Buying and selling homes can be exciting and fulfilling. But sometimes it can be disappointing and exhausting. The ideal scenario is that the transaction involves a willing buyer and a willing seller, both of whom is happy with the price and other conditions.
But not all real estate transactions succeed, even after an offer to purchase has been accepted. Why?
There are many reasons for the failure of real estate transactions; these are the top ten reasons identified by our Peachtree City real estate attorney:
- Sellers don’t work with professionals
- Sellers don’t screen buyers
- Buyer’s remorse
- Low appraisals
- Inspection reports
- Lack of negotiability
- Badly written contingencies
- Buyers aren’t totally honest with lenders
- Missed deadlines
Sellers Don’t Work With Professionals
Many sellers decide to sell their own homes and become “for sale by owners” (FSBOs). They can save on real estate commission this way, but often end up finding that their sales fall through because they don’t have the professional experience to ensure they succeed. Real estate agents do their job for a living and the good ones have loads of experience. They know secrets about pricing, screening potential buyers, preparing homes for viewings, handling inquiries, and negotiating deals.
If you live in Georgia and are determined to become an FSBO then be sure to employ an experienced Peachtree City real estate attorney to help you with the transaction.
Sellers Don’t Screen Buyers
If a seller isn’t pre-approved or at very least pre-qualified for a loan, unless the person has cash, there’s a possibility that the sale will fall through. If they don’t have pre-approval why bother to spend the time and effort getting your home ready for people to wander through like tire kickers? If the potential buyer is going to pay cash, the seller’s real estate agent or preferably real estate attorney should ask for proof of sufficient funds right at the start.
Thorough screening should also involve an assessment of the potential buyer in terms of the type of property they are looking for and other homes they may be considering.
Buyers Aren’t Honest With Lenders
Sometimes the desperation to get a mortgage makes people do silly things. The problem is that if a buyer isn’t 100 percent honest with the lender, this is very likely to kill the transaction.
This will generally only happen if a buyer hasn’t been properly screened.
Real estate agents are trained professionals who persuade people to buy and sell property. Like any good salesman, a good real estate agent can talk a potential buyer into making an offer to purchase, usually by highlighting the benefits and advantages of the house and the financial value it offers.
Surprisingly often, the buyer will wake up the next morning and be concerned that they have not made the right decision. They will then look for problem areas and reasons to withdraw from the sale. If they haven’t already put down a decent deposit, and find pitfalls in inspection reports or real problems in the structure of the house, they might be able to renege on the offer.
While buyer’s remorse is a commonly accepted reason real estate transactions fail, sellers also become remorseful at times, usually when they discover that a second buyer has or is willing to make a better offer.
Even if a buyer is happy with the price of a property, if the bank’s appraisal is too low, it could result in the failure of a transaction.
In times of financial uncertainty banks and other lenders tend to be conservative in their appraisals, to the extent that these appraisals are sometimes below market value. This can make it impossible for a buyer to continue with the transaction even if they want to.
Inspection reports are intended to reveal problems about a house a buyer might have missed. These include checks for structural and mechanical damage; mold; tests of water and sewer lines that sometimes pick up failure due to wear and tear; appliances, to ensure they are working properly; utility set-ups; roofing, and more. If inspection reports reveal problems that buyers weren’t aware of when they made an offer to purchase a home, this could lead to the failure of real estate transactions.
Sellers can avoid this eventuality by organizing a pre-inspection before putting the house on the market. If there are issues, they have the opportunity to fix them so they don’t pose a potential threat to a successful sale.
If sellers do pre-inspection reports and problems emerge, they need to reveal these to buyers even if they opt to fix them. If they don’t ask for reports but know that something is broken or requires maintenance this non-disclosure can also lead to failure of real estate transactions.
Lack of Negotiability
Every transaction is negotiable. But sometimes, even once an offer to purchase has been made and accepted, the parties need additional negotiation.
For example, a really good real estate agent might persuade a buyer to offer more than the seller wants – just to secure the sale. But when the buyer does a thorough walk-through of the property he notices there is quite a bit of work to be done and wants to reduce the price just a little. The price though is still way above the original asking price.
In this scenario, a seller could lose the sale by refusing to negotiate further. It does though depend on circumstances.
Badly Written Conditions
Contingencies and conditions in a real estate agreement must be resolved before the transaction can be finalized. These include acceptance of inspection reports, review of reports that cover preliminary titles, and escrow conditions. If they aren’t written succinctly so that all parties understand them, this can lead to problems which in turn could result in the transaction failing.
Things don’t always go according to plan and both poor communication and people who don’t perform on time can impact on a real estate transaction. If something is delayed for any reason, ensure that everyone involved agrees to extend the dateline. Just be aware that unscrupulous people can use this in their favor. For example, if a seller gets a better offer, he or she might be able to manipulate things so that deadlines are missed and the purchaser loses the sale … and they get a better deal.
The Peachtree City real estate attorneys at Slepian, Schwartz & Landgaard know the pitfalls that lead to the failure of real estate transactions. We will help you avoid them.