Q & A with Barbara Grumme Q: How can I protect myself from the risk of a buyer failing to close on my home?
A: There are no real guarantees. But, you can utilize some defensive measures.
- Ask for proof of mortgage financing as an added condition to the purchase agreement. As the seller, you want written confirmation from the buyer’s lender that a mortgage is in place, without lender conditions, before the agreement becomes firm and binding. It’s not 100% foolproof because the lender will usually perform a last minute credit check on the buyer just to make sure no credit check on the buyer just to make sure no credit issues have surfaced between approval and closing. Still, it’s an excellent safeguard.
- Thought not always possible, try to negotiate a deposit large enough to cover any estimated damages if the transaction does not close. At least negotiate a deposit that the buyer would think twice about losing. Most mortgage packages require proof of the buyer having at least 5% down.
- Talk to your lender about bridge financing so you will be able to close on the home you are buying and avoid a potential action for damages.
- You may have an action for damages against your buyer, but not until after the fact.
Protect yourself from a buyer failing to close to sale. Discuss your concerns with Barbara so negotiations can include defensive measures to protect your interests.