We Buy Houses in Minneapolis MN. After you’ve spent months hunting down buyers and finalizing a deal, having your house fall out of contract in the last stages can be quite a difficult thing to get over. However, there is a way to prevent this from happening. In this blog, we are going to talk about some of the most common reasons why houses fall out of contract and provide you with a few tips that will help you better secure your deal.
Selling your house traditionally (with a real estate agent) is not an easy thing to do. As such, the prospect of your deal falling apart at the final stages can be quite a hard pill to swallow. If you’ve recently had a buyer fall through and are looking for solutions to salvage your home sale, fear not. One of the best options that you can consider is to sell your house directly to FastPath Home Buyers. We Buy Houses in Minneapolis MN, and throughout the greater state of Minnesota. We also accept houses “as-is”, so you won’t have to worry about repairs or upgrades. Simply reach out to our company, we’ll provide you with the highest possible cash offer that you’ll be able to close on in less than a week. So why not give us a shot!
Most Common Reasons Why Houses Fall Out Of Contract
Here are a few reasons why a buyer might walk away mid-contract negotiation.
While houses falling out of contract is not a common occurrence in most home sales, there are a few things that can make your buyer falling through more likely. Below, we are going to talk about 4 of the most common reasons why houses fall out of contract. If your property or sale suffers from any one of these things, resolving it would be a great way to secure your deal.
So let’s get started…
The leading reason why most houses fall out of contract in the final stages of the home sale process is because of poor inspections. And this is something that the average home sellers cannot avoid unless they’ve made all the necessary repairs and upgrades beforehand. After the offer has been accepted, most agreements include an inspection contingency. The inspection contingency is a period of time that the buyer gets to do his or her due diligence on the physical state of the property. During this period (which is usually 7 days), the buyer can choose to opt-out of the contract without any consequence.
Typically, the buyer will hire an expert inspector who’ll then go over the property with a fine-tooth comb. The inspector will look at the mechanical systems (like the furnace, AC, water heater, etc), foundation, roof, plumbing and electrical. They will then also include opinions on the state of the entire property in their final report which the buyer will receive shortly after the inspector is finished. The cost of this process varies, but it’s typically around $300-$400 for a modest single-family home.
The buyer will review the report and consider any high-risk items highlighted by the inspector. For example, an inspector might uncover a large amount of mould and rotting framing due to a leak in the shower. This fact can severely impact the desirability of the property. Armed with this knowledge, the buyer can ask the seller to repair this damage, reduce the price of the property or cancel the contract entirely. Sometimes the buyer and seller won’t come to an agreement on the repairs, so the buyer will be left with no option but to simply walk away.
While no houses ever come back with a “perfect” inspection, these areas are often a strong motivator for buyers to look for better properties.
This is another very common reason why contracts fall through. Especially earlier on in the pandemic, contracts were getting cancelled due to the nearly instant skyrocketing of unemployment. If a buyer was unfortunately caught in this tragedy and was relying on a bank to finance the purchase, they likely had to cancel the contract because the bank would no longer give the buyer a loan without W2 income.
Another way financing could trigger a cancellation is if the property appraisal (required by banks to make sure the value of the house is more than the contract price) comes in low. If so, the buyer would then be on the hook for any extra cash requirements. This extra cash would be defined by the bank and based off the loan to value ratio. For example, a house is listed for $200,000. The buyer offers $200,000 and will finance 95% (usually the maximum amount for a conventional loan), therefore taking a loan out for $190,000. If the appraisal comes in at $190,000, the bank would only loan 95% of that value, or $180,500. Therefore, the buyer would need to come up with an additional $9,500 in cash to both get a loan and meet the contract price. In this case, if the buyer doesn’t have the extra cash, they will not be able to get the loan and the contract will be cancelled.
With so many buyers offering more than asking, this could be a serious risk depending on the cash the buyers have in reserves.
3. BUYERS HOUSE DOESN’T SELL
A third way a cancellation of a contract might occur is if the buyer gets into a contract for a house, but is contingent on their current house selling. This may or may not be related to the financing. For example, a buyer might be able to afford two houses and get a loan for the second house but may not want to carry two payments. This could play into financing when the bank requires the current house to sell. So, if the buyer’s house doesn’t sell within a certain period of time, the contract will then be cancelled.
3. BUYERS HOUSE DOESN’T SELL
Unlike the three mentioned above, this issue is on the seller’s side. Normally, the seller will transfer a clear title to the buyer. A clear title means that the property is solely owned by the seller and that no other party has a claim to the property. Examples of claims might be the seller hired a contractor to redo the kitchen a year ago, but the seller got into hard times, didn’t fully pay the contractor and instead decided to sell the property. But, the contractor filed a mechanics lien against the property so that he would get paid when/if the property sells. This lien, or any such like it, are bound to be discovered during the closing process. Other types of liens could be unpaid taxes, HOA dues and unpaid mortgage balances. These would all show up at some point, and the seller would need to “clear” these liens directly with the lien holder. In other cases, the buyer may choose to take care of these issues themselves – but, if so, the price of the house would typically be adjusted. If the buyer and seller can’t agree on how to overcome these “surprises”, the contract could be cancelled.
So there you have it. Here are our top 4 reasons why properties typically fall out of contract. If you have the aching feeling that your house might be bordering on any one of these issues, taking immediate action by fixing the problem and doing so quickly will be sure to help you salvage the situation.
However, there are cases (like reason number 1-3) where the issue is not on your side as the seller and is therefore out of your hands. In situations like these, the best course of action is to find a buyer, and Fast! Reach out to our company here at FastPath Home Buyers, either by calling (612) 351-2384 or by filling in the short form below, and we’ll be happy to buy your house directly, quickly and for a fair price.