Personal Property Managers

Top 5 Reason a Sale Pending Falls Through

Bucks County Home Downsizing

Property Manager PA NJWe all know that the housing market exploded during the pandemic and especially in 2021 and is continuing in 2022. There is a housing shortage. We have seen a shift from traditional work place settings to a flexible work environment; working remotely and a hybrid combination of all of the above. The housing market saw home prices rise from 15% to 20+%. So, needless to say homes can sell quickly. It is common to see a house listed for sale in the morning and have its status change from active to pending in a few short hours or in just a couple of days.

So, what does it mean when a listing status is changed from active to pending? It means that the seller has accepted the buyer’s offer and both parties are ready to move forward. Great. Right? Not so fast. We have put together the top 5 reasons that a pending sale may fall through.

This is part of an on-going 2022 best in class series of helpful real estate articles by Nick Santoro and Joe Santoro of Personal Property Managers who service Pennsylvania and New Jersey and specialize in real estate, home content downsizing, property management, estate sales and home watch services. During this challenging time in the Corona Virus and COVID-19 era, we help families that are unable travel or tend to their property needs by providing a true one-stop resource. We are focused on making life just a little easier for families during often difficult times. With Personal Property Managers, one call does it all.

So, even when there is a meeting of the minds between a buyer and seller, and even when a formal written agreement of sale is drafted and signed, sometimes a home sale just never takes off.

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 were terminated.

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.

“With multiple offers on properties and homes only staying on the market for a few days, buyers often feel pressured to make a quick decision and can get caught up in the bidding frenzy,” says Nick Santoro.

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.

Last-minute remorse can have severe ramifications for both parties, and can even have legal implications.

2. The buyer is unable to obtain financing
Unless you’re buying a home for cash, you’re likely to finance your home purchase with a mortgage. But 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.

If the buyer realizes he can’t get financing, there are steps he can take to rectify the situation.“Depending on the financing issue, you can try to find alternative financing and then refinance later,” says Joe Santoro.

It’s in everyone’s best interest for the sale to move forward, so sellers are often willing to extend time horizons if necessary.

Financing issues can also come up if buyers suddenly make a lot of purchases at once.

“If a buyer makes a large furniture purchase with a new credit account just before closing, that can become an issue,” says Nick. “When COVID struck, we had a client that became unqualified five days [before] closing because his bank raised their debt-to-income ratio. We had to move fast and used a local lender who got the paperwork done in 20 days. Many of these issues can be avoided if buyers make wise decisions about their spending while waiting to close." We always tell buyers to avoid major credit card purchases or taking on debt months before buying a house. Many people do not realize that getting a mortgage pre-approval is not a guarantee of financing. It gives an initial conditional approval and then just before settlement a lender will conduct another extensive credit search. If the lender finds unusual activity or unpaid bills and or delinquent bills they will deny the loan. If all the credit check is given the all clear by the lender then the lender will issue what is called a mortgage commitment and then all parties can proceed to settlement.

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.

“FHA loans and other loans require inspections done by a specially certified technician. If a home purchase with an FHA mortgage contingency fails the inspection, the sale is quashed,” Nick says. Typically FHA and VA mortgage back loans require the seller to pay for all items identified in their home inspection.

But if a buyer is keen on moving ahead with the sale, it can be safely and responsibly done under certain circumstances.

“You can negotiate with the seller to get a licensed professional to come out and complete all the repairs,” says Joe. “In addition, you can have the seller pay for a home warranty.”

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,” Nick says. “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.”

But there are ways around that, including adjusting closing dates to buy time, Joe says.

“You can always get a bridge loan while you wait, because as long as your home is market-ready and priced correctly, you should be able to sell it quickly.”

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,” says Nick. “I’ve had the buyers pay between $5,000 to $10,000 to cover a gap that they easily make up in equity by now.”

Joe agrees that going up to $10,000 over the appraisal in cash is reasonable.

“It can make the difference between winning the home and continuing the search for the one that got away,” he says.

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.

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For more information on real estate or home downsizing please contact Nick Santoro or Joe Santoro of Personal Property Managers at 215-485-9272 or 908-368-1909. Personal Property Managers specializes in helping home owners transition from their home of many years into a new community. Personal Property Managers services Pennsylvania and New Jersey and offers downsizing services, estate sales services, home staging, discount full service real estate services via its association with EveryHome Realty. Learn more about Personal Property Managers from our recent News Stories.

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