What Happens To A Real Estate Closing If Buyer Cannot Get A Loan?
If you are in the process of selling your home, you will probably be very excited when the agent or attorney notifies you of the date for the real estate closing. The closing is used to transfer ownership of your house to the buyer, but what happens if the buyer suddenly cannot get a loan? Here are several things to know about this issue.
Closing Gets Cancelled In This Situation
When a person wants to buy a home, the sale cannot take place until the loan is approved and ready. If the buyer suddenly cannot get financing for the house, your closing date will be cancelled. The buyer will then have some decisions to make about this. The main decision is whether or not to try getting a loan with another lender, or to simply cancel the entire deal and not buy a house at this time.
This situation is bad for both parties involved. The buyer may be extremely disappointed if he or she cannot buy this house right now, but you will also be disappointed, simply because you expected the deal to go through.
Reasons This Happens
Most homebuyers will typically get preapproved through a lender before shopping for a home. A preapproval basically tells a buyer that he or she should be able to get a loan up to a certain amount of money as long as everything with the house checks out. From the time the preapproval occurs to the time the closing date happens, a lot of things can happen that may change the buyer's financial situation.
For example, if during this time the buyer gets a judgement placed against him or her, it could knock the person's credit score down to a point where he or she no longer qualifies for the loan. Another thing that can occur is if the buyer decides to buy a new car or rack up new credit card debts. These actions could also cause problems with the person's credit score, and they may cause the person to no longer qualify for a loan.
The Effects On Earnest Money
As the seller of this house, you may feel that it is unfair that the buyer can simply walk away from the deal with no consequences. Unfortunately, though, there is not much you can do about this. You will most likely have to return the buyer's earnest money to him or her, and you will have to begin again looking for a buyer for your home.
If you are trying to sell your home and want to avoid problems like this at the real estate closing, you may want to hire a real estate attorney to represent you in this matter. Contact an attorney like Byron Huffman, PC for more information.