When you put your home on the market, you have high expectations as to how many buyers will fall in love with it, how much money you will get for it, and how fast the house will close. However, reality tends to be quite different than what you have envisioned, and a percentage of home buying deals fall through, no matter how promising the buyer might appear.
According to some studies done by real estate firms, about 4% of house contracts fall through, and although this means that 96% of home sales are successful, you don’t want to have your house fall in the category of those that are not.
What Is the Most Common Reason for Home Sales Falling Through?
When you are selling your home, one of the main situations where you may be crossing your fingers is during the time spent waiting for your potential buyer to get qualified for financing. After all, if they cannot get their hands on the required funds, the house will never be theirs.
This is no small worry since, according to a report by the National Association of Realtors, close to 90% of buyers need financing to be able to buy the home. However, in many cases, when the buyer tells you they have been pre-approved or have been pre-qualified for a mortgage, this may only mean that they have received a letter from the bank or mortgage broker stating that fact. But this is simply an estimate of how much the bank thinks they will be able to afford and not a promise of a mortgage.
This doesn’t mean that the letter is completely worthless. It is just a first step in the process but not a guarantee of approval. Why? Because there is always the possibility that your buyer will have had a change in their circumstances such as having acquired more debt, losing their job, or any other factor that may disqualify them to receive the loan. When this happens, the prospective buyer can walk away from the deal with no penalties, leaving you to start the process all over again, having wasted time and effort.
Other Issues that Make Home Sales Fall Through
Issues Found During Inspection
During the inspection, issues that you might be unaware of could be revealed. And they may be major enough for the buyer to decide to renegotiate the purchase price or walk away.
People looking to buy a home for the first time may also have a short credit history, so they may overestimate how much they can afford. First-time mortgage applications may end up going through additional scrutiny which might end up disqualifying your potential buyer. In cases like these, an experienced broker can help by gauging how realistic the offer is.
Buyers are Unable to Sell their Current Home
Buying a new home frequently depends on the ability of the buyer to sell their previous house first. Depending on the state of that property, market conditions, and the price they are asking for it, it may be hard to sell. Before agreeing with a buyer, do some research: check out their property and how many days it has already been on the market.
Home Appraisal Does Not Work in Your Favor
Lenders may require that the home be appraised before they approve the mortgage to make sure that the value of the property supports the sale price. The mortgage may be declined if the home appraises lower than the stated purchase price.
Title Issues or Property Liens
The mortgage lender will likely require a title search to make sure it is clean. In this title search, issues might be revealed such as outstanding liens or judgments, unpaid work by a contractor, or unpaid property taxes. Any of these problems will make the deal fall through.
Is There Anything You Can Do to Prevent Your Deal from Falling Through?
Don’t Focus Only on the Highest Offer
In an ideal world, you would absolutely want the highest offer for your house. However, after reading all of the above issues, you may want to pay special attention to your potential buyer and determine if they are likely to close the deal. Ask for a pre-approval letter but also find out how much money they have available for the down payment.
Do a Pre-Inspection
Particularly if your house is old and if you have been having some issues, a pre-inspection might reveal any major problems that might hinder the sale. Once you are made aware of the issues you can either fix them or change the price of the home to adjust for what the pre-inspection has uncovered.
Rethink the Contingencies
If selling your house is so urgent that you are willing to accept any buyer, think about the consequences of accepting a contract with someone who needs their house to sell before they buy yours. You may find that the contract falls through and by then other possible buyers might have moved on. For this reason, you may want to rethink accepting a contract with contingencies.
Consider Selling to an Investor
There are firms that will buy your home for cash and you do not have to worry about financing not being available, inspections revealing issues that you do not want to fix, contingencies on the sale of other properties, or anything else. An all-cash buyer will gather some information on your house, walk through it to appraise how it looks, take into account market conditions and how much money they would need to remodel it and sell it again, and make you an offer which you are under no obligation to accept.
If you do accept their offer, you can even set the date you want to move out and not have to worry about closing costs or commissions. You may discover that selling your house for cash is exactly what you need.