Common Reasons a House Sale Will Fall Through
When you put your home on the market and get an enticing offer, you’ll likely accept, and your property will go under contract. In most purchase agreements, there will be real estate contingencies that must be satisfied before there can be a successful closing.
When there is a contingent offer, the buyer must satisfy their requested contingencies in the agreed-upon time before they will be required to move forward. When contingencies are unsatisfactory, a buyer can walk from the transaction and get their earnest money deposit back.
Selling a home always presents challenges, especially if you want top dollar. But some issues can be considered more than just challenging when trying to sell – issues that can kill your sale altogether. You should know what problems are considered significant when selling and whether your home has any such issues.
If your home has significant issues, you will want to address them before you put it on the market. Real Estate agents like to call these things major home inspection problems. These concerns dramatically increase the odds of a sale falling apart.
Working as a Massachusetts real estate agent for the past thirty-seven-plus years, there is always apprehension when the inspection rolls around. As most agents can vouch for, it is a time when your anxiety levels rise.
Many of the issues we will examine will fall under the home inspection contingency.
The issues mentioned below cause more home sales to fall apart than any other. Remedy them if you can!
How Often Does a Contingent Offer Fall Apart and Why?
In my experience as a real estate agent for the past three decades, many sellers wonder how often a contingent sale will fall apart. Contingent home sales fall apart on average about five percent of the time.
Considering how many properties exchange hands yearly, that is a relatively low figure. Most contracts will become pending home sales and eventually close.
What Causes Contingent House Sales to Fall Through?
Most contingent home sales will fall through because of the home inspection. A myriad of potential issues could cause a buyer not to proceed. We will examine some of the more significant problems.
1. Water Penetration
Water penetration is one of the top problems that could kill your home sale! Whether it’s a basement flooding or a leaking roof, buyers will often steer clear if they discover your home has water problems.
Even a little water can lead to mold infestation, rot, and general destruction of the materials that make up your home.
In the winter, ice dam problems can be pretty common in the colder areas of the country. An ice dam issue should be addressed immediately when selling a home. Ice dam problems are preventable when you know how to resolve the issue.
The unknown is what causes many home sales to follow apart. Many buyers are fearful when they hear of any matters related to water.
Fortunately, water penetration issues are often relatively straightforward to repair with the help of a good contractor. Such problems are common, and in most cases, a skilled repair person can find the source of the water penetration and provide a remedy that will make it a non-issue as you move forward with your sale.
Above all else, be honest with the buyer. Disclose any problems you have had and how you went about remedying them. Even better is to provide the buyer with any paperwork from the contractors that repaired it. If there is a warranty with the work, that is also helpful to have on display. Remember, water problems freak buyers out! Water issues can easily cause a contingent offer to fall through.
2. Mold infestation
Buyers are understandably hesitant to buy a home with mold problems. Mold inside the house indicates a problem with moisture. Somehow, water accumulates in the home, so mold can gain a foothold.
There are also health concerns that come with the mold. While severe health damage from mold exposure has not been proven, some people can be sensitive to the spores and suffer reactions. However dangerous or not, expect buyers to be concerned if mold is discovered in your home.
If you discover a mold problem in the middle of your real estate transaction, it is best to address it immediately. There are professional mold remediation companies that specialize in removing mold and preventing it from coming back.
3. Failed Septic System
Septic systems are a vital component in homes that require them. The system processes the waste products leaving the home, so, understandably, buyers will want to know that it is in good working order.
When they find out that the septic system has failed, they will do one of three things – ask you to fix it before they buy, adjust their offer to account for replacement costs, or find another home with a functional septic system.
The problem you run into as a seller is that every lender requires a passing septic system inspection to lend money. If your septic system fails the inspection, it is easy to see why it’s a problem that could kill your home sale.
When your septic system fails inspection, you have a couple of choices. You can either replace it with a new system or put money into escrow to cover the replacement cost. It should be noted that most lending institutions require an escrow holdback equal to 1.5 times the estimated cost.
For example, if you have an estimate to replace the septic system at $20,000, the lender will probably require you to put 30,000 dollars into escrow.
When a seller is strapped for cash and doesn’t have the money to fix the system, it becomes hairy. This translates into an as-is home sale. The problem for a seller is they will take significantly less money for their home selling to only buyers who can pay cash. Having only cash buyers affects the law of supply and demand.
4. Elevated Radon Levels
Radon is a radioactive gas found everywhere, but in most homes, the concentrations are low enough not to be a health concern. However, there are times when radon is particularly high in the area where your home sits, and the container provided by your home can concentrate those levels to the point where they become dangerous.
No one wants to buy a home with dangerous levels of radioactive minerals. Fortunately, you can alleviate the problem with assistance from a professional.
It should be understood that radon can be found both in the air and the water. Removing radon from the air is a far less costly repair than removing it from the water. The average cost of a sub-slab radon mitigation system is around $1100-1300.
Removing radon from water is far more costly. You will be looking at roughly $4000-6000 dollars to reduce radon in your water. There are two removal methods for radon found in water. Both approaches are discussed in the reference above.
The cost for radon removal in air and water can vary depending on your location.
5. Major structural issues
Problems with your home’s main structure will drive away most buyers. It is easy to understand why. Buyers plan on paying a lot of money for a home they can live in for years if not decades.
But serious structural issues, like with the foundation, walls, supports, etc., put serious doubt in the minds of buyers about how long the house will be around – or if it is even safe to live in.
A home with issues like these will not look like a smart investment to most people. If you know of a major structural problem with your home, fixing it before going on the market makes sense.
If you are not financially able to repair the issue, two things should be done. The first thing to do is get an appropriate contractor to give you an estimate for repair. This structural problem should be disclosed to the buyer, and you should provide documentation on how to remedy the issue.
Even though this is an “as-is” issue, you are letting the buyer know that the problem can be fixed. By doing this leg of homework, you’ll eliminate doubt in the buyer’s mind.
6. Poor Well Quality or Quantity
Any modern home is expected to have access to clean, safe drinking water. A well is necessary to meet these water needs for homes, not on a municipal water system.
Buyers will expect a well in good working order that produces safe water of reasonable quality and provides enough water to meet the home’s needs.
Buyers will not be happy if your well fails to meet any of these requirements. Wells are expensive to drill, and no buyer wants to go to the trouble of paying for drilling, waiting for the well to be drilled, etc. They want to close on the home, move in and go about their lives.
Buyers will expect a problem like this to be remedied before the completion of the sale, and so will the lender. In real estate transactions, most buyers will do well quality and quantity testing. For the well quality, a sample will be taken and sent to a lab for analysis.
If the test comes back high in volatile compounds, you can expect the buyer to want the issues treated with an appropriate filtration system. A water quantity test includes checking the volume of water coming from the system and the recovery rate. Both are important considerations when considering a home with a well. Nobody wants to deal with a lack of water.
7. Major Pest or Rodent Infestations
Termites, mice, rats, squirrels, bats, roaches – many critters are happy to make a home in your house if they can. While a minor pest problem is part of home ownership, sometimes minor problems become major issues.
Termites can destroy the wood that supports the home creating significant issues. On the other hand, mice, rats, bats, and squirrels could present health concerns. None of these are issues a buyer wants to deal with in a home sale.
If you have a pest or rodent infestation, it is best to address it before you list your home. A specialist should be able to help you eliminate the problem so you don’t have to worry about it when you try to sell.
8. Sex Offenders Nearby or Other Neighborhood Problems
All of the above problems are things that you can do something about. Unfortunately, some issues can kill a home sale you cannot control. Having a registered sex offender in the area, for instance, can push away buyers with children.
Many sellers often ask how to deal with a sex offender who lives next door. The answer depends on the state you live in. Disclosure laws can vary from state to state. You and your real estate agent must understand the law.
Neighborhood problems can make your home less appealing, like high crime rates, unkempt homes, abandoned houses, or even an unruly neighbor.
When faced with problems like these, the best you can do is find a Realtor who is experienced in working with homes like yours and develop a selling strategy that adapts to your situation.
Just because your home is not in a perfect area does not mean you can’t sell it. You may not get as much as you would like, but you may also be able to get more than you expect with the right Realtor on the job.
9. Property Stigmatizations Can Kill a Contingent Home Sale
When a buyer performs their due diligence, they can discover what they’re trying to buy is a stigmatized property. A few more common stigmatizations include someone murdered in a home or paranormal activity.
However, a buyer could discover many other property stigmas that change their mind about your home. For some buyers, although common, anyone dying in a home could cause them to pull out of the sale.
Many buyers will research how to determine if someone died in a home. Today it is not that challenging to find the death history of a property.
10. Buyer Failed to Get Their Financing
Another reason a contingent home sale could come back on the market is the buyer not getting their financing commitment. It is not likely when the buyer has a solid mortgage pre-approval letter, which most buyers have. However, something unforeseen could happen, like the buyer losing their job.
11. The House Does Not Appraise For The Purchase Price
When a home does not appraise, there is an appraisal gap. Mortgage lenders typically require appraisals unless the buyer makes a substantial down payment. When appraisals come in low, and the lender does not have ample equity, the problem must be remedied.
The buyer will need to put down additional down payment funds, or the seller will need to adjust the sale price to meet the lower appraisal. Many sellers will be unwilling to do that, especially in favorable seller’s real estate markets.
Buyers can walk from the deal if they have an appraisal contingency.
12. There is a Home Sale Contingency
Although rare, a real estate contract occasionally has a home sale contingency. Making a purchase contingent on selling an existing home is frowned upon and often unacceptable. Sometimes in a buyer’s market, a seller will agree to it.
A seller is usually wise enough to avoid such a big gamble. When they allow this contingency, their contingent sale could easily fall apart.
13. Buyer’s Remorse
Sometimes potential buyers change their minds. There might not even be a significant reason other than being fickle. Unfortunately, buyer’s remorse is a frustrating thing for all parties in a real estate transaction to deal with.
14. A Title Problem is Discovered
The last on the list is discovering a title problem. This one would be on the seller and have nothing to do with the buyer. Sometimes title problems can be resolved quickly, and others can’t. When a property title search uncovers a significant issue, and the buyer doesn’t want to wait for the problem to be solved, they may terminate the sale.
Typically, sellers will have time to rectify the problem, but once that is up, the buyer can walk.
How to Deal With Contingent Home Sale Killers
As a home seller, you should always look to head off problems before they happen. Avoiding potential home-selling deal killers will keep your sale running smoothly and save you a lot of stress.
As you can see, many of the issues mentioned above relate to your home’s condition. One of the most brilliant things you can do is remedy the house before the buyer’s inspection. Every home has problems. Some issues are more significant than others. Besides the major issues presented, the article mentions other potential problems addressed before listing for sale.
You might even consider picking a good home inspector who can review your home before listing it for sale. It is entirely possible you may not even be aware of some of warts.
By conquering these common problems, you can often head off a buyer becoming nervous about the upkeep of your property.
Final Thoughts on What Makes Contingent Offers Fall Through
It can fall through at a moment’s notice when selling a house. It is why many real estate agents say it is not over until the fat lady sings. Even when sales go from contingent to pending, sales still don’t come together.
Do your best to stay on top of things. Sometimes doing your best doesn’t matter when so much is out of your control.
About the Author: Bill Gassett, a nationally recognized leader in his field, provided the above Real Estate information on what causes contingent home sales to fall through. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-625-0191. Bill has helped people move in and out of Metrowest towns for the last 37+ Years.
Are you thinking of selling your home? I am passionate about Real Estate and love sharing my marketing expertise!
I service Real Estate sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge MA.
