No buyer or seller wants their real estate deal to fall apart, but it can happen. That’s why it’s important to learn about common issues that pop up and to learn what you can do to avoid these issues and keep things on track. Below, we’ll describe three common situations that can cause a home sale to derail.
- Seller Refuses to Fix Issues Uncovered During the Inspection:
A home inspection is a normal part of the buying and selling process. Potential buyers have the opportunity to have your home inspected for structural issues, broken appliances, plumbing issues and so on. During the process, a licensed inspector will take a magnifying glass to your home to identify any issues that need to be fixed. After the inspection, the buyers will be presented with a report and will have the option to request whatever fixes they deem essential from the sellers.
As a seller, there are a couple important things to consider when you get a list of repair requests:
- Is the market currently favoring buyers or favoring sellers?
If the market is favoring sellers, you may be able to get away with doing some but not all of the repairs. You may even be able to get away with no repairs or a small credit to escrow. But if it’s favoring buyers, your best bet may be to offer a larger credit. If that doesn’t work, you may have to do the requested repairs.
- How much demand is there for your property?
If you were slow to get offers and you’ve got a lot riding on this potential buyer, you should do everything in your power to keep the sale on track. That includes fixing whatever your buyers request or offering a financial concession so the buyers can fix it when they move into the property. If you decide you don’t want to fix any issues, make sure the market and demand back up your decision or you could see your buyer walk away from the sale. That’s not a situation you want to be in because you not only have to wait for a new buyer, you’ll also be facing issues with the same fixes.
To really safeguard yourself as a seller, you can get a home inspection done before or just after you list. Doing so will allow you to address issues before buyers bring offers to the table or to provide reports to buyers that disclose issues right up front. Disclosing early will allow buyers to consider the cost of necessary fixes as they work up their offer.
- Your Property Gets a Low Appraisal:
A property appraisal is an expert opinion of the home’s value. A licensed appraisal comes up with the value based on a number of things, including:
- recent comparable home sales
- the state of your property compared to similar properties (floorplan, beds and baths, upgrades, etc.)
- local real estate trends and their impact on value
When a house appraises for a lower price than the buyer agreed to pay in the real estate purchase agreeement, the home sale may fall through. This can happen because the lender refuses to pay the full cost of the property because it’s over fair market value. Sometimes the buyer has cash to make up the difference, but if they don’t, the sale is most likely derailed.
What causes a low appraisal? According to Forbes, a key reason for a low appraisal in recent years is the increased rate of foreclosures and short sales. A property may appraise less than current market rates if there are lots of undervalued homes in the area. If your neighborhood falls into this category, you need to protect yourself by considering this when you price your property. Research comparable sales in your area so you know what similar homes are selling for when you go to set your price. Doing so will help you make sure your price is fair and that it’s more likely to appraise at the value you set.
- The Buyer’s Loan Falls Through:
These days, it can be more difficult to get traditional loan financing than it was in the past, so there’s always a risk that your buyer’s loan could fall through midway through or even late in the sale.
This typically happens:
- If your buyer is unable to come up with funds to cover their down payment and closing costs
- If the buyer wasn’t preapproved and is requesting a dollar amount they aren’t fit to receive
- There are credit issues that come up (late or missed payments, defaulting accounts, etc) that create issues for your buyer
- Your buyer has a change in employment or another major life event that impacts their income
In any one of these cases, your buyer’s loan application may be denied. If that happens, it can cause your home sale to fall apart. If this happens, you can wait for the buyer to try to secure funding through another source, but that option can take time and often will not result in a better outcome. That’s why in most cases, your best option is to move on and look for another buyer.
To minimize the risk of losing a sale to a denied loan, ask your buyer if they have preapproval before you finalize negotiations. You can request a copy of their preapproval letter, which is a note from their mortgage broker stating that the lender is confident in the buyer’s ability to obtain funding for a certain amount of money. You can also request proof of funds, showing that they have in a liquid account enough cash to pay their downpayment and closing costs. Taking this extra step can save you from a big setback by reducing the risk of your buyer’s financing falling through at the last minute.
Preparing to sell your property requires the right combination of knowledge, tools and strategies. Knowing about potential setbacks and learning how to do what you can up front to avoid them will increase your odds of having a stress-free home sale.
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