Congratulations! You've accepted an offer to buy your Waterloo Region home! But what exactly does that imply? And how close are you to completing the transaction? Although the vast majority of home sales go smoothly and on time, it's a good idea to plan for the possibility that your home sale will fall through.
When a house is pending or contingent, what does that mean?
When your real estate listing changes from "active" to "pending," it means you've accepted an offer, but the transaction hasn't yet completed. (You'll also hear real estate agents refer to this post-offer, pre-closing period as "under contract").
Several things happen while your house is pending, including the buyer and seller working together with their real estate agents to resolve any contingencies. If your listing includes the word "contingent," it means your buyer is working through any contingencies included in their offer, such as a financing contingency, home inspection contingency, or buyer home sale contingency. We'll go over these in greater detail later.
Most Common Reasons Why Sales Fall Through
Inspection Contingency Issues
Once a potential home buyer finds a home they love, they’ll typically order an inspection of the property to make sure everything is in good working order. A home inspection contingency allows potential buyers to renegotiate the price or walk away because of items of concern found in the inspection report.
Appraisal Issues
In seller’s markets where there’s limited housing inventory, bidding wars often raise prices beyond home values. This can lead to financing trouble when the pre-closing appraisal report comes back.
A buyer’s lender won’t finance a home for more than the appraised amount, so the buyer will have to pay the difference in cash, the seller will have to come down on price, or the buyer can walk away.
Cold Feet
Buying a home is a big decision, and sometimes, potential buyers just change their minds after submitting an offer.
Keep in mind that almost half of all buyers are first-timers. When faced with one of the biggest financial decisions of their lives, some first-time buyers will simply get cold feet, and for some even the loss of earnest money is not something that stops them finding a way to back out.
Title Issues
Before closing, a buyer’s lender will check to make sure there are no liens for unpaid debts or outstanding financial responsibilities on a property. Major title-related issues can seriously prolong closing — or cause a deal to be canceled overall.
Financing Failures
One of the most common reasons a home sale fails is that the buyer’s financing falls through. Typically, if a buyer has been pre-approved, a change in their status, like a difference in employment, new negative credit issue, accrual of additional debts, or a change in lender guidelines can cause the lender to cancel the financing.
You should always check a potential buyer’s financial status before accepting an offer, whether they’re financing or paying cash.
Buyer Home Sale Contingency
In cases where a buyer needs to sell their current home before being able to purchase a new home, they’ll submit an offer with a home sale contingency. This means they can pull their offer if their current home doesn’t sell within a certain time period. And while it may not kill a deal entirely, a buyer home sale contingency can cause your sale to be pending for a very long time.
Top Tips to Prevent a Failed Home Sale
Select the Safest Offer
If comparing multiple offers, it’s important to think through the pros and cons of each (your real estate agent can be a big help in this area). Consider prioritizing the offers with the fewest contingencies, and beware of high-dollar offers that might not make it past the appraisal.
Try to Avoid Buyer Home Sale Contingencies
Some contingencies are harder than others to work past, and if you accept a buyer sale contingency, there’s not much you can do other than sit and wait for your potential buyer to close on their current home.
Order a Home Inspection Before You List
Avoid big surprises in your buyer’s home inspection report by completing a pre-inspection before listing. Then, you can make any important repairs ahead of time and disclose any structural flaws in advance, bypassing stressful and time-consuming re-negotiations.
Getting ready to sell your Waterloo Region home, or buy a new one? Let Team Pinto use our huge experience and expertise to help you. Contact the award-winning Team Pinto here, or book a free Zoom consultation to discuss your unique Waterloo Region real estate needs here.