3 Huge Problems That Could Derail Your Home Purchase

If you're buying a house, the last thing you need is to have problems after you've found the perfect property and had your offer accepted. After all, it's stressful enough to even find a home you like and to get a seller to agree to the price and terms you're interested in.

Unfortunately, there are definitely situations where problems can arise after the papers are signed. In fact, here are three huge problems that could make it impossible -- or at least a whole lot harder -- for your sale to go through in the end.

1. Inspection issues

When you make an offer to purchase a home, you should pretty much always make that offer conditioned on having a satisfactory home inspection. This is called including an inspection contingency in your offer.

If you have an inspection contingency, you have the right to have a professional inspector come through and take a look at the home. They'll check for foundation cracks, problems with the roof, HVAC issues, or other concerns that may not be apparent to the naked eye but that could be very costly to fix.

If an inspector finds major problems, like a roof on the verge of needing replacement, you could be looking at an average cost of around $10,000, according to This Old House. And some problems may be even more expensive.

In this situation, you'd probably want to negotiate with the sellers to make repairs or lower the sale price so you can cover the repairs after closing. But if the seller won't do that, you may want to walk away from the sale and find another house that won't be a money pit. As long as you made your offer contingent on inspection, you can do that.

2. Liens on a property

Liens on a property are another major issue that could cause huge problems with your sale. A lien is a claim against the title of the house. The title is what shows ownership, and the seller can only transfer the level of ownership they have.

Sometimes, people won't pay their taxes or homeowners association fees or they'll get court judgments against them. When that happens, the person or company they owe money to can go to court and get a lien placed on the property. This essentially means they're claiming they have a right to some of the value of that property because of the debts the owner owes to them.

If there is a lien on a property, it would transfer with the house. The seller couldn't give you clean title or ownership rights without competing claims attached. Your mortgage lender won't let you buy a house if you don't have clean title, and you don't want to anyway, because you could get stuck paying off the debts.

You'll likely find out about any liens when a title insurer does a title search. You need to buy title insurance when purchasing a property to protect against surprise claims against the home, but if the title search shows issues, the insurance won't be available until they are cleared. Plus, the home loan can't close.

In this situation, you'll have to hope the seller is able to make payoff arrangements so the sale can move forward.

3. A low appraisal

Finally, the last big issue that could derail your sale is a low appraisal.

If you're getting financing for the house, your lender is going to cap the percentage you can borrow relative to the home's value. For example, some lenders allow you to borrow 80% of what a home is worth, and others allow you to borrow 90% or even 97%. But, in most cases, you need to have some home equity (ownership interest) beyond what the bank is loaning you.

The bank doesn't care what you're paying for the house -- it only cares what it's worth, so it'll want you to get an appraisal. Unfortunately, if the appraisal comes in at less than you're paying, this could be a huge problem.

Say you are paying $400,000 for a house, your lender requires a 10% down payment, and you're putting $40,000 down. You'd be good to go. But if the appraisal comes back and shows the house is worth $350,000, then you'd have a huge problem. The most the bank would loan you is 90% of $350,000, or $315,000. With your $40,000 down payment, you would be $45,000 short.

If you made an offer contingent upon (conditioned on) a satisfactory appraisal, you could walk away at this point, or could ask the seller to drop the price. If they don't, you would have to decide if you wanted to put the extra $45,000 down on the home.

It's easy to see why these problems could cause your home sale to fall through. Unfortunately, there's not a whole lot you can do to avoid them until after you discover them during the sale process. So just be sure you put the contingencies you need in your offer -- and be prepared for the fact a home sale isn't always going to go perfectly every time.