A lot of time and energy goes into buying a home. So, when it comes to closing the deal, you don’t want anything to go wrong. But many times, it does. Almost anything can happen in escrow. money.com gives five reasons on why home sales fall through. The website says to prepare early in order to avoid major issues or at least work around them.
1 - BUYER FINANCING WOES
The first reason a home sale can fall through has to do with buyer financing. During the housing market boom, getting a loan was fairly easy. As a result, a seller didn’t have to worry as much about a house sale falling through due to financing. Today, buyer financing trouble is among the biggest sale killers.
As a seller, to hopefully avoid this from happening, money.com says the first thing you should do is look for buyers with a pre-approved loan. Granted, buyers can still get rejected in the mortgage approval process, but it’s less likely to happen with buyers who have a pre-approved loan. You can also look for cash-only buyers but keep in mind, cash buyers often demand a lower price.
It never hurts to check with your agent, to ensure the loan is on track, while the approval process is underway. If you sense there’s a problem, you can always try to agree on a more affordable price with the buyer.
2 - LOW APPRAISALS
Another reason a house sale can fall through is with an appraisal that’s lower than the contract price. A buyer’s lender will only lend up to the value of the property. So, if a home ends up getting appraised lower than the agreed amount, the buyer can’t secure the full mortgage. The buyer will then need to come up with the difference from their savings. If they can’t, a low appraisal can be a deal breaker. A seller than must be ready to lower their price or ask the buyer to secure a second appraisal. Sellers can also help the buyer supply the appraiser with evidence of comparable home sales in the area to make the case for a higher value.
3 - TITLE INSURANCE AND HOME INSPECTION SURPRISES
money.com says, “the purpose of title insurance is to ensure the owner’s home is fully theirs to sell. Lenders require title insurance to protect the asset — the home — that secures the loan. If a homeowner defaults on the loan and a faulty title reveals that the home is not actually theirs, the bank has no way of recouping the money it lent.”
To avoid any surprise loan issues, it’s best not to wait for the title report from the buyer. Get your own report ahead of time to make sure the property is yours and there’s no threat of claims.
The same goes for home inspections. Many home sales fall through if the buyer’s inspection reveals physical faults with the property. The seller should be aware of any potential problems.
4 - WATCH FOR BUYER’S REMORSE
Buying a home can be emotional, considering the amount of money involved. Buyers have to live with the house and the community once the deal goes through. Sometimes, buyers get cold feet. In this case, there’s little a seller can do. But a seller can look for warning signs some as anxiousness on the part of the buyer and hesitancy about negotiating a deal. When possible, look for the confident buyers.
5 - DON’T HINGE A DEAL BASED ON THE BUYER’S HOME SALE
Many buyers want to make a deal based on selling their home. The danger in this deal, is if your buyer’s home sale falls through, your home sale could come to a halt, as well. The way to avoid this is to not let the sale of the buyer’s home be contingent on the buying of your home. Or find a buyer who has already sold their home or who aren’t relying on the equity in their own home to help finance yours.