By Mike Baird
In my years of real estate investing, I’ve seen it all. Most closings run smoothly, and after everyone signs all applicable documents, you walk away with a new property to flip. But flipping houses isn’t always that easy, and the trouble can start as early as sitting down at the closing table. While most motivated sellers want to get out from under their houses, and closing the deal is usually easy, things can and do go wrong. Here are five cases when things can go badly wrong and what you can do to avoid them.
There are Mistakes in the Paperwork
This is both one of the most common mistakes and one of the easiest to fix. Typos happen. Details get left out. Updates aren’t made. All kinds of mistakes can be made in the paperwork, and they can all hold up the sale for a few days, a few weeks, or even forever.
For flippers like you and me, closing the deal fast is essential. Waiting a few weeks (or even a few days) for a deal can be seriously detrimental to your business, so you want to avoid this if at all possible. Fortunately, it’s pretty easy. Just make sure that you’ve read and reread all of your closing documents before your closing date. Get your attorney to read them, too. Make sure everything is accurate, and you’ll be set for most of your closings.
The Property Can’t Be Sold
This one is really frustrating. Basically, the seller will not be allowed to legally sell the house if they have a tax lien on the property or if they do not actually own the property. In the case of liens on the property, proceeds from the sale can be used to pay them off, and you can move forward.
If the seller doesn’t actually own the house or does not have the right to sell the house at present for any other reason, just walk away. This is highly annoying, but there’s nothing that you can do about it. Fortunately, if you do your research upfront, you can usually identify the owner of the house before you get to the closing table.
The Seller Wants Too Much for the Property
Sometimes sellers change their mind at the last minute. Either they don’t want to sell at all or they want a price that’s much higher than your offer. In this case, stay calm and always be polite. Remind the seller of the market values in the area and the price of the work necessary to bring the property up to value. This will not always work, but you can usually come to an agreement that will make everyone happy, especially if you are willing to budge just a little bit on your offer.
Your Closing Attorney Got Double-Booked
This one is really rare, but it happens more to flippers and other real estate investors than it does to people buying their primary residences. Why? Well, we have to move fast on our deals. You might find yourself calling your closing attorney for a closing the very next day, and he or she may have accidentally double-booked. Try to always make sure that everyone has a clear schedule for closing, but if this happens, just apologize to the seller for the inconvenience and reschedule the closing.
You Don’t Have the Cash on Hand
Of course, the seller and your attorney aren’t the only ones who can throw a cog into the works at the closing table. If your lender or partner pulls out at the last minute, and you don’t have the cash on hand to buy the house, you’ll be the one holding things up. The more you work with private lenders and investment partners, the less likely this is to happen.
Things aren’t always certain in real estate investing, but there’s usually a workaround to help you in closing the deal so that you can get back to flipping houses.