Each step of the home buying and selling process is fragile. It’s not over, until keys are in hand! And while each house journey is unique, many of the underlying reasons that home sales fall through are similar. Here are a few reasons why this frustrating situation is so common and what you can do about it.
The loan doesn’t come through in time
Some buyers start to look for a home before they’ve been pre-approved for a loan. This isn’t recommended, as the approval process can be lengthy and buyers should ensure that they reach the credit minimums for a loan before falling in love with a home. Even then, being pre-approved for a loan, does not mean that a buyer will then eventually be approved for one. This can happen for a few reasons, including a change in the finances of a buyer. The earlier in the process a buyer is, the bigger the risk can be for the seller.
When a buyer uses a bank for financing, the bank will have set hurdles that must be completed for the bank to approve their loan. These steps must be done in a certain order and on a certain schedule, as decided between the buyer and seller. One hurdle is getting an appraisal done. The appraisal tells the bank the estimated value of the property. If the home is found to not be worth at least the amount of the loan, the loan offer can fall through.
Another contingency that can lead to a deal falling through is the inspection. An inspection is done by a third party and if a buyer is in the area, they are free to join. The inspector will look at the home from top to bottle—everything from plumbing to door jams. They will then create a report organizing their findings by urgency for the buyer to look at. If something surprising or expensive is found, a buyer has the opportunity to cancel the deal. This is an especially sensitive spot in the journey for older homes that will need more extensive work done. It’s also important to note that a selling agent will need to disclose any issues found with the home to any possible new buyer after an inspection is done.
An issue with the title
Title insurance exists to ensure that an owner’s home is rightfully theirs to sell. Lenders will require that insurance is purchased to protect the home before securing the loan. That way if the homeowner defaults on the loan, they can collect. No certainty, no deal.
The sale of the buyer’s current home falls through
To get a mortgage, buyers have to first sell their current home. This means that timing must be perfect or it can create a domino effect. So if the buyers’ sale falls through, then it’s possible that both sales will fall through.
You may have noticed that all five of these issues come from needing to secure a loan. The best way to have a more secure, safe, and sure sale is to work with a seller who does not need financing to close. This was not possible for all buyers. However, with Ribbon it now is. Ribbon can turn an offer into all cash, so that a buyer can purchase a home—no contingencies—and leave financing until later. Interested in learning more? Let’s chat.