7 Real Estate Deal Breakers to Avoid

The house is yours—almost. Make sure you don't fall victim to these common pitfalls that might break the deal.

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  1. Sold!

    Soldhouse

    The seller accepted your offer! The good news: It’s all over but the paperwork. The bad news: Plenty of land mines lurk in that paperwork. Beware of the seven deal breakers that follow, which have been known to unravel even the most sewn-up offers.

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  2. Know Your Limits

    Expensivehouse

    Don't make an offer you can’t deliver. If you win a bidding war with a check that the seller can’t cash, you have actually lost. Know the maximum monthly housing cost you can afford, and negotiate accordingly. Your maximum has to take into account not just the mortgage but also taxes, fees, and insurance. If you make an offer based only on the biggest mortgage you can get, those other costs will put you over the limit, and you might have to rescind your offer.


    Related:  Picking the Right Mortgage

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  3. Credit Boomerang

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    The lender will examine your credit report right before closing. If you’ve run up charges, as you might if you've purchased new appliances or furnishings, your credit score might drop, which can in turn affect your mortgage rate and fees.


    Related:  Clean Credit Wins Home Loans

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  4. On the Books

    Savings

    Be careful about committing income that a lender might doubt you have. Commissions, royalties, and earnings from self-employment—full- or part-time—that have come through for you in the past may not in the future. A skeptical lender might not let you count those types of earnings as income.

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  5. Miracle Down Payment

    Cashhouse

    How, exactly, did you assemble your down payment? Money that magically materialized in your bank accounts will draw a lender’s scrutiny. You must be able to prove that any such money is a genuine gift or it might not be counted towards your home purchase.


    Related:  What's Up with Down Payments?

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  6. Leading a Rising Market

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    If the appraiser determines that you paid too much, one of two things must happen to align the sale price with market reality: You must come up with more money or the seller must come down in price. If nobody budges, the deal dissolves.


    Related:  Is the Housing Market Recovering?

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  7. Impending Disaster

    Floodedhouse

    Inspections happen for a reason: to alert you, the buyer, of imminent problems. If the seller refuses to fix or compensate you for asbestos removal, a rotten roof, or a suspicious structure, you might be relieved to cancel the contract.


    Related:  Hire a Home Inspector Before You Buy

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  8. A Foggy Title

    Deed

    A title search and insurance seem like an anachronism—and a waste of $300—unless it turns out that the seller actually doesn’t own the house after all, thanks to the little matter of a disputed will or outstanding contractor’s lien. You can’t buy what he can’t sell.

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