Lately we have observed a rise in buyers backing out of contracts. This creates an unfortunate scenario for a seller, whose home is then somehow “tainted” with a broken contract, through no fault of their own.Here is why some these deals fall through, and how we help our clients so that they don’t experience disappointment from either side of the table.
There are many reasons why a deal may fall apart including:
The buyer’s mortgage application is declined.
Major issues surface during the home inspection.
The home gets appraised lower than the sale price.
The buyer can’t sell their existing home.
The buyer is inexperienced
Numbers 1 through 4 are self-explanatory, so let’s take a look #5
Unlike sellers, buyers can often back out of a contract fairly easily, reports U.S. News & World Report. For example, buyers who are new to the process may overestimate what they can afford or underestimate the timeline. They may use a contingency in the sale contract as a way to exit it. *
“I think that it is not only inexperienced buyers – part of the problem can also be inexperienced agents,” says Kimberly Kepnes of Monument Sotheby’s International Realty. “As a buyer’s representative, it is my responsibility to prepare my clients for the reality of their potential home purchase. I don’t just sell homes, I represent people.”
A good buyer’s agent will take their client through a listing with a critical eye. The buyer may fall in love with the home right away, and be anxious to submit a contract– it is their agent’s job to point out repairs that will need to be made, and how that will impact their overall budget, and subsequently what their offer should include.
“I feel like there are some agents that just want to sell a house, and will encourage their buyers to submit a contract with contingencies that will allow them to exit it if they change their minds. This is not fair to either the buyers or the sellers. A good agent will go over the contract page by page with their buyer in order to ensure a full understanding of every aspect of the offer,” says Kimberly.
Whit Harvey agrees. “I always help my buyers – especially first time buyers – negotiate the unfamiliar terrain of submitting a contract. I show them all the seller’s disclosures or disclaimers and explain exactly what that means in terms of the condition of the home. I would be reluctant to submit a contract for a buyer that I suspected was just “testing the waters”. I don’t want to waste their time or that of the seller.”
What a seller can do to prevent contracts from falling through.
Before putting your house on the market, consider getting a pre-inspection.
This step will alert you to potential problems that could hinder the sale of your home. Many home purchase contracts include the contingency that the buyer (and lender) must be satisfied with the inspection and appraisal, the results of which could lead to further negotiations.
“One service that I offer my sellers is a detailed list of repairs that need to be made in order to forestall any problems that will arise in an inspection. If a potential buyer sees a stain on a ceiling or wall, they are going to ask about leaks. To begin with, I want to have that fixed before the house is shown, and if they do see something, I want to assure them that repairs are being made,” says Whit.
Be selective — offer price isn’t everything
It’s easy to be drawn to the highest offer, but you may also want to consider the likelihood the deal will close. What contingencies are included in the deal? How could those impact the process and timeline? It is important to have an experienced agent who can help the seller review each offer carefully.
The goal of any real estate deal is for all parties to come away happy – the home seller pleased with the profit and the buyer satisfied with the price and excited to start life in a new home.