Why do home sales sometimes fall through?
Inexperienced/Incompetent Real Estate Agent
Whether you’re a buyer or a seller, it’s important to understand that hiring an experienced and competent real estate agent is critical. One of the most common reasons a real estate deal falls through is because one of the real estate agents involved in the transaction “drops the ball.”
Buyer and sellers unfortunately make many of the same mistakes when choosing a Realtor. This can make the process of buying or selling a home very frustrating and possibly unsuccessful. In some cases, an inexperienced or incompetent real estate agent is lucky enough to get their clients an accepted purchase contract.
This does not mean the home is sold and will make it to the closing table. An inexperienced or incompetent real estate agent will neglect to stay on time with contract dates and make the proper follow ups, which can lead to a deal falling through. Some of the tasks that an experienced and competent real estate agent will make sure are done on time so a deal doesn’t fall through include;
- Successfully negotiate through inspections
- Confirm bank appraisal results
- Ensure the potential home buyer gets approved
- Follows up with attorneys to ensure closing documents are being reviewed and prepared
Buyer Can’t Sell Their Home
Buying and selling a home at the same time is not an easy task. Every home is salable, however, some homes can take much longer to sell for a variety of reasons. One of the most common reasons a real estate deal falls through is because the potential buyer can’t sell their home and cannot purchase a home without selling their home.
It’s important to understand that if you’re selling your home and receive an offer from a buyer that is contingent on the sale of their home, you should not count on that particular buyer shaking your hand at the closing table. Home sale contingent offers in real estate have a much greater chance to fall through than offers that are not sale contingent.
Inspection Issues Are A Common Reason Why Real Estate Deals Fall Through
Potential buyers have the option to perform several different types of inspections when buying a home. There are lots of reasons why having a home inspection and other various inspections is a good idea. These inspections can also lead to many real estate deals that fall through.
If you’re selling your home, it’s suggested that you consider having a home inspection performed on your home prior to listing it for sale. Since home inspectors will find issues with every home, having a pre listing home inspection which will give you the opportunity to correct issues before they become an issue. This can go a long way in reducing the chances that a buyer gets scared away from your home.
If you’re buying a home, having a home inspection is suggested. It’s important to remember that every home will have issues and that the primary reason for inspections is to make sure the home doesn’t have any major deficiencies. Some of the red flags and major deficiencies that you should be on the look out for when buying a home include;
- Pest infestations
- Foundation/Structural Issues
- Roof leaks or damage
Potential Buyers Gets Rejected For Their Mortgage
Another common reason a real estate deal falls through is because the potential buyer is turned down for their mortgage. In a perfect world every potential home buyer who is walking around with a pre-approval letter would get to the closing table but this is not the case. Having a pre-approval letter is a must when buying a home, however, it does not guarantee a buyer will be approved for the mortgage.
Since there are many common reasons why a mortgage is rejected, it’s important that when buying and selling a home to keep in mind until the closing has occurred, a buyer isn’t guaranteed to receive the loan.
Keep in mind there are some mortgage lenders and banks that do a great job ensuring the majority of their pre-approvals get to the closing table. There are situations when a buyer is rejected that a top mortgage lender or bank has no control over. Some of these situations can include;
- Buyer loses their job
- Buyer experiences health issues or hardship
- Buyer separates from spouse
Bank Appraisal Issues
Real estate deals that involve a buyer who is obtaining a mortgage will be subject to a satisfactory bank appraisal. A common reason a real estate deal falls through is because there are issues with the bank appraisal.
Some of the bank appraisal issues are more common than others and some of the appraisal issues also increase the chance a real estate deal falls through. Generally, if a bank appraiser cites some minor repairs that need to be completed prior to a closing, this will not cause a deal to fall through.
If a bank appraiser determines that the value of the subject property is thousands of dollars less than the sale price, this is typically when a real estate deal can fall through. The amount that a home under appraises often will determine whether a deal will fall through or not. If it’s only a couple thousand dollars, normally a buyer and seller can come to terms. If a home under appraises by $10,000, the chances that the deal falls through will go up exponentially!
Issues With Closing Documents
Real Estate Closing Document Issues Can Kill A Real Estate Deal
Prior to a closing occurring there are many documents that are reviewed, typically by the attorneys for the buyer, the seller, and the banks attorney. A real estate deal can fall through due to issues with these closing documents.
The most common issues with the closing documents relates to the title of the property. Some of the most common title problems in real estate include;
- Outstanding Liens
- Public record errors
- Past bankruptcies
- Missing heirs
Short Sale / Pre-Foreclosure Issues
Buying or selling a short sale or pre-foreclosure can be tricky. Many short sales, sometimes referred to as a pre-foreclosures, end in a deal falling through for a variety of reasons. It’s important that prior to buying (or selling) a short sale or pre-foreclosure, you determine whether it’s a good fit for you or not.
In respect to a short sale, the primary reason a real estate deal falls through is because the lender involved in the short sale approves the sale and requests a closing to occur in a time frame that is nearly impossible to meet. When buying a short sale, a lender will give their clearance to close and will request it is completed within 14-21 days, sometimes even fewer days.
Since many buyers will request the appraisal is not completed until the lender approves the short sale, this does not leave sufficient time to get the appraisal done and all of the closing documents prepared and reviewed.
Buyers Experiences Remorse
One of the worse nightmares for a home seller is finding out a week before the target closing date the buyer has decided they no longer want to buy a home and have decided to continue to rent.
Buyers remorse happens in real estate. There are many reasons home buyers remorse happens, which ultimately can lead to a real estate deal falling through. If you’re buying a home, having a strong understanding of how to avoid buyers remorse in real estate can eliminate lots of frustration for you and a seller.
It’s important to always keep in mind when buying or selling a home, real estate deals can fall through. As indicated above, many of the reasons a real estate deal falls through are completely controllable while others are not.
If you’re buying or selling a home, you should set realistic expectations. If you are aware of the above common reasons why a real estate deal falls through, you will put yourself in a much better position whether your deal falls through or not. Having an experienced and competent real estate agent working on your behalf will give you the best odds that your deal will NOT fall through!