Don’t Sweat the Small Stuff: No Need for Home Buyers to Walk Away Over These Common Issues

Understandably, house hunters look for “issues” as they search for the right homes. They wait with bated breath to scour the reports from inspectors, appraisers, and title reviewers.

Any time a mortgage is involved, a lender requires a title search. Through this process, the deed’s history is traced, to check its integrity. The key question? Marketability of the title.

Then there’s the value of the physical home. There will just about always be flaws. Most are minor dings that shouldn’t come between a hopeful buyer and a quality deed.

Issue-Spotting Through a Title Search: What to Expect

In the title search, a title company reviews past deeds and other documents. The sources of information are the county recorder’s office, local court records, and online resources. In most home sales, the search results don’t present any problems.

Some normal burdens on a property will show up. Things like gas and electric easements, restrictions established by zoning departments or homeowners’ associations’ rules, etc.

Could the property have a second mortgage that’s not fully repaid? That’s a lien. The title search should spot it. The seller should resolve it by the time of closing. Common problems can also involve old, expired liens lingering in the county record, which should not pose any barrier to a sale. 

Did a homeowner’s association or a contractor place liens on the title over past-due fines or bills? Those, too, can cloud a title. But sellers can resolve them using proceeds from the buyer’s purchase money.

Pro tip: Buying into a multi-unit property? Check with the property manager well in advance of closing, and find out about any legal actions involving the association. If a current lawsuit exists, find out if your lender will agree to issue the mortgage anyway.

Restrictions and Easements: Will They Matter?

Check your deed for the “subject to” clauses. That keyword helps you find the easements and encumbrances you’re accepting with the deed. In turn, that helps you understand where you can and can’t make modifications to the property.

Restrictions in the deed might present issues for some buyers, but not for others. A utility easement could mean you can’t build or install anything in certain areas of the property. Local ordinances could rule out home business plans. Any restriction of the deed that’s not time-limited will bind every buyer who ever acquires the deed “subject to” that limitation. So, check the deed language carefully.

Be especially aware of access routes. Are there obstructions? Access is necessary for a marketable title.

Sometimes landscaping or built objects overhang or encroach on bordering land. To avoid serious boundary disputes or loss of land, ask your agent about hiring a surveyor.

Anticipating Title Surprises, and Finding Peace of Mind

Could the title search unearth a lien on the property that the homeowner didn’t know exists? It could. And if it does, a buyer can pay it from escrow. The seller will get money at closing to repay the buyer.

What if an unknown heir’s interest runs up? Sometimes a “last will” was probated — but it was not the last. Or perhaps an undisclosed co-owner exists, or someone who never got to exercise first-refusal rights.

What if a deed passed through the hands of someone who couldn’t legally transfer it? What if an earlier owner lacked the legal ability to sign away the deed? Now and then, a past owner will be found to have signed under pressure, fraud, or mistake.

While title companies have lawyers to discover and resolve quirky problems, some odd issues can slip through the cracks. Getting an owner’s title policy? Good idea. What’s covered? Learn about the difference between a standard title policy and an extended policy.

Fair Market Value? Dealing With an Appraisal That Comes Up Short

The home has to be appraised. And the report from the appraiser has to meet the lender’s expectations for the value of the home as loan collateral. What if there’s a snag?

Usually, there isn’t. This is because an appraiser typically aligns the appraised value with your purchase agreement, if it’s around the expected range you’ve agreed to pay.  

But from time to time an appraisal falls short. That presents a risk to the lender — jeopardizing your mortgage approval.

Does your purchase agreement have an appraisal contingency? Keep it in the contract. Then you’ll be in the position to ask your seller for a price drop so the deal can be saved.

Those Dings You Find in Home Inspections and Walkthroughs

Stuff happens. That’s why it’s good to leave an inspection contingency in your contract with the seller. So you can pull out of the deal if needed without penalty.

But this is the right moment for your agent to use negotiation skills with the seller. Your seller should be willing to either fix the issues, or lower the home’s price, so that you can comfortably pay for the fixes.

Watch out, though, for signs of repetitive stormwater infiltration, outdated electric outlets and wires, renovations that need but lack permits, or chemical hazards. Other possible deal-breakers could be a worn-out roof or an ancient heating and AC system (unless the seller wants to cover replacement costs, which can easily top $10K). Also check for insufficient insulation, major cracks in the foundation; seriously hazardous trees, or tree roots invading sewer pipes.

Whether you’re looking at old or new construction, be ready to change your mind and keep shopping for the right home.

It Bears Repeating: Just Don’t Sweat the Small Stuff!

Keep in mind:

• Window screen tears are easily repaired. There are DIY kits and patches to help with this.

• Same with old caulking in the bathroom, or kitchen drawers that stick. These things are common in older homes. They’re usually resolved by a do-it-yourself repair job.

• Holes in the wall can be spackled. Walls can be repainted.

• A buyer can easily replace missing smoke or carbon monoxide alarms.

• Replacing old kitchen appliances? Expensive, but easily done.  

• Bad landscaping can be a plus! It’s an opportunity to style your grounds as you want them.

We’ve noticed; so have you, if you’re looking at homes for sale. Today’s real estate market is filling up with homes that need work. Ask your agent for advice if you’re not sure how much the work will set you back after closing. And keep plenty of cash reserves at the ready.

A Few Final Words

This article is not legal or financial advice. Buyers may want a real estate lawyer to go over a title report and offer negotiation support. And, of course, a good real estate agent will work hard for you, help you steer clear of serious pitfalls, and reassure you when a flaw is really no big deal.