Pending Home Sales Fall Through, What You Can Do About Them
Home sales are on the rise, and that is good news for buyers and sellers alike. A rising number of home sales is also good news for the overall economy, but as sales increases, so-called fail sales tend to go up as well.
While only a small percentage of pending home sales fail to go through, the situation is extremely frustrating for the buyers and sellers caught in the middle. Buyers whose sales fall through are forced to stop packing and reevaluate their dreams of home ownership. Sellers who see a pending sale disappear at the last minute may need to put off their own moves or carry the cost of two mortgages until they can find another buyer.
No matter what the short-term and long-term ramifications, avoiding a failed sale is always the best course of action. Being an informed buyer or seller can help you avoid the last minute disappointment of a failed sale, and it all starts with knowing what causes most pending home sales to crumble. Here are the three biggest reasons home sales fail – and what you can do about them.
#1. Problems with Financing
Issues with financing are more likely to arise when the buyer is a first-timer, but these problems can come up even with experienced home buyers. Lenders have learned the lessons of the Great Recession, perhaps a little too well. They have tightened their lending standards significantly since those heady days, and buyers need to be prepared.
The best way to avoid last-minute financing failure is with a pre-approval. Getting pre-approved for a mortgage is always a smart thing to do, and it gives you added negotiating power in a tight market. In addition, walking in with a pre-approval reassures the seller that you are serious and helps both parties avoid unpleasant surprises later on.
Not only sellers should ask for a pre-approval but also should ask their broker to interview the lender and ask for more detail. Knowing the financial strength of your home buyer will improve the likelihood of closing the deal.
#2. The Appraisal Does Not Match the Agreed Upon Sale Price
Home prices have risen sharply, so much so that they have started to get ahead of realistic values. In more and more cases, appraisals are coming in short of the agreed upon sales price, and that is causing financing to fall through at the last minute.
Buyers and sellers both have a role to play in preventing this kind of mismatch between appraisals and sales prices. Sellers should conduct their own research and check out comparable sales in their neighborhood before they price their own homes, and buyers should do the same for houses they are considering. Appraisers use the same kinds of comparable sales data available to homeowners, so there is no reason to be taken by surprise.
#3. The Home Inspection Reveals a Major Problem
With baby boomer retiring at a record pace and lots of their old homes on the market, many sales are falling through because the home inspection reveals a major problem. From cracks in the basement walls to shifting foundation, these home inspection reveals can derail a pending sale in an instant.
Owners of older homes can prevent these unpleasant sales fails by conducting their own pre-market inspections and making the necessary repairs. Knowing what is lurking beneath the façade of paint and plaster will go a long way, and having a home in perfect condition can make the sale faster and more successful.
Sellers should expect any competent buyer to have a thorough home inspection, and they should be prepared. The home inspection is always a critical part of the buying process, but it becomes even more critical with older baby boomer-owned homes, some of which date back to the 1960s, 1950s or even before.
Selling a home is hard, and buying one can be even harder. After months of hard work and careful planning, the last thing you want is to have the sale fall through at the last minute. Knowing why other pending home sales have fallen through and taking steps to address them is the best way to safeguard your own deal and make sure the sale, or the purchase, goes off without a hitch.