Pop the champagne! Take your partner out for a celebratory meal! The deal is done!
You’ve accepted an offer on your house. But how close are you really to that coveted closing? It’s true that, according to the statistics, over 96 percent of home sales closed without any hiccups and in a timely manner in 2016. But then, there’s that pesky 3+ percent of the time when the unthinkable happens. So, it’s a pretty good idea to prepare yourself now for that unlikely possibility.
During that eternity while your offer is pending, there are a lot of things happening behind the scenes, not the least of which is your respective real estate agents clearing any unforeseen events. Whenever you see the term “contingent” on your listing, it means that your buyer is working hard to clear up any snags that they haven’t planned for. These can take the form of failed home inspections, financing, or that they simply haven’t sold their own home yet. Let’s take a look at some of the most common. With no further ado, direct from the foremost real estate investing expert, the top 6 reasons that home sales fall through.
1. The appraisal comes in too low
When the market is in the seller’s favor like when there’s limited availability of houses in the area, it’s not uncommon for bidding wars to erupt. Hooray for the seller, right? But bidding wars often lead to offers that are higher than the fair market value of your home. This can lead to financing trouble when the appraisal comes in too low. Everybody knows that a bank won’t finance a property for more than the appraiser says it’s worth. If the buyer can’t come up with the extra cash for the down payment, either the seller is forced to reduce the price, or the buyer has no choice but to withdraw. Remember the old saying, a bird in the hand is worth two in the bush? Don’t price yourself out of a sale.
2. Inspection problems
Buyers have the option to have more than one type of inspection performed on their potential home. As the seller, it may be worth your while to have an inspection done to identify potential concerns before you’re under contract. It’s very common for inspectors to flag issues that you might consider minor. Having a fresh set of eyes taking a look at things will provide an opportunity for you to correct any problems before they become …
3. Buyers experience cold feet
The percentage of first-time home buyers has been increasing steadily for the past several years. The majority of these buyers are utilizing FHA loans, which can determine the type of home they can purchase. These loans are typically scrutinized more closely due to the potential risk and lower down payments. Many of these people aren’t familiar with all of the ins and outs of the process. If they don’t have their finances in order or they haven’t been made aware of the initial costs involved, all of the details might keep them awake at night. A good agent will sort most of these issues out for you, but on occasion, the potential buyer can become overwhelmed, or they may learn that they simply aren’t prepared to be a homeowner, causing them to back out.
4. The costs
When you have a contract in hand, there are risks that you will suffer if the potential buyer is either unable or unwilling to complete the deal. Probably the most frustrating thing about a home sale falling through is the time that’s been wasted. During the time that your contract is pending, other potential buyers have moved on to other prospects. If your buyer backs out, you’re forced back to square one to start over with another buyer—whenever one happens to come along. What about that new home that you were on a timeline to move into? If you’re under contract yourself, and your prospective buyer backs out, you might have an additional and unforeseen expense for breaking your contract. If you’re making payments on your current mortgage—on the house that you’re selling—then all that money is wasted too. Don’t even get me started on the ongoing maintenance costs of your current house. If you are not up to speed on every cost, check out this definitive guide to real estate closing costs.
5. Mortgage issues
The buyer must get a mortgage, usually within a specified period after signing. Often, there is a condition written into the contract where if the financing falls through, the contract is nullified. It’s very important that you, as the seller, require the buyer to provide a mortgage pre-approval document before the ink is dry at signing. Before risking a mortgage falling through, read everything you need to know about funding a rental house loan.
6. Infestation irksome
Here’s another situation where a few preemptory dollars spent on an inspection can head off closing issues. Most of us have contracts with pest control companies, but there are a stubborn few who consider the risk nominal. If this is you (and I hope it isn’t) it’s always a good idea to head off surprises before they can put a kink in the system. Depending on your inspector’s experience and diligence alone may not pay off, so if the home you’re selling isn’t under a pest control contract, it’s a good idea to get a second look from someone whose skills are specific to infestations, so the route to the closing doesn’t get all buggy.
So, do yourself a favor, and do your diligence. A small investment in an inspection and a little pre-planning of what you require of any potential buyer can save you a lot of aggravation in the long run.