Why Do Pending Home Sales Fall Through?

Exploration of potential explanations for why potential sales fall through and advice on how to avoid them.

Getting an offer on your house is a cause for celebration, but don’t break out the bubbly just yet.

There are still numerous steps to take before the sale is final.

Realtor.com states that it typically takes 50 days from the initial offer to the completion of a sale.

During this period, various issues may arise, so being aware of the potential problems at each step can improve the odds of a successful conclusion.

In this article, we will cover:

• What is a pending sale?
• Reasons why pending home sales fall through
• What you can do to help prevent a sale from falling through
• Takeaways

This guide will provide understanding into some of the regular causes why proposed sales don’t get finalized.

What is a Pending Sale?

Once an offer is accepted by the seller, the real estate transaction is in a pending state until the sale is officially completed.

Agents may also refer to this period as being “under contract”.

When a sale is in progress, there may be certain conditions that need to be fulfilled before it can be finalized.

These conditions, known as contingencies, could be related to a home inspection or financing.

If these contingencies are met, the process of completing the sale can continue.

Why Pending House Sales Fall Through

Being aware of these situations can help you complete the sale.

Prepare for the worst possible outcome but still remain optimistic.

A major factor that could cause a sale to not take place is when the buyer is unable to get a mortgage.

According to the NAR’s 2018 Home Buyers and Sellers Generational Trends Report, 88% of home buyers finance their properties.

When shopping for a loan, potential buyers may have access to pre-approved or pre-qualified letters.

A pre-approval letter is more reliable than a pre-qualification letter as the lender has examined the borrower’s credit, checked their paperwork, and approved them for a certain loan amount.

However, neither of these letters guarantees that a mortgage will be accepted.

It’s plausible for a buyer’s financial situation to shift, like becoming unemployed or owing more money.

If the contract includes a financing clause, the buyer could opt out of the purchase without any repercussions.

Issues That Surface During the Home Inspection

Potential buyers typically need to enlist the services of a professional inspector in order to ensure that they are not inheriting any major problems with the property, and this inspection may uncover issues of which the seller was unaware.

This can then be used as a basis to renegotiate the purchase price.

If the home inspection reveals serious problems, like mold, foundational problems, or a damaged roof, the buyer may use a home inspection contingency to cancel the deal.

To make it easier for potential buyers, it might be a good idea to make any necessary repairs before listing the property.

Additionally, it’s helpful to be open about any major repairs that need to be done.

Buyer Nerves

Forbes suggests that a lack of knowledge and experience among first-time homebuyers is contributing to the decline of pending home sales.

According to a NAR report, this group makes up about a third of buyers, and they may have shorter credit histories which can complicate the mortgage application process.

Forbes also mentions that first-time applicants get more scrutiny and if a mortgage is not approved, the deal can be easily dissolved by the buyer, as stated in U.S. News & World Report.

It is essential to look over every offer thoroughly, as buyers who are new to the process can often overestimate their budget and timeline and may try to find a way out of the sale using a contingency in the contract.

An experienced real estate agent should be able to tell how serious the buyer is and if the offer is possible.

Issues With the Home Appraisal

Prior to granting a mortgage, a lender typically has the property in question appraised to make sure the value is aligned with the sale price.

If the appraisal reveals that the home is worth less than the agreed upon purchase price, the bank may turn down the mortgage or request that the buyer pay the difference in cash.

In a seller’s market when housing inventory is low, it is often seen that appraised values are lower than the offer amount.

This can cause a bidding war and can drive the price of the house beyond what the appraiser assigns as the value.

If the difference between the offer and appraised value is large and the buyer doesn’t have additional funds, they may use the financing contingency clause to back out of the purchase.

Buyers’ Existing House Doesn’t Sell

Some potential buyers search for a new house prior to selling their current property.

If they find a residence they like, an offer with a home sale contingency may be submitted.

This means that if their home is not sold within a predetermined timeline of 30 or 60 days, they have the right to back out of the contract.

This kind of contingency could be dangerous for sellers as the buyer may not be able to offload their existing home.

Market conditions should be taken into account if this kind of contingency is accepted.

The Days On Market (DOM) statistic will provide information on how long it usually takes for a home to be sold.

Title Issues or Liens on the Property

Prior to finalizing the sale, the buyer’s lender will mandate that a title business investigate the property to ensure that there are no unresolved claims or legal grievances, like unpaid taxes or unpaid labor from a tradesperson.

The title transfer must be approved by all parties on the deed, such as a former spouse or heir, before it can be finalized.

This can take a long time and the buyer may choose not to wait, causing the sale to not go through.

How to Prevent a Home Sale From Falling Through

Once you are aware of the consequences of accepting a certain offer, let us take a look at some proactive steps you can take to ensure a smooth transaction.

Don’t Simply Choose the Highest Offer

The cost of the offer shouldn’t be the only factor taken into account.

You should also consider the chances of the deal actually going through.

Certain conditions, such as the need for a pre-approval letter and proof of funds for the down payment, can affect the process and timeline.

Having a good pre-approval letter and the money for the down payment ready is usually a sign that the buyer will be able to get a mortgage without any issues.

Have a Pre-Inspection Completed

Prior to selling your house, think about getting a pre-inspection to identify any potential issues that may make selling your house more difficult.

An inspector can let you know what repairs should be made before listing it.

HomeAdvisor.com reports that the average cost of an inspection is around $326.

This is especially important if your home is older, as significant repairs may be required.

Say No to Offers With Sale Contingencies (if Possible)

You don’t have to accept an offer that comes with a home sale contingency; however, there is a danger that the buyer may not qualify for a mortgage without the sale of their current home.

An alternative option is to accept the offer and include a “kick-out clause” in the contract, allowing you to search for other buyers and if a more desirable offer arises, to give the first buyer a set amount of time, such as 72 hours, to waive the home sale contingency.

Sell to a Cash House Buyer

Selling to MyHouseIntoCash eliminates the risk of a sale failing due to a buyer not being able to pay.

We provide an all-cash offer for eligible homes quickly and without any obligation to accept.

Furthermore, the seller has control over how long the sale takes, with a minimum of 14 days and a maximum of 60 days.

For further information on how we value your home and how it compares to a traditional sale, feel free to learn more.

Final Takeaways

Real estate deals bring certain dangers, but the more informed you are the better you can plan.

Make efforts to avoid potential issues that you have influence over.

This will likely lead to a successful sale and give you a cause to celebrate.