Why Do Real Estate Sales Fall Apart?
Back on the market… Let’s explore why!
Whether you’re a buyer, a seller or a noisy neighbor, you have likely seen homes that have gone under contract and later come back on the market. Is this a reason to be concerned? Let’s explore the most common reasons that real estate deals fall apart.
Reason #1 - Spontaneous Decisions
A simple change of heart.
You heard that right. In today’s fast paced market, buyers are forced to make quick spontaneous decisons about one of the largest purchases they may ever make. The old saying “if you snooze, you lose” can hold true. Offer deadlines are established and home go under contract within hours of going live. If you take too long to make a decision, the home can sell in the blink of an eye so buyers jump into action and sometimes second guess themselves. Perhaps they’re afraid they’re paying too much or maybe someone got in their ears. Maybe they got cold feet. In any case, if you’re the next buyer in line, there is no reason to be concerned.
Or, perhaps they’ve found something better.
Have you ever been searching for that perfect item, thinking you’ve found it only to find something even better a few days later? The same holds true in the housing market. Buyers tour, offer and sign the deal and days or weeks later may find something that they feel better suits their needs or feels like a better deal. Is there anything wrong with the home they were pursing? No, but unfortunately if their heart isn’t in it, they may choose to walk away, even if that means that their deposit is on the line.
Reason #2 - Contingencies are not met
What is a contingency? In real estate, a contingency refers to a clause in a purchase agreement specifying an action or requirement that must be met for the contract to become legally binding.
So what are the most common contingencies?
The two MOST common contingencies are (1) Financing (2) Home Inspections.
(1) A FINANCING contingency allows the lender to dig deeper into the buyers financials to be sure they are qualified to purchase. As part of this financing contingency, the lender also typically requests an appraisal to be sure that they are not lending more than the house is worth. This protects both the lender and the buyer.
If a buyers employment or financial situation changes while they are under contract, they may not qualify. Not all lenders are created equal and not all lenders do a thorough pre-qualification. Even when a buyers circumstances have not changed, there is still a slim chance that they may not qualify if the lender didn’t do their homework before providing a buyer with a pre-approval letter. Or perhaps a buyer gets laid off while they are under contract. This clause protects the buyer from being forced to purchase something that they can not afford.
When it comes to appraisals, the lender wants to protect themselves should a buyer ever be in default on their payments. In a heated market, prices often get bid up, sometimes to amounts more than what they are actually worth. Have you ever wanted something so bad that you were willing to pay whatever it took to get it? Perhaps it was a ticket to a sporting even or concert ticket or maybe the HOT item on someone’s holiday wishlist. This happens in real estate as well. Buyers fall in love with properties and get into bidding wars, sometimes offering to pay more than they should have. When buyers pick a magic number to offer on a home without doing their due diligence (enter your Realtor who can help you through this), appraisal issues can arise. If a house does not appraise for the purchase price, a buyers financing may be denied. When the financing contingency is not met, we see the home come back on the market unless the buyer has a Plan B.
(2) A HOME INSPECTION is a must have! This is a buyers chance to learn the ins and outs and dirty little secrets about the home before they are fully committed. An inspector will look the home over from top to bottom, identifying any structural or safety related issues. After all, this is one of the biggest purchases you will ever make so it is important to know what you can expect.
If concerns arise, buyers may choose to walk away from the purchase. Let’s just say you’re buying a home thats advertised as “move in ready” with no work needed and your home inspector finds that the home needs a new roof and all new mechanics, you may decide to walk away. If the findings are more than a buyer is willing to take on, they do have the choice to part ways.
As your best advocate, a licensed Realtor will be able to look at a properties history to investigate. Sometimes red flags can be found just in doing a bit of research. If you’re interested in a home thats come back on the market after being under agreement, it’s a good idea for your buyers agent to connect with the sellers agent to find out why the prior deal fell apart. Why waste time or money pursing a house that will require more work or money than you’re interested in taking on. Do your due diligence. If a deal falls apart after a home inspection, this is a reason to dig deeper.
Here to Help
Buyers agents are here to advocate for their buyers. Before you even take time to tour, your agent should be able to help you research the home to be sure that you know what you’re getting into.
Sometimes home sales fall apart for no good reason at all but if something feels off, ask questions and know what you are getting into before you commit.