When a home’s status changes to sale pending, it means the seller has accepted the buyer’s offer and both parties are ready to move forward. Hooray!
While a failed pending sale isn’t common, it can happen, even in a thriving real estate market. Last year, existing-home sales totaled 6.12 million, an increase of 8.5% year over year. However, a number of purchases didn’t pan out. About 6% of all purchase agreements in the last three months of 2021 were terminated, according to the National Association of Realtors®’ Realtors Confidence Index.
So what could possibly be to blame for real estate transactions fizzling out? Below, we take a close look at the top five reasons pending sales fall through. If you can plan ahead, chances are good you can avoid these pitfalls.
1. The buyer changes his mind
Second-guessing yourself is human, especially in situations where you’re spending large sums of money. That’s why something as simple as buyer’s remorse can cause a sale to fall through.
Because most buyers include contingencies in their offer that allow them to walk away—and many states offer a due diligence period on contracts—buyers have time to change their mind. But keep in mind that things get much more complicated once the purchase agreement is signed.
2. The buyer is unable to obtain financing
Things happen, and sometimes a buyer can’t secure financing. In most situations, if a buyer’s offer includes a finance contingency and the loan isn’t approved, the buyer will get the earnest money back. Financing issues can also come up if buyers suddenly make a lot of purchases at once.
3. The home failed inspection
For buyers, an inspection is integral to a home sale as it gives a thorough picture of the property they’re purchasing. But a failed home inspection often spells doom for a sale.
If a buyer’s offer includes an inspection contingency and the house fails the inspection, the buyer is allowed to either negotiate for repairs or cancel the contract. But if a buyer is keen on moving ahead with the sale, it can be safely and responsibly done under certain circumstances.
4. The buyer hasn’t sold the home he currently owns
When writing an offer on a new home, buyers have the option to include a home sale contingency. That way, if the home they’re selling doesn’t sell in time to close on the new one, the new purchase either will not occur or will be postponed.
5. The home appraisal is lower than the purchase price
Buyers and sellers know that a lender will require a home appraisal to ensure the house is worth the value the lender is agreeing to finance. But in some unfortunate situations, the house will appraise for less than the approved loan amount. When this happens, it’s tough for buyers to know how to proceed. Should they stick with the sale and make up the difference, or walk away?
It’s not unusual for the seller to ask the buyer to make up the difference, but whether or not the buyer should do that depends on the gap that exists and the potential value for the property in the future.
But if the difference between the home’s appraised value and the purchase price is too vast, the buyer may cut his losses and decide to walk away.
As seen on:Realtor.com