When you accept a contract to sell your Austin home, you’re essentially telling the pool of potential buyers your house is spoken for. What some sellers don’t realize is there are still more obstacles the buyer must resolve to continue to move forward. For sellers who have a buyer who cancels, it can be a very frustrating experience. Not only will subsequent buyers ask “what’s wrong with this house” when they see it come back on the market, but you will have wasted time opening up your home to inspectors, appraisers, etc. How can sellers guard against buyers who might cancel? Here are the 5 most common reasons home purchases fall apart and how a seller can minimize the chances of a buyer canceling.
#1: Buyer Changing their Mind
If a buyer pays for an option, they have the right to cancel the contract for any reason during the option period (usually 7-10 days). This means if they wake up the next morning and decide they made a mistake, they sign a piece of paper and they are no longer obligated to buy your house. Sure, you get to keep their option money, but a few hundred dollars compared to hundreds of thousands of dollars for a completed sale is hardly a consolation to have to go back to the drawing board.
How to Guard Against Buyers Changing their Mind?
Pick the buyer who is willing to put up the most option money and who will keep the option period to the shortest number of days. Buyers who put up more option money are more confident in their decision that your house is the house for them. Buyers who put up an abnormally low amount of option money might be having second thoughts while they write the contract and want to keep their losses to a minimum if they change their mind. As for the length of time they ask for, it is generally the same rule. They’ll need time to do their inspections and negotiate repairs, but much past that and it is just buying themselves more time to make the decision to cancel.
#2 Buyer Doesn’t Qualify for a Loan
This one happens more often than you’d think, especially with buyers working with lenders who are inexperienced or inept. These loan reps don’t spend any time pre-approving a buyer before they are under contract. They usually have a short phone conversation, ask them how much they make and shoot off a pre-qualification letter based on unsubstantiated info. To them, there is no real money in it until the buyer is under contract. That’s when they’ll spend the time to put the buyer’s documents together for an underwriter (person who makes the decision to approve the loan) to review. These lenders don’t care if the seller wastes their time on a buyer who isn’t qualified and will simply issue a decline letter when the buyer doesn’t qualify and move on to the next buyer.
How to Guard Against Buyers Not Being Financially Qualified?
Have your Realtor request a genuine pre-approval letter, not a pre-qualification letter, from the buyer. If the buyer’s assets, credit and debts have not been verified and substantiated by the lender, the pre-qualification letter is worthless. A good listing agent will also contact the buyer’s lender to find out if the buyer is really qualified to buy your house. If your Realtor can’t get a hold of the lender, you might want to think twice about accepting the buyer’s offer. You can often uncover financial red flags before you accept an offer by asking a few questions about the buyer’s creditworthiness.
#3 Can’t Agree on Repair Requests
After a buyer completes their inspection, they often hit a seller with a repair list that can be pages long. Some buyers think it’s their way of driving the price down, especially if they feel they’ve paid too much. Though buyers usually come around and present a more realistic list to a seller, that’s not always the case. If buyer and seller don’t come to an agreement, the seller runs the risk of the buyer canceling the contract and going back to square one.
How to Guard Against Long Repair Requests?
Get a pre-inspection before you find a buyer. You’ll learn everything that an inspector will find and be able to make the repairs yourself. Unless otherwise agreed to in writing, repairs during the transaction must be done by a professional. If you make the repairs before you get a buyer, you can save yourself a fortune, especially if you are handy and can do the work for the cost of the materials. Pre-inspections usually pay for themselves several times over. And, they can also be used as a marketing piece to show your home really has been well cared for and will not be a money pit for a buyer.
#4: House Doesn’t Appraise
After the option period, there are still a few points in the transaction where a deal might go sideways and the appraisal is the biggest hurdle. If a buyer is getting a loan, the lender will lend them a certain percentage of the appraised price or contract price, whichever is lower. The contract says the property must meet the lender’s standards and that includes a satisfactory appraisal. If the property does not appraise, the buyer will usually come back to ask for the seller to reduce their price so they don’t have to come out of pocket for the difference. This is a pretty frustrating experience for a seller who thought they were going to get one price and then some entity comes in and says the house isn’t worth that much. It is especially frustrating when the seller had multiple offers to show the house was worth that much to more than one person. A seller doesn’t have to agree to reduce the price of their house, but a buyer doesn’t have to come up with the difference out of their pocket either.
How Do You Guard Against Appraisal Issues?
Spend some time understanding the price you came up with. Are their comps (recent sales) that support the price? Because of the new lending rules, Realtors and loan officers aren’t allowed to speak to appraisers directly. But, smart listing agents leave a book of comps and explanation of how they came up with the price for the appraiser. Things like there were multiple offers over asking price or that a house down the street that went pending had multiple offers are pieces of data appraisers won’t get from the MLS. Make sure your Realtor has a strategy to fight for your price at every step of the transaction.
#5: HOA Docs
If your home is located in a mandatory HOA, order the HOA documents from the association before you find a buyer, especially if your HOA has strict or unusual rules. Provide these documents to a buyer before they make the decision to buy so they’ll know the HOA’s rules. You might get fewer buyers interested in making offers if the rules are abnormally strict, but you’ll know the ones who do make offers have reviewed the HOA docs and are on board with the rules.
Considering Selling Your Austin Home?
We not only have the best home marketing plan in Austin, but we also have the experience to help you navigate the transaction with ease. We know how to get sellers the most money in the shortest time. Let us focus on the details, so you can focus on finding a new home or moving on with your life. Check out our Austin Home Sellers page to learn more about the best home selling system in Austin. Then, fill out our Seller Survey, call us at (512) 827-8323 or email us at info@11OaksRealty.com to schedule a no obligation consultation.
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