You probably heard that new listings get multiple purchase offers within days.
Did you know that many of these contracts fail?
Contract terminations are common. They are very unnerving for the seller. The house has to be relisted and future buyers will ask why the previous buyer did not close.
You want to prevent this from happening whenever possible.
Here are the top 5 reasons why listings fall out of contract:
#5: Loan Officer Error
Although not very common, sometimes loan officers do not properly pre-qualify buyers. It happened to me last week. In that case the loan officer did not know that his bank could not lend money to a buyer with a certain kind of visa.
This type of termination happens a few days before closing. The seller has already waited for a month to move. Now the home must be relisted and the whole process starts all over.
Prevention: Work with a local, experienced lender who has a direct line to the underwriting department.
#4: Buyer Goes On “Shopping Spree”
That happens quite frequently. Buyers are looking forward to moving into their new home and buy new appliances, a new TV, or even a new car, all on credit.
Now their debt-to-income ratio changes, and they may no longer qualify for the home loan.
Prevention: Don’t buy anything before you close!
#3: Low Appraisal
In today’s hot sellers’ market many buyers offer more than list price. The appraiser may not agree with the higher value and appraise the property below the purchase price.
In that case the buyer has the right to terminate or renegotiate per our standard purchase contract.
Prevention: Only work with buyers who have extra cash and can afford to bridge the appraisal gap.
#2: Home Inspection
If a buyer is not satisfied with the home inspection, they have the right to terminate the contract. Some buyers get really nervous about minor cracks or the slightest trace of mold in the bathroom.
The good news is that home inspections are usually completed soon after signing the contract. If a buyer wants to get out, you know early on and don’t have to wait for a month.
Prevention: Disclose any known problems with the house to the buyers before they write the offer and try to get “as-is” offers. The buyers can still do an inspection, but they already agreed not to terminate for anything you disclosed.
#1: Cold Feet
The #1 reason buyers terminate contracts is “buyer’s remorse.” In this competitive market buyers are rushed into submitting offers right after a property hits the market. They don’t have time to “sleep over it.”
As buyers can’t cancel the contract just for getting cold feet, they use one of the other reasons – typically the home inspection – to terminate.
Prevention: Give potential buyers time to see the property a second time before they submit their offer. I recommend to my sellers to keep the listing live for at least 4 days and do an open house.
Whenever possible get a backup offer.
If you list your home with me, I will perform the extra due diligence to ensure the sale of your home will close on time. Call or text me TODAY at (614) 975-9650.
Susanne Novak has been a Realtor since 2007. She is the broker and owner of RE/MAX 24/7 in the Dublin Historic District. Susanne typically helps 50-60 families each year with their real estate needs. She's your trusted advisor when you search for your dream home, and a skilled negotiator when she lists your property to get top dollar when you sell.