You’ve readied your home for sale, endured an open house or two, and a buyer has submitted an offer. It’s time to celebrate… right?
Don’t break out the bubbly too quickly. Sales fall through all the time; the average home sale takes about 50 days to close and a lot can change in almost two months.
Whether your home sale is pending — meaning the seller accepted an offer, but the sale hasn’t closed yet — or it’s a contingent sale — meaning the buyer or seller (or both!) must meet certain conditions before the sale can close — don’t celebrate too soon. Here’s what to expect and what can still go wrong.
What Percentage of Pending Sales Fall Through?
The number of failed sales is on the rise. Research shows that, over a recent two-year period, failed home sales increased from 1.4% to 4.3% of all listed properties.
These numbers highlight the fact that most home sales do go through. However, there is a myriad of reasons why pending sales and contingent offers fall through. Let’s look at common causes of failed sales.
Why Do Pending Sales Fall Through?
1. Financial Difficulties
You probably won’t be surprised to learn that financing difficulties are a cause of pending sale failure, especially given that 88 percent of buyers finance their home purchases.
- Changes in financial status — such as losing or switching jobs, taking on new debt, or changes in lending guidelines — may lead to a lender canceling a pre-approval
- Lenders may deny a loan to buyers who have high debt-to-income ratios
- Buyers may have liens filed against them that they don’t know about until they apply for a loan; lenders won’t offer a loan until these liens are cleared
2. Home Inspection Trouble
Another common sale obstacle? A home inspection contingency. If an inspection reveals unexpected problems, an inspection contingency allows the buyer to walk away. Sometimes, the buyer may ask you to fix the issues or reduce the sale price before they walk.
3. Lower than Expected Appraisal
Then there’s the appraisal. Lenders won’t finance a property for more than the appraised value, but in a seller’s market, bidding wars often raise prices above market value. If an appraisal comes in low, options may include reducing the price, the buyer paying the difference in cash, or the buyer choosing to back out.
What if the buyer has written a home sale contingency into the offer? Many buyers can’t pay two mortgages, so they won’t buy another home until their current home is sold. If their home doesn’t sell within an agreed-upon time, they can walk away.
4. Buyer’s Remorse
Finally, a buyer may simply get cold feet. Consider that 33 percent are first-time home buyers who may experience stress when making the largest financial decision of their lives. Buyer’s remorse is all too common.
No matter what the reason, buyers can usually find some way to walk away from a sale.
How to Keep Your Home From Returning to the Market
Fortunately, sellers do have options. You don’t have to agree to contingencies; however, rejecting a home sale contingency may decrease the buyer’s ability to secure a loan.
You may also include a “kick-out clause” in the contract. This way, you can keep your home on the market and continue to accept other offers while the buyer tries to sell their home. Most clauses require you to give the buyer notice if you receive another offer you’d like to accept.
Being selective is key. Though the highest offer may be attractive, it isn’t always the most likely to close, as it may not stand up to the appraisal. Instead, prioritize offers with the least contingencies.
Avoid surprises by pre-inspecting your home. You’ll know what needs work before the buyer’s inspection, so you can make repairs… or adjust the price accordingly.
Skip the Stress of Contingent Offers
If you want to skip the stress and uncertainty of the home closing process, make it easy on yourself and sell to HomeGo. We buy homes as-is in any condition so you’ll enjoy a transparent, same-day offer while avoiding the hassle of preparing and marketing your home.