With house sale rates falling over the last year, the idea of a sale falling through scares sellers more today than in the past. Buyers are not as common as before, meaning sellers want to be selective about who they consider for their home.
Rather than worry, let’s talk about what percentage of house sales fall through and what steps you can take to ensure yours succeeds.
Common Causes of House Sales Falling Through
House sales can fall through for a variety of reasons. The top reasons for this include:
Before buying a home, many buyers want a home inspection performed to get an accurate idea of what property they will buy. These inspections not only let buyers know if the home is up to par with local and state regulations but also what systems in the home might need replacing shortly.
So, as a gesture of good faith, many real estate contracts have a home inspection contingency that lets the buyer back out of a deal if the inspection yields poor results.
If a home inspector finds issues during an inspection, your buyer might be dissuaded from closing on the home. You might find it valuable to have your home inspected before putting it up on the market. Issues found during self-inspections give the sellers a chance to fix major issues before buyers can be scared of them.
Potential Buyer Is Rejected From Their Mortgage
Most sellers ask for pre-approval letters when considering buyers, especially if the buyer cannot make a cash offer. While these letters can increase the chances that a buyer will close on the purchase, they don’t guarantee that outcome.
Lenders can withdraw their mortgage approval from a buyer for several reasons, most of which relate to the buyer’s financial status. Banks are hesitant to their lend their money to folks that might have issues paying it back. So, buyers that lose their job or ability to work while searching for homes are more likely to have their pre-approval status revoked.
Still, banks work hard to ensure that the majority of buyers that come to the table can back up their pre-approval status. So, while this issue is common, it’s not the most common reason why buyers back out of a house sale.
Issues With Bank Appraisals
Buyers securing a mortgage will be subject to a bank appraisal of the property before the deal can close. These appraisals look for issues with the property that would keep the bank from willingly lending money to the buyer.
In general, minor issues with a property won’t scare off the bank, as these troubles can be solved by the buyer. However, massive flaws with the property can prevent a bank from committing money. In these cases, the bank will either back out entirely or wait for proof of the issue’s resolution before entering back into the deal.
Closing Document Troubles
Before closing a deal, attorneys for the buyer, seller, and the bank review the closing documents for issues or discrepancies. If there are issues with these closing documents, a real estate deal can fall through if a resolution can’t be met.
Most of the issues with closing documents start from the title of the property. Issues such as outstanding liens, public record errors, a history of bankruptcy, and missing heir information can prevent realtors from closing on the sale due to legal reasons.
Buyer Can’t Sell Their Previous House
Many home buyers have a previous abode they wish to sell as part of the deal to purchase a new home. These sorts of deals help home buyers secure the funds they need to meet a down payment or, in some cases, avoid taking out a mortgage period.
However, if a buyer can’t sell their current home, it can cause the buyer to back out of the deal if they have no other means of securing financing.
These contingent deals are some of the most common deals that fall through. Adding the extra complexity of selling another house to fund a new one means there are more ways for a deal to go south.
Short Sale or Pre-Foreclosure Troubles
Short sales are tricky deals. Because of the limited time frame for realtors and buyers to work with, these deals can fall through, especially when sellers don’t afford the buyer enough time to go through all the responsible steps needed to review the property and get all necessary paperwork and financing in order.
On average, a short seller will give between 14 and 21 days for these steps to be followed. Given that the standard house sale can take a month or longer, cutting down to half or less time puts a lot of crunch on the buyer.
This is why short sales are not common recommendations for first-time homebuyers. Mixing inexperience with haste is a recipe for disaster, and you’ll end up scaring off potential homebuyers from your property.
Sometimes the fact is that buyers get cold feet. While there are plenty of reasons why a buyer might feel they need to exit a deal, the truth is that these situations can happen. A home seller doesn’t want to see their buyer leave a week before the deal is meant to close, but some buyers have their circumstances change.
Most of the negative feelings that cause buyer’s remorse can be alleviated with a better understanding of the numbers and circumstances on the part of the buyer. Good realtors will be able to help buyers understand the details of each property and its closing deals to help the buyer feel comfortable with their commitment.
Inexperienced Real Estate Agents
Most folks are not ready to navigate the complexities and administration requirements of buying a home on their own. This fact is why real estate agents are important since these professionals can help guide buyers through the process of looking at homes, reviewing bank information and inspection results, and closing on deals.
However, inexperienced or incompetent agents can make the experience worse. An agent leaving out critical details or missing deadlines for deals can cause buyers to give up on buying a home and leaving the market.
So, for potential buyers, taking time to review real estate agents in your area and their credentials and experience can be the difference between a smooth or bumpy road to buying a home.
The National Association of Realtors (NAR) offers resources for relators resources to improve their craft and prove their credentials.
Percentage of Pending House Sales Falling Through
The good news is that, according to a 2016 report from Trulia, only 4.3% of home sales fall through. This fact means that the vast majority of home sales will go through, regardless of the financing or inspection issues that come up during the process.
The study also goes into detail about the kind of deals that are more and less likely to fall through.
For example, the report finds that new home sales and sales for very old homes are the least likely to fail. This fact makes sense given that new homes tend to be custom-built for the buyers, increasing their connection to the property. Likewise, old properties tend to go to those willing to put in the effort to restore or renovate the property.
Starter homes had the highest rate of falling through at 7.3% of all sales. Given the financial instability, young couples can have at the beginning of their relationships, this fact also isn’t much of a surprise.
What to Do if a Pending House Sale Falls Through
Most often, a house sale falls through due to issues on the buyer’s end, rather than the seller’s. So, when a house sale falls through, the seller will have some work to do to get the property relisted.
The first thing a seller will need to consider is if they should stay with their current agent or find a new one. While buyers are responsible for their end of the bargain, experienced real estate agents can tell if a buyer is serious or not before closing documents come up.
As for buyers, a house sale falling through usually means there was something wrong with them. While that idea isn’t pleasant to think about, buyers should consider what they could have done during the deal to improve the process.
Since most issues relate to financing troubles or emotions related to the deal, getting a better handle on these things improves a buyer’s chances of closing later on.
While there are several reasons for house deals to fall through, most of them can be prevented with a little bit of foresight or work ahead of time. Since many of these issues can come from the buyer’s finances and the state of the seller’s home, these two facets of a real estate deal should be the focus of the initial setup for a house sale.
If you need to sell a house fast in Tennessee, then Nexus Homebuyers can help! We have tools to help sell your home quickly and even some guides on selling your house without a realtor.