If you are selling your home, odds are good that an offer has already been made on it. But what happens if it falls through?
If you are wondering how often do contingent offers fall through, Contingencies can often cause sales to fall through. Here, learn more about contingent offers and how to prepare for them.
1. Buyer’s Mortgage
Finance contingencies allow buyers to exit a deal if they cannot secure a mortgage loan by the contract’s closing date, providing an extra layer of protection if their financial circumstances change and helping ease some of the risk associated with buying your home.
Buyer’s Mortgage Contingency One of the primary reasons that real estate deals fall through is due to its buyer’s mortgage contingency, but issues during home inspection could also play a part. A water problem such as mold could potentially scare away potential buyers and force them out of a deal altogether.
When a property is listed as “active with contingencies or pending,” this indicates that another offer was accepted and sale conditions still haven’t been fulfilled by a specific time. Should these not materialize by then, however, the home will return to market; should that happen, another offer can be submitted on it.
2. Buyer’s Appraisal
Assuming you’re selling your home on credit, any offers submitted for it will almost certainly contain a mortgage financing contingency clause to protect buyers from purchasing something they can’t afford by allowing them to terminate the contract should their lender decline the loan or if the home fails appraisal at their requested price point.
Sellers face an acute risk if an inspection reveals major problems in your home that result in them losing their earnest money deposit and/or having the buyer walk away altogether from the deal.
However, in a hot market with multiple offers on your home, waiving this contingency could help secure the deal. Just ensure any previous water issues have been clearly explained and documents from contractors that addressed them to reassure buyers of its condition.
3. Buyer’s Inspection
An inspection is an integral component of the homebuying process for buyers. This provides them with an opportunity to assess the property they intend on purchasing and ensure there aren’t any major issues that would prevent them from closing on the sale.
Contingency offers often include a home inspection contingency clause that allows buyers to back out if something discovered during an inspection poses an irreparable obstacle to closing on a sale. For instance, if a potential purchaser discovers knob and tube wiring which violates building codes and poses dangers that require updating before moving in could make their decision easier; they could opt to withdraw.
Sellers must understand that even though contingent offers may seem commonplace, they can still pose significant barriers to completing a sale. Sellers should negotiate reasonable time frames for contingencies like mortgage and financing contingencies (usually 30-to-60 days), inspection contingencies (typically three to five days), etc.
4. Buyer’s Rejection
Contingent offers can be beneficial in real estate transactions, but they should never be treated as certain. There’s always the chance that they won’t close due to circumstances beyond a seller’s control – such as being declined for financing or an inspection uncovering unexpected issues with the house.
As a seller, you can reduce contingencies by including a “first right of refusal clause” in your contract allowing you to keep the home listed for an agreed upon amount of time before accepting another offer if current buyer’s home sales or inspection conditions don’t go through as planned. Unfortunately 4% of contingent offers still fall through so don’t let this dissuade you from selling; rather be prepared to negotiate in good faith to get the best price based on current market conditions – working with an experienced real estate agent can ensure best possible results from transactions.