4 Things That Can Kill Your Home Sale
4 Things That Can Kill Your Home Sale
Just because an offer has been accepted on a home does not mean it is a done deal. Instead there are many steps that need to be accomplished prior to the actual homebuyer and sellers being able to close on the home and transfer ownership. Before closing there are a number of issues that can pop up that may not only stall a home sale but can kill the deal completely requiring the home to go back on the market. This article looks at where issues may pop up and some ways to prevent those issues from causing a deal to fall apart.
Buyer or Seller Cold Feet
While not as common this does happen from time to time where either the buyer or the seller decide they no longer want to buy or sell a home. If the homebuyer announces their intention ahead of time not to buy the home then sellers may only have lost a few days on the market and can quickly have the home back on the market. On the other hand if homebuyers declare they don’t want to buy the home at the last minute this can leave the home sellers in a tough situation especially if they have packed everything up and maybe even moved out of the house. Often these situations can result in a lawsuit to recover money for expenses made in anticipation of selling the home and the buyer could be forced to buy a home if a court ordered them to complete the terms of the contract they agreed to.
In the event the seller decides not to sell the home hopefully they also announce that decision early and not force the buyer to spend money to hire an appraiser, home inspector and more in order to make sure the home is in good condition. If done early enough then maybe the buyer will walk away and try looking for another home rather than filing a lawsuit against the seller. If the home seller backs out at the last minute right before closing then expect a letter from an attorney followed up by a possible lawsuit if the buyer demands are not met nor are they offered any compensation for their lost time and what they spent in anticipation of buying the home.
The easiest way to avoid cold feet is to make sure as a homebuyer or home seller going in you are committed to buying or selling a home. If the homebuyer or the home seller are not ready to buy or sell a home then don’t start the process and wait until you ready. It is better to go in fully committed to buying or selling a home from the start than going in half hearted and facing possible legal consequences due to a last minute change of heart.
If a home seller prices their home too high and finds a buyer willing to make an offer at the inflated price or as a result of a bidding war the price of a home goes above its actual value then a deal to purchase the home could potentially fall apart. This can happen where a mortgage is being used to finance the purchase of a home or can happen during a cash purchase offer and the buyer wants the purchase price to reflect the actual value of the home.
Usually an appraiser will determine the value of the home and provide that opinion of value document to the lender and to the buyer. If the value of the home is shown as less than the offer price then the following options exist: the price of the home can be reduced; the buyer must put more money towards a down payment (applies when mortgage financing is involved); in the case of a cash offer the buyer and seller can agree to proceed as agreed upon; or the buyer and seller can agree to cancel the deal. .
If there are disputes as to the appraisal value then the homeowner can appeal the appraisal with their lender. In order to appeal an appraisal the requester must present proper justification for the appeal (such as updated list of recent homes sold, list of features that were not considered or discovered during the appraisal…). If the mortgage lender believes the justification is sufficient they may be willing to order a new appraisal.
The best ways to avoid appraisal problems that result in a cancelled deal is to make sure a home is priced properly from the get go. Overpricing a home as some sort of selling strategy rarely works and only causes the home to sit on the market longer than it should. In the event of a bidding war it would be wise for the homeowners not to just consider what the highest price offer is, but also consider which offer will be most successful. If a buyer is using a low down payment mortgage and offering an amount well above the home’s true value that deal is more likely to fail if the home is appraised below the offer amount since those buyers may not have extra cash to put towards a down payment.
Another area where a home sale can fall apart is after a home inspection. If a home inspection turns up major issues with the home (foundation problems, structural problems, mold, or something else) this could result in a buyer cancelling and walking away from a deal. Even for non-major issues if a home seller takes a hard line and refuses to fix things that are in need of repair or in the alternative refuses to agree to a price reduction to account for the repairs needed they run the risk that the buyer will cancel their offer and walk away from the deal. If the deal is cancelled and the homeowner must relist their home for sale then under most state laws those significant issues will need to be disclosed to all future potential buyers. Failure to disclose any significant issues could result in legal liability in the future and the possibility of being forced to take back the home if the issue is discovered after closing has taken place.
One of the easiest ways to avoid home inspection issues is to have a pre-listing home inspection so that issues are uncovered and repaired before buyers walk through the home. If the report turns up minimal to no issues then the inspection report can be shared with homebuyers. Even if some issues are uncovered those issues can either be repaired or if there is no time or funds to repair then the issues should be disclosed to any potential buyers and the home’s price should take account of the work needed to be done.
Minor non-safety related issues should be dealt with by the buyer when they move in. Anything safety related (plumbing, electrical, mechanical issues that cause safety concerns) should be addressed by the home seller if requested to do so by the home buyer. To push back on safety related repairs is not a very good negotiating tactic unless the homeowner is willing to reduce the home’s price in order to account for the repairs.
Where there are component age issues or questions about the long term operability of aspects of the home (old HVAC, old garage door opener, old appliances etc…) then a home warranty offered by the sellers to the buyers can help assure the buyers they won’t face any unexpected expenses once they move into the home. Sometimes buyers can ask home sellers to reduce the price of their home to account for the eventual replacement of components of a home. Many of those items can be costly and a better way to negotiate around that is to offer a home warranty which should protect the buyers in the event those items do go bad. Home warranties generally do not cost that much per year in the grand scheme of the home. Offering a home warranty to homebuyers can help sidestep issues of old home equipment that might otherwise stop a sale.
This is one area where sellers have minimal control and most of the responsibility is on the buyer. Mortgage financing can be pulled at any time even right before the closing documents are all signed. It could be because the buyer has bought a new car the day before closing or because they maxed out a couple of credit cards to get new furniture for their home they are about to move into. Whatever the reason is homebuyers are advised to hold off on any major purchases of furniture, cars, electronics, or more until after the home has been closed upon and title has transferred. Homebuyers should also make sure to provide to their lender in a timely fashion all documents that are needed as part of the loan package. Any missing documents can lead to the delay of closing on the home or worse to the loan being denied.
The four items covered in this article that can halt a home sale are some of the more common reasons that home sales fail. In most of those areas both the buyers and the sellers have the ability to work around the issues and keep the home sale on track. Due to the time and expense involved with buying and selling a home it is wise to try and keep it on track as best as possible.
- Walk Through Issues That Can Stop Closing by Kyle Hiscock
- The Rules Of Engagement When Selling A Home by Xavier De Buck
- Is A Home's Initial List Price Important? by Lynn Pineda
About the author: The above article “4 Things That Can Kill Your Home Sale” was provided by Luxury Real Estate Specialist Paul Sian. Paul can be reached at paul@CinciNKYRealEstate.com or by phone at 513-560-8002. If you’re thinking of selling or buying your investment or commercial business property I would love to share my marketing knowledge and expertise to help you. Contact me today!
I work in the following Greater Cincinnati, OH and Northern KY areas: Alexandria, Amberly, Amelia, Anderson Township, Cincinnati, Batavia, Blue Ash, Covington, Edgewood, Florence, Fort Mitchell, Fort Thomas, Hebron, Hyde Park, Indian Hill, Kenwood, Madeira, Mariemont, Milford, Montgomery, Mt. Washington, Newport, Newtown, Norwood, Taylor Mill, Terrace Park, Union Township, and Villa Hills.