The “pending sale” sign is up, the deal is done and now you can finally relax, right? Well, not necessarily. Until the sale is closed and the property title changes hands, there’s always the potential for the deal to fall through. Deals falling through is a surprisingly common occurrence: according to a Trulia report, 4.3% of sales fell through at the end of 2016.
So what causes the sale to fail, how can you help prevent it, and what should you do it if it happens to you?
What Are the Common Causes of Home Sales Falling Through?
Home sales can fall through for all sorts of reasons, but there are a handful that seem to come up time and time again. Haunting every seller’s nightmares, they can tear apart even the most solid of deals in no time at all.
The Chain Breaks
A property chain is a number of sales that are dependant on each other. Each new property sale adds another link and another contingency to the chain. All it can take to ruin half a dozen sales is for one of the links to break. Although the chain can sometimes be repaired, the uncertainty and delays will often cause a domino effect that wipes out all the transactions.
Avoid this by asking any prospective buyer about their chain. The ideal buyer will be able to pay for the property without needing to sell another of their homes, which greatly reduces the risk of their financing falling through. If that’s not possible, try and keep the chain as small as possible.
If you intend to use the proceeds of the sale to buy another property, be sure to ask the owner of that property about the status of their own chain.
The Buyer’s Financing Fails
One of the primary reasons that a chain will collapse is because a buyer will ultimately be unable to afford the deal. Usually this is because their mortgage fails to be approved and they are left without a loan. Mortgage applications fail for many reasons, and it’s hard to know for sure if a buyer’s application will be successful or not.
You might not be able to know for sure, but there are some plenty good indicators as to whether or not the buyer is going to be able to get their financing in order. You may want to only accept an offer from a buyer who has already been pre-approved for a loan, for example.
Once you’ve agreed on a deal, check in regularly with your real estate agent to get progress updates on the status of the buyer’s mortgage application.
A Troubling Home Inspection
Buyers will usually want an independent inspection of your property prior to finalizing the sale. These inspections can reveal issues that are easy for the casual observer to miss, such as faulty AC units, patches of damp walls, or termite infestations.
The associated costs of fixing the problem are a common point of friction between the buyer and seller. Buyers will usually expect the seller to either fix the issue before the sale or to reduce the price to compensate for the post-purchase cost of repair.
Hire a professional home inspector before listing your home. Each issue should be qualified as well as noted, to give you a good idea of how severe it is.
The serious issues will almost always need to be fixed. Any good inspector is going to find them and their discovery is likely to cause mistrust between your and the buyer, as well as a reduced offer.
The Buyer Changes Their Mind
At the end of the day, people sometimes just change their mind. You might do everything right, only to have the buyer suddenly wake up one day and decide that they simply don’t feel strongly enough to go ahead with the purchase. This unpredictability is a cause for concern for many sellers
But when you move your sale as fast as possible, you can lower the chances of a deal falling through. The longer a sale drags on, the more time a buyer has to get cold feet or find another property that they like better. It can typically take 45-60 days to close the sale.
A Low Property Appraisal
To qualify for a mortgage for a property, a buyer will have to have the property appraised by the lending party. This appraisal will give the lender a solid evaluation of how much the property is worth and help them decide how much they’re willing to lend to the buyer.
These appraisals are based off a variety of factors, including how much other local properties are being valued at and the features of the particular property.
If the appraisal is less than the asking rate you’ve agreed, your buyer will have to pay the difference. Sometimes that’s simply affordable.
If your appraisal comes back too low, ask your real estate agent to compile a brief, which includes key features of your property and comparable properties in the area that have sold for a figure around your agreed price. You can then submit this to the appraiser to help inform their decision and highlight the value of your property.
There are a number of legal requirements that a seller must satisfy before they can legally transfer the property. These include the settling of liens for unpaid debt and outstanding financial responsibilities, which can place a heavy burden on the seller. Likewise, the buyer may be unaware of how certain liens filed against them will stop the progress of their financing. In those cases, the issue often goes undiscovered until they attempt to close the property.
Have your lawyer check for any liens that might prevent you from selling the property and settle them before attempting to close a deal.
What to Do next
Having a sale fall through can be devastating. All that planning and negotiatinggoes out the window and sends you back to step one.
To decrease the odds of this work with the right seller’s agent. A great realtor will have extensive knowledge of the local area and a fastidious, proactive approach. A Clever Partner Agent will act as the intermediary between yourself and the buyer, using their experience to help you spot potentially problematic situations before they can become a more serious issue.