The Art of Closing: Understanding Why Some Home Deals Fall Apart

By Cass Lutjen | September 15, 2023 |

The process of buying a home can be both thrilling and nerve-wracking. You’ve found your dream house, made an offer, and gone under contract, but sometimes, despite your best intentions, the deal falls through. While it’s disappointing, understanding the common reasons why homes under contract don’t make it to closing can help you navigate the real estate journey more confidently.

In this blog post, we’ll explore some of the most prevalent reasons for contract cancellations and how to mitigate these risks.

One of the most common reasons for a contract falling through is financing-related problems. Buyers may face difficulties securing a mortgage, including changes in their credit score, income, or debt levels between the initial pre-approval and closing.

To avoid this, work closely with your lender, maintain financial stability, and avoid making major credit or employment changes during the home-buying process.

A crucial step in the home-buying process is the appraisal, where a licensed appraiser determines the home’s value. If the appraisal comes in lower than the agreed-upon purchase price, it can disrupt the deal. Buyers and sellers then need to renegotiate the price or find additional funding.

To mitigate this issue, have a clear understanding of the market, and work with an experienced real estate agent who can help set realistic expectations.

Home inspections often uncover issues that can lead to contract cancellations. If major problems such as structural issues, mold, or electrical problems are discovered, buyers might reconsider the purchase or request repairs or concessions from the seller.

Being prepared for possible repair negotiations and having a contingency plan can help resolve these issues without canceling the contract.

Real estate contracts typically have contingencies, such as financing, home inspections, or the sale of the buyer’s current home. If any of these contingencies fail to be met within the specified timeframes, the contract can be terminated. To minimize this risk, ensure that you’re working with professionals who can meet deadlines and fulfill their obligations.

Title problems, such as unresolved liens, boundary disputes, or ownership disputes, can derail a closing. A thorough title search can help uncover these issues early in the process, allowing time for resolution. Title insurance is also essential to protect buyers and lenders against unforeseen title defects.

Sometimes, buyers get cold feet, especially when making a significant financial commitment. Buyer’s remorse can lead to contract cancellations, even if there are no substantive issues with the property. Communicate openly with your real estate agent, and ensure you’re emotionally and financially ready for the purchase.

Sellers can also have a change of heart or face unexpected circumstances, causing them to withdraw from the contract. Sellers should be cautious about entering into agreements if they are uncertain about their willingness or ability to sell.

THE BOTTOMLINE

While it can be disheartening when a home under contract doesn’t make it to closing, understanding the common reasons behind these situations can help you be better prepared and proactive in preventing them.

Effective communication, working with experienced professionals, and conducting thorough due diligence can significantly reduce the likelihood of contract cancellations, allowing you to move forward with confidence in your home-buying journey.

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