Selling your house is a daunting task at best with all of the preparations you need to take, not to mention the inconveniences of showing your home. If you’re fortunate enough to go under contract with a buyer, you definitely want the deal to stick. But a growing number of real estate transactions are never making it to the closing table. It used to be that roughly 90 percent of all purchase contracts went to closing, but that number has slipped to only two-thirds of all deals. Why are so many real estate deals falling apart? The reasons vary from case to case, but as a seller here are the top three reasons your deal could fall through.
The pendulum has swung in the world of financing. For awhile it seemed lenders would loan money to just about anybody. But with the fallout of the financial crisis on Wall Street, and the housing crisis felt across the nation, securing financing has become much more difficult for buyers today. As such, sellers should never accept an offer from a buyer who does not have a letter of pre-approval from a lender. And don’t forget, a pre-approval letter is nothing more than a lender stating that after a preliminary look at the buyer’s financial portfolio; they anticipate the buyer will get approved for a loan. But once the loan application is underway, lenders will scrutinize every aspect of a buyer’s financial status and if they discover anything that is not satisfactory, your buyer could lose their financing, which means you lose your deal.
Unless you are lucky enough to have a cash buyer for your home, you will be subject to the home appraisal process. Historically speaking, appraisals did not pose much of a threat to killing a deal, but that is changing in today’s market. Your buyer’s lender will require that a qualified home appraiser assign a value to your home as a means of justifying the agreed upon sales price. But more and more home appraisals are coming in lower than their contracted sales price because there were so many foreclosures and short sales messing up the comps. And here’s the catch, a lender will not agree to loan your buyer more than appraised value. That means one of two things could happen – and either would squash your deal. First, as the seller you could refuse to lower your price to the appraised value. If you do this, the buyer will likely walk away because a) they refuse to pay over appraised value, or b) they simply do not have the funds to pay the difference. Secondly, even if you decide to renegotiate with the buyer, you may need to lower your price so dramatically that the sale is no longer attractive and you simply decide to abandon the deal.
If your home is being sold as a short sale, you could lose a buyer simply because the process is too lengthy; most buyers don’t have months to sit and wait for your current lender to decide whether or not they will accept an offer. Perhaps a home inspection resulted in some substantial repairs that are going to delay your buyers from getting into the house. Or maybe you simply required a closing date too far into the future. Whatever the case, if buyers encounter too many delays, they are more likely to back out and find another home.