There’s an accepted purchase offer. Great! That doesn’t mean your transaction is a done deal. This is not a comprehensive list, but rather some of the problems you may encounter:

Bank Addendum has unacceptable terms: If you are buying a foreclosure, the bank that owns the property will send you a big addendum with terms that over-ride your local paperwork. This document is written by a team of lawyers and is not negotiable. Read it carefully! If the buyer can’t live with the terms, the only thing to do is walk away.

Inspection turns up problems: This is why buyers should always do a property inspection. Sometimes the problems are much worse than expected. As a buyer, you can ask for reasonable repairs in most cases. However, most bank owned properties are sold “as is, no repairs prior to close.” In the case of a short sale, the seller might not have the money to make repairs. The buyer might have the ability to negotiate a lower price based on the inspection report, but it is unlikely on foreclosures and short sales. A traditional seller hit with a bad inspection report has the option of making reasonable repairs or offering a lower price. This is a great reason for sellers to pay for a property inspection up front — the opportunity to make repairs before somebody else finds a problem, or adjust the price up front.

Short Sale Approval Doesn’t Work Out: After months of looking at the seller’s financial papers, the bank can come up with one of 3 replies: yes, no, or new terms. Since the bank will be losing tens or hundreds of thousands of dollars, they do get the last word. If the bank comes up with a higher price or other terms that are not acceptable to the buyer or the seller, the only option is to end the transaction. What might be unacceptable to the seller? No release of deficiency or a big out of pocket payment at closing! What might be unacceptable to the buyer? Higher closing costs, a higher purchase price, or an unreasonably short time in which to close. If the bank’s terms just won’t work for either party, the only answer is to cancel.

Title Problems: These days, it’s increasingly common to have a problem caught by the nice folks at title: a forgotten lien, delinquent HOA payments, sometimes even a seller who doesn’t actually own the property! Only the seller can fix these problems, and it does take time. The seller should probably cancel the transaction, clear the problem, and put the property back on the market.

Appraisal Comes Back Low: The buyer’s mortgage company is not going to let the buyer borrow more than the property is worth. That leaves 3 options: the buyer can come up with the difference between the purchase price and the appraised value  in cash (not always possible), the buyer and seller can negotiate a lower price close to or even at the appraised value, or the buyer can walk away. This leaves the seller in a bad position, since that appraisal is likely to come up again.

New Loan Conditions based on Appraisal: The appraiser may notice something that must be fixed — at least in the mind of the lender! Sometimes these items are minor, like a couple more smoke detectors. Sometimes they are major, like a new roof! The loan will not fund without the required repairs. A traditional seller can be pressured to make repairs. When the seller can’t or won’t make repairs, the buyer has a problem. I will never recommend that a buyer make repairs on a property he doesn’t own. But usually, a buyer can either put money into escrow towards repairs to be made after close, or in some cases get a home improvement loan for the express purpose of making those repairs after close!

HOA Rules or Fees Unacceptable: Most states require the seller to make sure the buyer gets a copy of the HOA documents before close. The buyer should have an opportunity to read things like the community policies and budget before closing. Sometimes, things pop up in those documents that just won’t work. Perhaps the buyer planned to rent out the property and the HOA doesn’t allow rentals. Perhaps the buyer hoped to paint in new colors or renovate the landscape in a way that isn’t allowed. The buyer has the right to back out and there’s not really much the seller can do.

Loan Problems: I find this to be the most common item. Sometimes a buyer does something without thinking that it might effect their mortgage: open a line of credit at a furniture store to buy stuff for the new place; have a garage sale for all the stuff they aren’t moving and deposit a large sum of cash in the bank. Most loan problems can be overcome, but they take time. Buyers should ask their mortgage professional up front what things they should avoid in escrow, and keep very good financial records in case a problem comes up. Again, not much the seller can do.

Unexpected delays: Sometimes things just take longer than they should. No matter which side is to “blame,” the only answer is an extension addendum. This basically says “I know we agreed to close on this date, but we will close by this later date instead.” Be sure to ask for as much time as you need up front — and within reason! — because most people are reluctant to grant a second extension.

I hope this is helpful. Good luck!