But then, life throws a curveball — an issue comes up that turns out to be a major deal-breaker, causing the sale to fall through. Here are some examples:
These issues could cause the buyer to panic and open further negotiation on the price, or they could ask for a credit or relief from the seller as compensation. If the buyer included a home inspection contingency in their offer, it also allows them to renegotiate the price or walk away due to those issues.
The seller, in return, has three options: 1.) They can fix the problems by hiring contractors; 2.) They can credit the buyer so they can make the fixes themselves; or, 3.) They can reduce the selling price of the property.
The problem comes if the seller refuses to do any of these. The buyer can then cancel the home sale and simply walk away, although they may lose the earnest deposit they made when signing the contract.
How to prevent this:
However, if for any reason, their home doesn’t sell within the timeframe, it could cause delays with your home sale or cause it to fall apart. You may be left searching for another buyer or having to proceed with a backup offer and begin a new transaction all over again.
How to prevent this:
Keep in mind that a mortgage is not guaranteed until the buyer has signed a final agreement with the lender. While waiting for the mortgage to close, buyers should avoid making significant financial changes, such as taking out a new loan for a car, changing or losing a job, etc. These changes could affect their debt-to-income ratio, which may make them ineligible for the mortgage loan for which they originally applied. Once the buyer’s financing falls through, the pending home sale will go back to active and the transaction falls out of escrow.
How to prevent this:
With the help of your listing agent, you can request that buyers be pre-approved and only enter into a contract with a serious and qualified buyer. The only exception is when the buyer wants to make a cash purchase. In this case, there won’t be any financing contingency to deal with.
If this situation occurs, the buyer and seller have a few options. The buyer can order another appraisal from a new professional. If not, they will have to pay the difference in cash. However, not all buyers have the extra amount to bring to the table. They may also ask the seller to reduce the sale price so it’s more in line with the appraisal. Sellers need to be prepared for this negotiation. The seller can attempt to justify their own appraisal, with comparables in the area, to prove their higher asking price.
However, if both parties cannot reach an agreeable solution, the buyer can walk away, and the pending sale will most likely fall through.
How to prevent this:
Once a buyer places an offer, he or she is legally bound. However, buyers can get scared or overwhelmed with the difficulties of the process. Once they realize they don’t want to continue with their purchase, they will do anything they can to get out of it, whether it be contingencies stated in their offer or loopholes in the contract.
When this happens, the seller is left in a bad position. This is why the earnest deposit is important. This deposit, which is typically 1 percent of the home’s final sale price, is made when the buyer signs the purchase contract. It serves as protection for the seller in case the buyer changes their mind. If the buyer chooses to walk away from the deal due to a change of heart, they will lose their deposit money to the seller.
However, it’s still a heart-breaking situation for the seller because they now need to put their home back on the market and start from scratch.
How to prevent this:
For buyers, especially first-time home buyers, get the help of an experienced real estate agent who can walk you through the real estate process and eliminate any misconceptions you have about buying a home. Realtors can also provide counseling if they notice any signs of cold feet from their client.
