Why Deals Falls Through

Why Deals Fall Through

Real estate has many moving pieces. You have sellers, buyers, a mortgage company, a title company, an appraiser, an inspector, a listing agent, a buyer’s agent, an insurance company plus any friends and family of the buyers or sellers.

Even after you have a signed purchase agreement, there can be a few bottlenecks that slows progress in the sale. Most often, these disruptions can be remedied with some coordination on all sides.

This depends on many factors and what side of the transaction you are on. This blog will focus on the sellers’ side. We will try to do it in order of the stages of the process to give an idea where you may see some of these issues.

There are points in the process of getting to the closing table where a problem can occur. This guide will help identify these points.

Where Deals Fall Apart

Inspections

The inspector’s job is to look at the entire property to determine it’s condition along with the components.

Most buyers will hire a professional inspector only after offer is accepted. It’s a good idea to spend time prepping the property’s weaker points before putting it on the market. 

Unless selling a newly constructed home, the home will be used, and the inspector will look for any signs of wear and tear in the house. Do not be offended by this, it is their opinion on the home, and they work for the buyer to find blemishes. 

After the inspection, the report goes to the buyer and their agent for review. Depending on the outcome, there may be a new round of negotiations, or worst case, a withdrawal.

A deal may fall apart if all parties cannot agree on costs or there are too many variables in the inspection report deal with.

If the buyer withdraws within the due diligence period, the Earnest Money Deposit is returned to the buyer.

*As a note, if the property has a well or septic, there may be additional inspections needed, and again negotiations may happen, or the buyer walks away.

Appraisals

The market value of the home is important to both the buyer and bank when financing a loan. To ensure the value of the loan, it’s supported by an appraisal from a professional independent source.

If the appraisal comes in with a value at, or above the offer price, the deal can proceed.

If the appraisal comes in lower than the offer price, either negotiations will happen, or the seller will choose to walk away. Keep in mind that as the seller it could be more costly to wait, since an appraised value is quite accurate.

If the deal falls apart here, the Earnest Money Deposit is returned to the buyer (as long as it is within the contract terms).

If you are working with a listing agent, they can typically put together the comps they used to list the home and dispute the appraisal.

More on Home Valuation

Lenders

Starting at pre-approval or pre-qualification, and continuing all the way to closing. The lender will be with a buyer in nearly every phase. 

While a mortgage or loan is in process, there’s paperwork and verifications that are required. Along with the review of appraisal. As you can imagine, there could be many triggers for buyers to get denied a loan along the way.

Borrowers not providing the lender with all the required items; or taking too long, or going out and damaging credit before closing to name a few.

The EMD and who it goes to will be based on so many factors and will be negotiated when the financing can no longer go forward. The EMD can go to the seller or back to the buyer.

This is where you make sure you keep all the information in writing and make sure you can fight for the EMD if needed.

More on Pre-Qualification and Pre-Approval

Buyers

The borrower can end the deal.

Sometimes a buyer just walks away. There are times when for reasons no one understands, after the expenses of inspection, appraisal and other costs are spent; the buyer just decides they no longer want the property.

This is when the EMD is usually given to the seller. When the mutual release or whatever form your state or board uses, is presented. The seller will be entitled EMD. Again, this can be a fight to get at times. All parties must agree as to where the EMD is going.

These are just a few examples of where and how deals fall apart. These examples are the ones most often dealt with in a real estate transaction. Real estate is a process, with legal documents and many parties. Navigating it is never the same.