Higher interest rates and other economic factors have cooled the real estate market in some states, but not in Connecticut. Prospective home buyers will still face a combination of low inventory and plenty of competition with other buyers.
Those who find a property that meets their needs can easily make mistakes during the process that can put them at a disadvantage by risking their resources or delaying their closing.
What two common risks often affect Connecticut residents when making an offer on a property?
1. Failing to properly protect earnest money
One of the ways that buyers try to stand out from the crowd when the market is competitive is to forgo contingencies in the offer that they make. They essentially provide the seller with a firm commitment that they will follow through with the purchase regardless of what might happen.
Contingencies may be the only protection for someone’s earnest money if an inspector turns up latent defects that will cost tens of thousands of dollars to address or if the buyer can’t obtain a mortgage despite having pre-approval when they made the offer. Many buyers benefit from customized documents that include protective contingencies.
2. Making an unreasonably high offer
Competition in the real estate market drives up prices, which can then complicate the closing process. When buyers offer higher prices for properties than what sellers are asking, the risk of an appraisal gap increases.
The appraiser reviewing the property’s value for the lender before closing may determine that the fair market value is lower than the amount someone offered to pay for the property. The buyer may then struggle to get financing as they have to cancel the closing.
Buyers who understand the issues that could complicate a residential real estate transaction will have an easier time minimizing their risks throughout the process.