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. If you are asking for the seller to provide money to a contractor at closing, will someone check your contractors licence number to make sure it is active?
    I have a highly recommended contractor that I want to do the repairs, however I looked up his license number and it shows that it expired in November will this be an issue at closing? Please help!

    1. There’s a lot to this question, but basically it boils down to the type of work being done. If it’s not work that requires a contractor’s license, you’re probably ok to use your guy in a handyman capacity. It’s also possible he has no idea his license is expired and could clear it up easily if he did. When I held a General Contractor’s license, it was a very simple matter to resolve license issues, but it all depends on the people doing the licensing.


  2. I just closed on a home yesterday. Yay, right? That’s what I thought, until I discovered that my $8,000 concession from the seller to replace the roof wasn’t included. Now, my lender has pulled the funding claiming they didn’t know the property needed repairs that would total to that high of an amount. They’ve had the addendum to the contract stating the sellers agree to pay me $8,000 at closing, so I’m not sure how they missed this. I’ve sent them the home inspection and am waiting for them to review. The home has had many renovations and is in overall great condition, but the roof is original (75 years) and is asbestos. It had one section that showed signs of a leak, but is in pretty fair condition otherwise. Because of the material, we need to do a complete replacement – which is why we’re receiving the large concession. Is this normal for a lender to stop funding on a home that needs repairs?

    1. It’s not normal for a lender to do take backs after closing, no. That’s never normal. It’s happened at least twice to people in this thread, though… so there’s that. Hopefully they’ll re-fund your loan or roll you into a product they’re willing to take this repair on. If it was an FHA, a leaky roof should have never passed — otherwise, I’m not sure what happened.

      Good luck and let us know how it’s going.

      1. After waiting for two days, I finally got the “Ok, we’ll give you the funding” phone call. It was under the condition, though, that the roof needed to be reinspected by the bank, and the title company would hold the concession money. They would pay the roofers directly, upon a passed inspection, and if any money was left over it could be given to me. Seemed a bit odd to me, but I was told “this happens all the time.” They also referred to my closing as a “dry closing” since I was able to sign all the paperwork and have keys in my hand, but the funding was not provided. At that point, I was happy I didn’t need to start the house hunting process all over again. This was with a conventional loan, and luckily remains as one.I just moved into my new home, with a brand new roof, and am happy all that is done with. Now…to unpack all these boxes!

        1. This is awesome news!! And yes, the escrow you’re describing is a very normal situation for repairs that don’t get made before closing. We had one on our current house, in fact, since our sellers were none too motivated to finish up the loan.

          I’m so glad it worked out for you — and good luck with all the boxes. We moved last summer and I still have one or two that need unpacking…. 😉


  3. I’m selling a house, shortly before closing the buyer had financial problems and no longer has the money to close on the loan. The loan fell through. What recourse do I have. I have been told retainer for lawyer will be big bucks. Contract stated if buyer couldn’t get approved for loan they get earnest money back. Am I just hosed?

    1. I’m way behind on answering these, but I’ll start with you and work my way back down.

      So, here’s the thing. If your contract included a financing clause or a financing addendum, you agreed that the buyer could terminate the contract if they couldn’t get financing. Having no money usually creates a situation where they can’t get financing.

      Does this suck? Yes. SO, SO much. But, probably all you can do is brush yourself off and put that house back on the market. Make sure your agent specifies on the listing that it fell through through no fault of your own. On my own properties, I have asked for copies of home inspections, etc., from the ex-buyer and provided those for future buyers to examine while looking at the home. Sometimes it shortcuts the next sale and makes it easier all around.

      I’m really sorry this happened, but real estate is a twitchy mistress. Hopefully the next buyer will be much better — after all, the market is about to heat up for the year. Good luck on the next sale.


      1. I moved across the country at our initial closing date. Now I’m freaking out about maintaining a house half way across the country. I also had a contract where I moved waiting on funds from the sell of my old house. Is it still your opinion it would not be worth while to sue? Thank you so much for you quick response!!!

        1. Typically, what happens when you sue is that you not only spend a great deal of money to collect a small percentage of the contract amount, but you also tie that house up. Meaning you can’t sell it to anybody else. That’s where the biggest rub comes in.

          In your case, I’m not convinced you have grounds for a lawsuit (check your contract) and what will ultimately happen is that you’ll spend a lot of money for nothing. Even if you did and you won, you’d still have to figure out how to collect the money from your buyer, who is obviously broke — a judgement is only the beginning.

          I’m sure you can make some sort of arrangement with your current contract to either convert to a short-term lease or extend the closing date since your sales contract fell through. That’s not unusual and most Realtors know how to handle it.

          Again, not having all the details it’s hard for me to make a good judgement from here, but in general in a healthy market, your best bet is to just put your property back up for sale. Since you’ve most likely agreed to a financing clause and made it clear that your buyers are broke, you’re going to spend a lot of money to recapture nothing or almost nothing. From a strictly financial standpoint, you need to get that house back on the market and let this buyer go.


  4. I am buying a house in south Georgia. Our loan has a locked in rate until April 8th. Well my loan officer did not get done in time with our papers in time so we will not be buying our house before our locked rate expires. She is trying to get a free extension. I am in a complete bind right now becuase our closing date was April 8th and now she has changed it to April 21st. Theres literally nothing we can do but wait. I am worried that she will not get the free extension and will have to find a new lender to finish up our loan. In your opinion what should we do?

      1. In my experience, USDA mortgages are the most difficult to close. She’s probably got it all in hand, it’s just taking longer than normal. I’d wait and be patient as possible. There’s a lot of stuff going on in the background right now. Just keep your Realtor in the loop so they can be as annoying as they can to the lender. 😉

  5. This is a question for my sister, not myself. She purchased a home in Jan. All seemed good to go. Move in date of March 31st. Final inspection March 31st. Seller refused to provide final inspection. My sister found out that apparently there was a lien on the house, and the bank apparently said no to selling and they were keeping the home. To sell at a higher value (since the market went up almost 60k since Jan).
    Now my sister is out of this home, the bank owns it and is selling at a much higher value.
    Who’s at fault here? Should the lawyers have known this, or the real estate agent? Is there anything she can do to be somewhat compensated for how much the housing market has gone up over the last few months? She signed the papers, gave the down payment, etcetc. All looked good and this happened…

    1. This is an incredibly sticky wicket. Yes, the sellers should have known there was a lien — if not, it was their responsibility to find out before they put the property up for sale. So, the sellers are clearly at fault.

      Remedy, however, can be difficult. Your sister’s contract should spell out the potential remedies — here we use a form that says the injured party (your sister) is entitled to 10% of the agreed upon sales price in compensation. She’ll have to check her contract for the exact terms she and the seller agreed upon.

      The tricky part in this won’t be proving fault — I think that’s clear enough. It’ll be actually collecting. In most states the way it works is that you go to court and get the judgement and then you’re on your own to collect. If the guilty party doesn’t want to pay, it can cost more than you’ve won to try to force it.

      That being said, it sounds like this is a valuable market, so it might be worth the effort. She may also be able to pursue arbitration, which is much easier and cheaper for her. Your sister needs to talk to her Realtor about this and they need to talk to their brokerage lawyer to help your sister pursue a remedy that’s fitting.

      Best of luck — let me know how it goes.

  6. I have a crazy situation. I am buying my first home and although the process was a headache, everything was going good until last Thursday. My LO told me we would close Monday (yesterday), but she called me back a new condition the underwriter came up with that morning. I took care of it and it was cleared that same day. I signed the Loan Estimate and expected the CD on Friday morning to prepare for closing. The issue started when my LO, realtor and processor did not answer, respond or return any of my attempts to contact them to see why I haven’t heard from them. Today is Tuesday and I have yet to hear from them. I have tried on numerous occasions to reach out but NOONE has called me back!!! I got so angry to where I emailed a nasty one that said how upset I was at the lack of communication and how I have done everything they asked but now I can’t even get a simple update. The agent that represents the house I’m buying got a call from me today and I explained to her the situation. She stated she gets the same cold shoulder from them as well, but she popped up at their office. When she did, they told her that we were closing this week. I got even madder because how can we close and they haven’t tole me ANYTHING. I’m so tired of them that I want to move to another company.
    With it being so close I hate to start over, but maybe someone else will actually work for me and not have me feeling like I’m running behind them just to get a simple answer. My biggest thing was, am I closing or not because the last thing I was told was I was to close yesterday. The original agent said the only way she knew something went on was when she was expecting me at the closing but no one showed up. I swear!! I’m so beyond pissed, I could scream!!!!
    If I move to a new company, am I entitled to my file in hops that they won’t mess it up out of spite?

    1. If you move to a new title company, you’ll have to start all over. You’re not entitled to the file because that’s their file, their title insurance, their research. The new title company will have their own title insurance and their own title mill. Sorry. Hang tight and try to grin and bear it, sometimes these things get out of control and it’s no one’s fault.

      Your Realtor is doing her job, from the sound of it. Keep on her and she’ll keep on everybody else.


  7. We just closed on a VA foreclosure last Friday handed over my 31k for closeing. We we ere told that the VA had two documents to get done and it would be later in the day so we would have the keys that afternoon. We have some renovating to do before we move in so time is of the essence. I was asked to sign an extention that evening because the paperwork still wasn’t done. Monday I was asked again to sign another extension till this Friday. The check has cleared and I still have no keys . I was told now that we’re waiting on Hud to approve the transaction? Have you ever heard of something like this ? Our house , is sold so I have to move out in 19 days. But can even start renovation of the new house to get it move in ready. Very frustrated as my realater has been real crappie when we need her out at the property to open it up for some of the contractors to give us bids for the repairs. She even left my wife because a contractor got lost on the way there and was 8 minutes late. So he could only look threw the windows .

    1. I haven’t sold many VA foreclosures myself, but I’ve heard they can be very troublesome and slow. I’m sorry your agent sucks — there’s no excuse for that sort of behavior. Are you guys in possession now?


  8. I am in the process of purchasing a rehab home, mid way we had to switch loans to an FHA 203K loan. We have almost everything processed and the close date is suppose to be the 21st of April. We still have a final appraisal to make sure the value after rehab is high enough for the loan.We have asked for an additional 7 days to make sure the report is back in time and deal with TRID (mandatory 3 day wait time). Now the seller is saying there is no way we will even make the deadline let alone the additional requested 7 days. Does anyone have any advice for how I can get the seller to have confidence in our deal and give us the extra time needed?

    Thanks in advance,

    1. Wow, Angela, I am so sorry that I’ve let you down. It’s the 22nd, so I hope that you’ve managed to get a few more days. In these situations, it’s highly dependent on the market — if it’s hoppin’, it can be hard to convince a seller to wait — they may believe they can get a better deal if they put their house back on the market. Otherwise, the hope is that they won’t have to start from scratch trying to find another buyer, which can be time consuming in a good year.

      I hope everything worked out for you. All my best.


  9. Hello i am in the process of purchasing a new home, my old home was destroyed in a fire on june 29,2015. I settled with my mortgage company for 52,500 but i owed about 64,000. It was a mobile home that i added on to. The problem that i am having is on my credit report it says settled for less than full amount. But i have mortgage company sent me the title and everything. The problem i am having is the people i am trying to buy a home from considered it a short sale. But the papers and Deed i received from the mortgage company says paid in full.

    Thanks in advance


    1. Sorry for the delay. Sometimes this page notifies me about new messages and sometimes it waits a week — it’s weird. Anyway…. this is an easy one. In most states you can get a concession for appliances and carpet and that sort of thing, or closing costs. It’s typically up to 3% of the loan amount for conventional or 6% for FHA. However, that amount normally can’t be given to you in cash.

      If you want specific appliances or specific carpet, what you should ask for is that your closing costs be paid and instead pay for those things yourself outside of closing. That way you keep your cash and still get to pick your colors or appliances or whatever. If it’s not that big of a deal to you, then just ask the seller to have those items installed prior to closing.

      If you just want cash, well, that’s not how this works.


  10. Hi. Look. I really am Confused. Everything was going well. Ready to close. I was going sign paperwork and get keys for my home on Monday. And bam. I had lien from 2004 rear up. Now closings on hold and I have not received one call from realtor,Escrow, or lender. I DID SOME RESEARCH THAT says in California after 10 years if they did not renew judgement it was void. They have not. I did fill out a paper with escrow so they can have release on lien. It’s been a nightmare. I’m just sad. I mean all calls have stopped cold turkey. I also have a bankruptcy in 2013,which should have taken care of this lien. Very scared after a month of work . My lender going deny me the loan. Help with suggestions. Ouch Mary

    1. Hi, Mary. I’m sorry I haven’t gotten back to you sooner… I’m sure that’s not helping your anxiety. Right now, everybody is probably putting their heads together trying to figure out how to deal with your lien. Considering the BK, you should be clear, but only if the lien was included in the paperwork. I’d bet that’s where they’re at right now — trying to track all that down.

      I don’t know if this is any comfort at all, but besides your Realtor and Lender and Closer being generally good people, closing loans is how they get paid. Your Realtor mostly likely on commission (and maybe your Lender, depending on the setup) — so at least one person in this transaction is highly invested and won’t get paid unless it completes.

      Call your agent today and ask for an update. Tell them you just need to hear anything, even if it’s an “I’m working on it,” because you’re worried. Do the same with your lender. Let them know you’re still invested in this transaction, that you had no idea about this lien and hopefully it’ll resolve quickly. I’m really surprised your bank’s underwriters didn’t find it with your initial credit check.

      Best of luck to you,

  11. We bought a townhouse last May and it’s almost a year later and we’re still paying our mortgage to the mortgage broker each month. They have been unable to sell our mortgage to a bank. Should I be concerned? Will there be any sort of problems if they can’t sell our mortgage?

    1. Nah. No bank or broker sells them all — a few are held to help keep the company profitable in the long run. You’re just one of the lucky ones. 😉 You’re probably considered extremely low risk, so they wanted to keep you in hand. Congrats. 🙂


  12. Hi,
    I’ve been scouring the Internet all day for help. Finally found this page! We were set to close on our dream house this morning at 9am. At 8:30 am, yes 30 minutes before, we received a call from the title company saying they had just discovered the owner owes 18 thousand more on the house ( late mortgage payment penalties) and she didn’t know. She does not have this money and isn’t even making any from the sale of her house. What can we do? We already packed and I quit my job (moving far away). The bank wants to foreclose on the house now and we won’t be approved to buy a foreclosure

    1. You know that face a doctor makes when he has to tell you that your mole isn’t actually a mole? That’s the face I’m making right now. Because this is really bad news.

      Your options are extremely limited. Normally, I’d say you’d have a really strong lawsuit for failure to perform, but since your seller can’t cough up the $18k she needs to be able to clean up this mess… I really doubt you’re going to do anything but spend a lot of money and time for nothing.

      So, here’s the good news. I know, you thought this was the end…. and when I say “good news,” keep it relative to being homeless and in the streets. You’ll get your escrow money back (you will need to pay for any inspections or appraisals that were already performed, unless your bank is willing to foot the bill). You’re free from any further obligations related to that first property.

      Now you can start over. You can go revisit your #2 best and favorite, if it’s still on the market, go look at some new ones that have popped up, and look and look and look until you find one you can make an offer on. If your agent is motivated and you’re flexible, you can probably even get another one under contract in a weekend in most normally behaving markets. There are always exceptions, so please don’t hold me to that.

      Since your loan was all but funded, a lot of the legwork there will be already finished, so you may be able to close on a tighter schedule. Instead of four to six weeks (or six to eight, whatever happens in your area), you might be looking at two, three or four weeks, provided the home you choose doesn’t need any time-consuming repairs.

      What do you do until then? I don’t know how old you are or what experience you have moving into a new area, but just in case, I’m going to touch on that. Because we’re here to help. Feel free to disregard this entirely.

      Option #1. If you’re going to dive right back in to the market (I would since you’re all but there) and the job’s already started, check out an extended stay hotel or a hotel that offers business class accommodations. These aren’t your scary sort of daily/weekly rental hotels you see in movies, they’re decent joints. Extended Stay America has the benefit of being both inexpensive and clean, which is what you’re looking for — the quarters will be cramped, but you’re going to be busy with house stuff, so if you’re not at the office or out in the new city, you’ll be sleeping, right? **This may be trickier if you have a pet.

      Option #2. If you find a house right away after checking into that extended stay hotel, your bank can assure the current owners that your loan is solid as a rock and the house you’re looking to buy is VACANT (capitalized because that’s important), you can ask the sellers to give you occupancy prior to closing. You’ll more than likely have to pay rent for the time you occupy before closing and you’ll have to have insurance in place, but it’ll might be cheaper than living in a motel in the long run.

      Ask your agent to explain your problem to the sellers of said VACANT home, give ’em a sob story — but don’t expect to get a price break. You risk a lot here, putting your cards on the table and all, but at the same time you’re in a pickle so you need to find someone in an equally tight spot and help each other out. Vacant houses often are homes that were initially overpriced and now no one will touch with a 10 foot pole. Two things: get a letter from their bank assuring you that the payments are being made on time, just for your own protection against a repeat of your first closing, and make sure the inspection has already been completed before you move in.

      I hope something in this response has helped, and I sure hate that this has happened to you guys. These are the kinds of things that sour people on every participating in the real estate market again. Please understand that for every nightmare you guys bring here, there are a thousand closings that go without a hitch. Maybe more than that, I’m not sure there’s any way to really measure it. I continue to be astounded at the problems you’ve managed to bring to my attention.

      All my best, Brit — I hope that things work out for you. Please keep us posted and feel free to ask any other questions you might have down the line.


  13. Need help now. I have closing date I am the buyer, actually only my husband, I have beeen handling everything by internet emails. We were in mexico when he signed, we skipped the inspection i had someone look at at only for me with realtor. They asked for earnest money we paid that, they asked for proof of funds and we never provided because I had no proof. I was waiting on money to come in to buy in cash. We don’t have the funds and the closing date is soon. I told them we need to cancel and when we came back to our state we finally got a walk through but not everything because it was getting dark. It is a duplex only half was livable I knew that but I thought I was ok with that. We thought it was too much work. Realtor didn’t check off on contract whether he refused or accepted deal but he signed all papers and didn’t mark other areas also. He didn’t date areas correctly either, forget to add the ending year on a few areas. Can we get out of this without going to court?

    1. Hi. You got lucky, I was just responding to Brit down there.

      So, there’s a lot I don’t know. Is this a completely cash deal? Is there any financing (and a financing clause)?

      From what little you’ve given me, I think you’re in trouble. I don’t know what state you’re in, but one or more of you is probably on the hook for this property if it was a cash deal.

      What will happen if you fail to perform (aka. close) can be very ugly. Especially if you’ve promised a cash-only deal and now it’s falling apart because of a mix of nerves and lack of funding. In my area, the sellers can pursue you for 10% of the purchase price, plus any actual damages (for example, if they had to uncover a septic tank to test it and it was damaged in the process — that could be on you). This will all be covered in your contract.

      The seller will not care that you waived your right to an inspection or that you didn’t both lay eyes on it before closing. They only care that you agreed to take it and then didn’t. Will they sue you? I can’t say — but it might be a better idea to figure out what the repairs will cost and compare that to hiring a lawyer and the very likely penalty that will be assessed (again, outlined in your paperwork).

      If the repairs are cheaper, explain that your funds are delayed and ask for an extension. My bet is that they’ll be much more willing to do this than they will be to let you out of this contract.

      If you can close and choose to close, you can always consider owner financing this property to someone who is willing to take it on as it sits. You might make a little extra money on it, and you’ll certainly be spared a lawsuit. This is something to discuss with your agent, since I have no idea what the market is like or what the property needs.

      I hope it works out for you, but in the future please always have a home inspection for your protection. 🙂


  14. I am the victim of a problem I never seen coming. All the i’s dotted and t’s crossed…never compromised any part of the agreement. The broker and the lender were given every single document they needed and asked for.. The sales agreement was this: 135,000 including the cost of 11,000 for the upgrade of knob and tube wiring to current code. that was 1 month ago. we were approved. Two days before closing they asked for our insurance verification, it was provided. They then wanted the quotes for the electrical upgrades…3 were provided immediately…they already had 2 of them. They declined the loan after we already signed because of the knob and tube wiring. We had already guaranteed our insurance company that it would be done within 30 days. The lender admitted to our broker that she had not thoroughly read the previous paperwork, now that she has…she has said knob and tube is an absolute no no with no exceptions. We have done everything asked of us. Now I am in danger of losing my significant deposit. Closing is Friday….I am frustrated and angry. Is it worth seeking legal measures against them?

    1. Is this an FHA loan? If so, you may be able to extend the closing, have the work done and then have the appraiser come back and verify that the work was finished. Depending on the size of the home and the speed of your electrician, this sort of work can be done in four or five days at most.

      Under these circumstances, most electricians will be willing to be paid at closing. That way everybody can breathe a big sigh of relief, your electrician is motivated and you can move to close.


  15. I’ve closed on my loan and it’s been three days – Monday through Friday for funds to disburse but now my lender is saying they can’t for another two more days. It’s the end of the month and now my mortgage will be affected and if not funded in time. what can I do?

    1. Boy, you got me. If it’s closed it should have funded. I’d call the title company and see if they can find out what the hold up is. Your lender might not be telling you the whole story. Also, if it funds on Monday, it’s still early enough in the month that it could be treated like an end of the month closing, but that’s a question for your title company.

      Good luck.

      1. The title company is not saying particularly why just that they could not guarantee disbursement and the file will be funded by the mortgage company and depending on the time title receives, this most likely will not go out until Monday. ??? don’t understand the problem. Today is suppose to be the funding date.

        1. I don’t understand the problem, either. It’s not common for a loan to not fund at the table. Are they telling you what the consequences will be to you? It may be more of a heads up rather than a thing meant to scare you. Who is the lender?

          1. If they’re not telling you there are going to be consequences, why are you assuming there will be? Sometimes it’s just a matter of paperwork going in the right place. Try to breathe. Did you call your loan officer after this exchange? How’d it turn out?


  16. I had a court ordered date to close by in my difference. I had to take my ex off my premarital house. It was a difficult divorce. Since October I have been pursuing a specific mortgage. Delay after delay I finally closed on 20th of April. While signing I realized the deed transfer forms missing. The mortgage company knew from day 1 why I was getting a mortgage in my name only as I gave them the divorce settlement paperwork. Over a week delay and finally title company gets transfer documents from mortgage company. Title company wants currently dated and notarized (2013 in court at time of divorce are not acceptable. Now old mortgage company just called to say my mortgage is overdue. I thought that part was closed after signing. Upon questioning if they could at least put mortgage through as I qualified in my own right. They never returned my call. Finally 8 days later they send me deed transfer forms for a difficult ex to sign. I sent papers return receipt to four different addresses, return receipt of course. If no response another delay to get a contempt-of-court order. What are my options at this point? Somebody clearly dropped the ball.

    1. I appreciate that you’ve come to me with this particular problem, but I think it’s well beyond the depths of a Realtor and should be handled by an attorney.

      Good luck!


  17. I am in the position where I had to get out of the house I was renting because of hazards the landlord refused to fix. After exploring the options of renting another place, I refuse to spend that kind of money when I could be investing that into mortgage. It took several lenders to listen to me because of not being financially prepared to move. I finally found someone who said that they could help me. After I completed the initial application, she called me the next day and told me that everything looked good and I could start packing. She asked me if I had a realtor which I did not. She provided me with one and told him specifically what my maximum loan would be. The following week I Look at five houses. I immediately fell in love with one of them, made an offer, and the seller accepted.

    I am now past due diligence and the owner had made all of the repairs that I had requested. I am three weeks out from closing ( end of April, 2016 ) and I get a call from the bank headquarters which was different then the location of the loan officer that I was working with. The bank proceeds to tell me that although I have provided all the documentation that they had requested, they were unaware that the government had changed FHA guidelines in March, and I suddenly did not qualify because of one issue.

    The worst part of this is, I have lost my earnest money, spent money on an inspection, and spent money on an appraisal. My question is, do I have any recourse with the representative I was dealing with because she led me to believe that everything was OK when it was not? I would have never even looked at the house let alone make an offer on one if I was unaware that this mortgage was not going to happen.

    The seller is up in arms because her due diligence expires on the house she is purchasing in about two days and she was relying on the sale of this house to move. I hope she understands that this was not my doing.

    Do I have any recourse with the representative for misleading me and can I be sued by the seller?

    1. I’ll be curious to see what Kristi says. In my situation, my realtor put a mortgage commitment contingency in my offer, which protects you “the buyer” from not being able to walk away if your lender can’t give you a mortgage commitment. Hopefully, your realtor did this and you’re covered.

    2. Wow. I must have missed this back when it happened, and for that I apologize. This page sometimes moves very quickly and comments get buried.

      So, by now all of this should have resolved. Since you more than likely had a financing contingency, you should have gotten your earnest money back, but the inspection and appraisal were on you. The seller of the other house should have been advised by her own agent that these things happen sometimes. And they do. There’s not a ton that can be done about it, really. If you have a financing contingency, you’re in the clear — your purchase was always contingent on your ability to secure a loan.

      I don’t mean this to sound negative in any way, but I’ve dealt with a lot of lenders and when you go to several that tell you they can’t help and you finally find one who says it’s not an issue — not “We’ll try,” or “This might be hard,” or even, “I don’t know, but the worst thing that can happen is a rejection,” well…. it’s sort of a setup for what’s happened.

      Sometimes they can actually get the job done. But they charge you for the privilege and they really take advantage of the situation. We used to call these guys “dirty paper” lenders under our breath because back in the day they were the ones pushing those no doc loans that got us all into a lot of trouble.

      Do you have recourse? That’s a harder one. My gut says no, but because of the document shuffle, I’m honestly not sure. You’ll probably want to consult with a real estate attorney if you really want to know if you could seek damages. The problem with damages, in a legal sense, is that you typically have to prove that someone has caused you a financial burden. Although there are some types of punitive (punishment) damages, they’re harder to secure.

      Unfortunately, in the real estate industry, there are a lot of situations that end up being “just one of those things.” Situations that don’t have a good solution. And I hate saying that’s just the way it is, but unfortunately I don’t have anything else to say. A home inspection, at the end of the day, is a service you hire. It’s like if you had a car inspected because you were interested in buying it — you’re hiring someone else’s expertise. An appraisal is the same type of thing, though I do genuinely understand the frustration there. I don’t understand why they can’t be recycled for other buyers, but it’s not generally allowed.

      All my best,

  18. So this is my scenario, I found this home (short sale) and signed all the docs at the title company on Monday. On Wednesday, my realtor told me that my lender’s underwriter is requiring repairs before the loan is funded. My COE was last Friday. I did al the repairs and had an appraisal approve it. Now we are just waiting for the short sale extension approval (for 7 days). My lender said as soon as we get the SS approval extension and the appraisal reinspection report, we’re good go. My loan rate will expire on Wednesday 5/4. I just hope and pray that we get all the necessary docs in place before my loan rate expires in 3 days!! Have you had this kind of scenario? Underwriter throwing a curve ball the last minute ??? Please advise …

    1. Hi. I’m sorry, sometimes we get behind on these messages and we don’t catch them in time for things like yours to be timely enough. I hope you found a solution in time. And for the record, last minute problems happen a lot, especially with complicated cases like short sales.


  19. My question is our sellers are moving out Saturday and we were told we could move in Saturday afternoon. They are now stating (per the contract) we cannot move in until Monday because she has a cleaning crew (which we did not request) coming in to clean for 3hrs Monday and finish up Monday but we are not allowed on the house until they’re finished. This will ultimately cost is $1680 in storing moving trucks, hotels and boarding for our dogs. What were to happen if we showed up and camped out but didn’t move our furniture in (because our trucks won’t be available) Saturday night? Are there legal ramifications to us and our legally owned home?

    The seller has been lying about things we said and wanted that were boldface lies. She is also saying we had flexibility in our move so it was ok. We do not. We have to be out of our current home Saturday at 12.

    They are not responding to our letter requesting either. Completely ignoring us. They may also ignore our request for a final walk through.

    What legal means do we have to camp out Saturday and/or have a final walk through also?
    Thank you so much.

    1. If the contract says you can’t move in until Monday, you can’t move in until Monday. Anything else is just a gift on the part of the seller. I wish I had better news, but… that’s about all I have. Legal ramifications could include (depending on the laws in your area): being charged with harassment, damages somehow involving impeding their move… that could be something a lawyer might dream up… things of that nature.

      You may just have to rent a storage unit short term. It’s a pickle, to be sure,

      As for the walk-through, if that’s specified in your contract, you’re legally entitled to it. Just go over there with your agent. Barge in if necessary. Your agent’s broker should be calling the other agent’s broker if they continue to stonewall you. Time is of the essence.

      You can still walk away from this deal if they refuse you a walk-through you’re entitled to. I know it sounds crazy, but remind this seller of that. Be strong. Speak softly, but take no shit.


      1. Thank you so much. We’re moving in Monday but have a walk through. They continued to be difficult until We found a “loophole.” They lied (inadvertently or not but still provided a loophole) about when the septic tank was pumped. So we said unless they legally signed off on a Monday move in and our final walk through then we were walking. It was the fastest they have ever signed anything back. Usually it was days before they signed.

        Still uneasy about closing, moving in, and afterwards living in a house where people are mad at you. But we have new locks to install Monday and hopefully someone coming to bless the house. Yikes. Thanks again for your reply!!!

    2. where were the professionals during this transaction…I say once closed that’s it unless the owner pays you rnt till you can get in….and usually if you work it may be hard to move on a Monday…and that really sucks

  20. Hello, I have a dilemma ! my husband and i closed on our house on 4/15/2016 and the sellers realtor is demanding money from us. Apparently the seller paid on a loan for the utlitity bill for 300 dollars and the realtor said that we needed to pay that money. They said they need a check or they are suing ! can they demand a check outside of closing ? is this an ethics violation?

  21. Hi – I recently bought some vacant land with a pole shed on it. The listing stated that there was electric to the shed but the seller did not have it turned on After I closed, I contacted the power company to get it switched over to my name. Not only is there not a meter on the property, they will not put a new one on unless all of the lines are replaced (they are saying the lines are too low). It is going to cost me about $3000 to run the lines. I am working on buying an adjacent piece of property from the same seller. Would it be inappropriate to lower the offer by $3000 to compensate for the incorrect listing?

    1. Heck no. That listing is a contract of sorts and the power should have been serviceable. I’d say you should not only make that $3k lower offer, but explain why. Hopefully, the seller will appreciate that you’re not taking further legal action (you may or may not win, but you certainly could try and that would be expensive and annoying for them) and at least meet you somewhere in the middle.

      Good luck!

  22. My scenario is quite unique, at least that’s what I think. I am supposed to start closing in a week (15 May 2016) and my lender (VA) is giving me problems. My promotion that will put me over that debt to income ratio will not happen until 1 June 2016. I am buying new construction so I would like to know if it is unreasonable to ask the builder to delay the start of closing process 30-45 days? Any advice or help would be greatly appreciated.

    1. My stepdad was a builder before the economy destroyed the world as we knew it, and back then he’d probably throw a huge fit about someone asking for that sort of delay. However, we were pretty small potatoes, and at the end of the day, it’s always easier to work with an existing client than to go out and find a new one.

      In the future, make sure everybody knows what’s going on long before closing, especially in a situation like this. Your builder knowing that he could have been working elsewhere instead of hustling to get your home closed first would have made him a lot happier camper, but at this point it is what it is. Just keep everybody in the loop, make sure all parties know exactly what you know when you know it, and it’ll be as smooth a ride as it can be.

      Hopefully you have a Realtor involved who can help keep the transaction alive. This is one of the many skills they bring to the table — acting as the middle man is a highly underrated ability. 😉

      Good luck!

  23. We are closing our house contingent. We were told the house closes on Tuesday and we have to be out that day by 6:00 PM. But it sounds like we won’t get our funds from escrow till the next day (which are required for funding the next home) So It sounds like we have to be out of the house and have a 1-2 day lag between having to be out and being able to move into the new home – that sounds wrong to me – seems like every contingent sale would be a nightmare – Any feedback or advice would be appreciated

    1. Hiya SJC.

      Are you doing both closings at the same closing company? If so, they’ll handle the paperwork shuffle and it won’t be an issue. If you’re closing at different title companies, just check with each to ensure they’re both aware of the situation. Around here, we call these “dominoes” because one sets others in motion (clever, right? You don’t have to laugh, it’s ok.). Anyway, dominoes are really common, the closing companies / title companies know how to handle them provided they’re aware that’s what’s going on.

      I’d not worry too much about it. I’m sure it’ll be fine as long as everybody is staying in communication.


  24. I’m buying a home and my banker told me that $3000 would cover the closing cost, we signed paperwork locking a rate of 3.25%, after a few days they changed my rate to 3.75%. My banker stated that $3000 wasnt enough and if I wanted the 3.25% i would have to come up with $1300. I argued my point, she then lie saying she never said $3000 would cover it, I found the email confirming that she did said $3000 would cover, so she went down to a 3.35% and said I wouldnt have to pay nothing but the downpayment. Closing coming up soon, I asked how much money I would need for the closing day and it was $1300 more than what it should have been. Whay should I do?

    1. Your banker should have provided you with a Good Faith Estimate the day you locked your rate or when you applied for the loan. If that’s $1300 off, then go find a banker who isn’t such a train wreck and tell your Realtor what’s going on. They can assist you in the search, maybe even get someone moving to help you close quickly.

      If, however, the GFE shows that you needed that money all along, then you agreed to it, even if your lender verbally told you something else. And I’m sorry to say it, but you have to read all this stuff carefully.


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