09/23/2021
Top 3 Reasons Buyers May Back Out of a Contract on a Home
September 22, 2021 admin Category: Real Estate Advice
According to the National Association of REALTORS®, 9 percent of sales contracts were terminated in January 2021. What exactly is a contract, you may ask? It’s usually the 30-day window of time between an offer from a buyer is accepted and the official closing of the, well, closing.
Sometimes, however, there are complications that come up along the way in that window, such as negotiation of the sales price because repairs are needed before the sale or financing falling through. Which may mean the contract is no longer.
Here is some more detailed information about three of the topmost common reasons that home sales contracts are negated:
Major repairs are found during inspection.
A professional home inspector’s job is just that: to inspect every square inch of a home, inside and out, for a buyer. This typically happens after the seller accepts the buyer’s offer within seven days. The inspection report almost always includes some sort of issues found, from common wear-and-tear problems to repairs that are more concerning. This then places the power into the buyer’s hands because they can ask the seller to fix certain issues prior to closing or to reduce the price to cover the cost of repairs.
Common issues include cracks or wear in grout or tile, carpet tears, and countertops that need to be resealed or resurfaced. More major issues involve the roof, the foundation, HVAC systems, and electrical or plumbing systems. Even in this seller’s market, it’s recommended that the seller makes some of the requested repairs. An experienced seller’s agent will be able to guide you to which ones would be best for you and seller, Otherwise, if an agreement can’t be made between buyer and seller, a buyer may be able to back out of the contract without losing their earnest money (the lump sum a buyer pays into a third-party account, or escrow, when the home first goes under contract).
Home appraisal price is less than the offer price.
This is also a tricky balance between buyer and seller. Contracts usually require a property appraisal after the inspection. If the appraisal value is higher than the offer, most lenders will not finance the home; if the appraisal comes in lower than the offer, either the seller will have to lower the price, or the buyer will have to pay for the difference out of pocket. Which can certainly lead to a contract falling through.
There may be a glimmer of hope, however. Sometimes, a knowledgeable seller’s agent could contest an appraisal by showing that comparable properties indeed sold for a higher price or by showing that the home received multiple offers at or above the listing price. This decision is in the hands of the appraiser.
Financing falls through for the buyer.
If you’ve made it through the first two obstacles we covered, sellers (and buyers) are usually feeling confident by now … with one possible snag: the buyer’s financing falls through. This could be caused from a number of missteps, but ultimately can be avoided if buyers have as much of the loan paperwork process completed before putting in an offer, including past tax documents, failure to pay taxes, up-to-date credit scores, and more. Also, it’s not a good idea for buyers to go on any high-buy shopping sprees before officially qualifying for a loan, such as new furniture, cars or vacations.
Our advice? Work with an experienced agent through this often-complicated house buying/selling process to stay ahead of any of these obstacles that came up and to proactively address potential issues. To sit down and discuss your plans to buy or sell a home, please call Melinda Schlosberg Valentine
Sands Reality Group
845-705-0051
