had no choice but to pay to stop foreclosure & rent it out.. She the realtor was mad about it being occupied & released me & her from all of our contracts (I had her selling 4 properties) & next thing you know I just got a letter showing a lien was placed.. No notice, never seen a bill, they knew I didn’t have the money that’s why the realtors husband did it, expecting to get paid at closing, filed it a couple weeks after 6 months, & it’s not owner occupied, the house is not in my name, but the lien was recorded in my name, TOLD U THE WORST SCENERIO! I have a death, I have military guy that backed out, & a lien for 7000. What do I do? I’ve dealt with alot since my mother’s death.. There is no peace. I’m reaching out to you in hopes of a response.. Do I have to pay an attorney? Should I file something with the courts.. Shouldn’t I have been told or had a contract.. I have texts from the realtor to prove this.. SOME ONE PLEASE HELP ME. RESPOND ADVICE, CALL ME IF YOU CAN HELP ME.. I’M alone on this.. 8504852793.

    1. Hi, Sandy. I’m sorry about the delay in responding to this. I’m also sorry to hear about the death of your mother. Unfortunately, this situation is going to get a lot worse before it gets better.

      The plan that you and your Realtor hatched would be illegal in my state, but I don’t know what the law would say about this in Kentucky. Purposefully over-billing and then paying it back to the seller when you’re the agent (or in this case, the spouse of) is a big, fat no and could be considered fraud (bad for you), or an inducement (bad for your agent), depending on how the law reads.

      Not knowing the whole situation, I can’t really tell you better — but you shouldn’t go into court telling anybody the story you just told us until you know the consequences. It may also behoove you to talk to the agent first and see if you can work out a payment plan — and if she’ll reduce the lien to the amount you had understood the bill would be. Get everything in writing, she’s obviously a wily one.

      As for your other properties — in my opinion, if you have to put this much money into them to sell them, they’re not worth keeping. Instead, you can put them on the market as is and let an investor take them, talk to your bank about a short sale under the circumstances, rent them out or just walk away. This was your mother’s debt, not yours — you’re under no obligation to continue paying it.

      At the end of the day, you have to do what makes the most financial sense. If your plan remains to sell the properties as investments, there’s always going to be risk involved — your buyer may fall through, there might be something wrong at the inspection and so forth. Being cash poor is a bad place to start the process, a cash-out refinance could give you the capital you need, but I can’t guarantee that.

      Were it me, I’d not be capable of dealing with the loss of a close family member and disposing of their property at the same time. I would dump those houses as quickly as possible in whatever way I could.

      I wish you the best of luck in this situation, Please feel free to touch base again.

  15. Hopefully I can get some advice on this nightmare-ish situation. I am under contract with a house that my wife and I agreed on needed “some work”. House appraised at asking and Inspection was done and we signed a contignecy to get 5k for roof repair and supporting of sunroof(now part of the living room) that was sinking. After all the terms were met and agreeded on I had my contractor (my uncle who is a contractor for 20 years) take a look at the property and he informed me the roof was installed wrong and has to be re-roofed(8k) and the foundation was sinking in the living room(8-10k). That with a bunch of other defecencies that are going to put us way over budget to just make the house livable. My wife and I now do not want to get into this property but my broker is saying we do not have any other options because we already have a commitment and are not being denied a loan. Our lawyer is saying we cant backout or seller will sue. Sellers currently have our deposit and we offered for them to take deposit and cancel contract but they denied. Any ideas on how to get out of this mess? I do realize it was our fault in not having my uncle see house prior to submitting offer but he was out of the country. Any advice would greatly be apperciated.!

    1. Hi, Jonathan. I wish I could say there’s an easy out, but since you’ve already had your inspections, the sellers have agreed to make a certain number of repairs and the appraisal came out, you’re hung with this contract. You can’t get out just because you’re getting cold feet.

      But, perhaps this will give you some feeling of security. Just because your uncle’s a contractor doesn’t mean he knows everything. I know, I know… but your home inspector sees homes each and every day. He understands the variations of methods of application, such as the roof that’s in question. Like anything else, roofing methods have evolved over time.

      As for the living room, if the foundation was sinking, again, that should be on your home inspector to find. If the floor is actually bowed, this is also normal wear and tear for an older house (I have no idea how old this house is).

      In the end, you hired an expert and you need to rely on his judgement. Check your inspection report to see exactly what the inspector discovered and what he recommends. Also get copies of any quotes from contractors your Realtor secured in order to determine the amount of money to ask for in repairs. That way you know it’ll only cost so much from that particular provider.

      If you’re still filled with doubt, call the company that did the home inspection and *CALMLY* explain to them what your uncle believes he’s seeing. Ask if the home inspector can take time to come out and recheck those items for you, or if another inspector can give a second opinion. If those items are actually failing, the roof and the foundation, these are big things that they should have caught. The home inspection company may be held liable for additional repairs if they are needed, since you were relying on them as an expert and they steered you wrong.

      I’m not getting down on your uncle, but oftentimes contractors are specialists in particular areas and haven’t seen as many variants in valid construction methods as home inspectors. So, try not to panic. Your home inspector sees homes each and every day — he knows what’s typical and what works in your area.

      There’s no guarantee that you’re not in trouble, but the likelihood is good that you’re going to be ok. At this point, you need to close or you’ll be risking major problems from all sides, so bite the bullet, take the ride and hope that your inspector didn’t miss anything major (or if he did, the company will make it right without a fight).

      I wish you all the best, I’m sure once you get some reassurance that this home is ok you’ll feel much better. Opinions are like noses, everybody has one, and there’s not a single way to do most types of construction — so take a deep breath and sign on the dotted line because there’s no way out short of quitting your job or spending all your savings on candy at this point.


      PS. If you’re looking for a source of money for future home repairs, you may be able to tap your 401k, or at least borrow against it. It can make those big repairs a lot less frightening.

    2. Examine the appraisal. Question all adjustments that do not look right. Examine the description of dwelling and repairs noted for accuracy. Look to see if comparables are superior in condition or were properly adjusted. Must be market supportive. Most appraisers have problems with this. Have the appraisal reviewed by an appraiser with review experience if necessary. Especially if there are easy errors noted. Go to the comps, speak to the new owners. dig for information. Find out how the appraiser was assigned the appraisal. Was it done “as is” or subject to. Repairs need to be noted. appraiser has E&O insurance. If your lawyer works for you, he should know this. If the appraisal is no good the deal is bust. Look at all people who advised you. Did they all come from Real Estate Agent (big mistake)

  16. I can say the worst just happened to me…I was set to close on a house Friday and now I will not be able to. I got the house at a great price, great mortgage rate, and little work to be done for a foreclosure. My debt ratio was just a few percents too high, and when I say a few I mean like 2%, due to a loan that my parents took out and it ended up in my name, even though I never signed or paid on the loan. I have been dealing with this issue for 3 months now to have it removed and ended having to deal with the credit bureau to fight this out. When it was finally discussed that it could be removed, it was too late and I had to rely on too many other people. I have lost the home that I have put over $2,000 in before even closing. I’m absolutely devastated.

  17. I am in a pickle. I closed on a house while out of the country on vacation 2 weeks ago. My mother was set up as my power of attorney and signed all the docs for me. No problem, everything went fine… that is, until I got home and went into the house for the first time last week. Major electrical upgrades were NOT done as claimed by the seller before the closing took place. The seller was to remove and upgrade all the knob & tube wiring in the home. Clearly no electrical work was done. (the seller did do some other upgrades he said he was going to make however; including put in a new hot water heater, upgrade the electrical panel, replace the drain lines in the basement, etc.)

    The house closed fine and I’m moved in. I contacted my realtor late last week about it and he said he’d get back to me. I haven’t heard from him since. I think I should consider legal action. I’m not even sure I would want the seller to hire his own electrician at this point. I’d rather hire my own and send the seller a bill! Ugh, I’m about to contact the attorney that my lender and I used for closing. Upgrading electrical can be thousands of dollars.

    1. I’m so sorry, Eric, I’ve been away and am just now seeing this. Your Realtor should have been your first point of contact because most contracts require arbitration before a lawsuit. Of course, this varies based on your contract.

      I hope everything went well and you’re enjoying all the juice the electrical box can give you.


  18. Hi. I’m a first time home buyer. I’m set to close in just under 14 days. I was informed after I had submitted my offer, had it accepted, signed all necessary documents for lender, also have insurance inspections appraisal and surveys done that my down payment of 3.5 percent was changed to 5 percent. Nothing has changed since I originally got approved for the loan. I do have the funds to cover the additional leap in payment but is that normal? And secondly I have signed everything except for my actual closing can a lender back or prior to closing if everything is the same no change in income credit or debit

    1. Typically the lender is bound to the disclosure they gave you when you applied. You’ll want to dig those papers up and examine them closely — what’s on paper is what’s enforceable. That being said, if you changed programs from FHA to a conventional, you’d need a larger down payment — so that’s something else to consider. Your lender may have simply bumped you into a program that was less expensive over the long term.

      Call them and find out what’s going on.

      Good luck and happy closing,

  19. I sold a condo in orlando, FL and this is a banking Nightmare. Everything went through and my husband and I bought a new home from the sale of our old condo. We made out and banked let ruffly 50k. 4 months after the sale and purchase of our new home, I got a call from my bank saying my bank account is over drafted over 220k I almost had a heart attack. I rushed to my local bank and found out the loan company that paid use there check was as you say returned. The buyer had used a co-signer that didn’t actually co-sign she signed her mothers name. So her loan was returned. She and her family moved into my home already. It messed up my banking so badly my new loan is frozen on a house we already own and live in. I called my realtor and there office told me she was fired because of this issue they new about for the last 3 weeks and didn’t bother calling myself or my husband. Ive called local lawyers and no one will touch this case since all my bank accounts are frozen I actually only have 200.00 to my name only be default I had in my wallet. The worst is the bank is so rude and just keeps telling use we now owe them $247k because the money was taken from our account and I didn’t have it all in my account because we used it to buy another home.

    1. I’m pretty sure you win the award for the biggest nightmare. Lawyer is definitely the right way to go — a check from a bank should never bounce. Either the company who did the closing was not doing their job or the bank was doing something fraudulent. Someone’s errors and omissions insurance should be kicking in… something should have been in place to cover this sort of situation.

      Honestly, this is the kind of problem I would have taken to my broker and our company attorney, I have no idea what to tell you. But I will say this: don’t give up until you find an attorney who will handle this case. Someone will be decent. Contact your state’s bar association — they usually keep a list of attorneys who will handle cases pro bono.

      Best of luck to you, Catherine. If I won the lottery today, I’d send you a check. I can’t imagine how you’re feeling right now.

    2. This is horrible. I’m so sorry. It’s definitely a situation for a lawyer, I hope you found one.

      If you’re still in limbo, go back to the brokerage that employed your Realtor. They will have a lawyer on retainer that should be willing to help you.

      All my best,

  20. Definitely not as scary as Catherine’s, but apparently just as rare since I can find no discussion on it. Received plenty of opinions as soon as I named the issue but none appear to be informed opinions that I can take to the bank, literally.

    Here’s the skinny (I’m initially being vague to hopefully get objective answers): I (buyer) exercised optional inspection item and found an un-pleasantry 4 weeks ago that is all too often overlooked in house buying. We’ll call it (A). Bank says it just needs amendment. Seller and I work on professional estimates to inform credit/escrow hold-back (as applicable). During same period appraisal came back with (B) 5% price cut, (C) a VA MPR, and (D) an apparently cosmetic item presented as a safety issue. Of course bank(actually credit union), says, ” ALL REPAIR OR NO CLOSE”. Property is very rural with nearest town more than 10,000 over hours away with temperature challenges and lack of local skilled labor.

    Anyways, seller fine with (A, B, C, and D). I challenge bank on (D) because effecting repairs to bank’s requirement during cold season will negatively affect value and safety as work will quickly fail and need to be redone at my expense after closing. Bank says it’ll be fine for closing. I ask (D) to be substantiated in a reg/policy. Bank says it’s an MPR. I prove it’s not. Bank then says it’s a building code. I prove it’s not. Bank finally falls back to “management says so”. I table the issue so I can tackle my priority issue, (A).

    Three weeks after I notified bank of issue and after professional estimates generated, the double-signed amendment with price change and repair escrow is submitted to bank. Next day, bank rejects amendment saying appraiser didn’t ID safety issue with (A) so escrow can’t be done. I tell them this indicates appraiser did not review inspection reports provided. I ask them to push issue up to management while I socialize credit as alternative. Instead of emailing management’s response, phone tag ensues for more than a day until I find bank did a complete reversal elevating (A) to REPAIR BEFORE CLOSING status and credit is off table. They are now also telling me to provide them any and all optional inspections and efforts I exercised even if they are redundant to seller’s testing. I elected to have extensive water testing performed on top of the contractually required seller testing (which was sat) because I intended to upgrade the water filtration system with a custom installation during a pre-move-in remodel/addition.

    How can bank require my personally acquired data if it was to support actions outside of the real estate transaction. as for (A), the necessary skill set for the ASTM governed repair is not available in the next two weeks but would have been if the bank provided timely feedback four weeks ago when they were first informed. I either have to 1) accept sub-standard repairs through available local talent, or 2) missing closing date which is also when when rate lock expires. Rates actually went down but bank says I wouldn’t benefit but would be charged additional half-point to continue process another month. The reality is I wouldn’t be in this pickle I hadn’t told the bank and just handled things externally. Taking the integrity approach has put the transaction in jeopardy.

    And for those who demand to know particulars: (A) is 4.7 radon level and (D) is deck paint failure (proof exists paint from after 1994).

    Five certified mitigators within two hours of property, none available for mitigation in next two weeks. With those numbers an unskilled contractor could easily reduce levels below 4.0 but expecting anything less without a certified professional is unrealistic and naive. I was prepared to put up some serious coin to deal with radon but now a cob-job installation will make that option harder.

    Regional temperatures (almanac) do not exceed 40 degrees until after closing. Bank said painting still possible. Ironically, after pushing back on radon issue, bank has backed down on paint agreeing to escrow hold back for painting in Spring.

    I know I’m being fairly “retentive” here but I am starting a family in this home and I feel informed diligence is warranted.

  21. What do you do if you were never even offered a walk-through, and the house was in far worse shape than when you put a bid on it?

  22. Ok here goes mom and dad sold a house, all parties agreed to all terms, house was owned outright by my folks. no money down, a monthly payment, buyer assumes all responsibilities (insurance, utilities, HOA, etc) and also agreed to pay all closing costs, 10 year ballon, he has the deed, he has made five payments as of now (March 2016) but the agreement was to close Nov. 1st 2015, when mom received the paperwork some of it was wrong (so she did not sign, sent it back to title company). Feb 13 she heard from the title company saying the final “correct paperwork should be coming soon” , and has heard nothing since. I do not want them to lose this deal, but also do not want them to get screwed over. Graduated from Real Estate school in FL, and also studied law in multiple languages, but I am at a loss here, and I tend to look at things like this:

    1-Stop…don’t say THAT.
    2-Create an action plan.
    3-Focus on critical needs to fix the opportunity.
    4-Evaluate to prevent future occurrences.

    Before I go any further I want to point out one thing on the above list. I mention the word “opportunity”. I am not sure where I learned this and I am sure a reader can point it out to me, but early in my business career I was taught that there are no problems only opportunities. I was taught that we can either shrink from opportunity or rise to meet it – the choice would always be mine. I have always remembered that and each time I am faced with a little adversity, a little challenge, I tell myself this is another opportunity to rise up and succeed.

    I don’t know how to handle this, but I do know that I want the burden and property off of my mothers 74 year old plate…. Would love to hear your take on this. What is the best way to finalize the deal, not start a court battle, and close the deal ? There has to be some sort of limitations on how long the buyer can float on paperwork, when they are paying already (5X) on the property and everything has been transferred.

    1. Call the title company. Something’s wrong on their end. This is probably a very minor thing, errors and omissions happen all the time at closing. I don’t know what paperwork is problematic, so that’s the best I can offer at this time.


  23. I am currently involved with a nightmare of a situation. I am the seller of a condominium. The deal was moving forward great but then a few days before closing I learned that the closing Attourney will not clear the title. You see my complex is stated to have a section indicated to be for residents over 55 only. It turns out there is no documentation stating which units are 55+ so the closing Attourney will not allow the title to clear!!! It was ok when I bought four years ago and it was ok when the last unit sold a few months ago. Now when I’m selling I’m told I can’t sell, even though I hold in my hand a title that has been clearly insured. I really don’t know what to do. I have an attorney and he is working very hard but I’m feeling overwhelmed.

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