March 2, 2016
Selling a house is not a simple process, and it can become even more complicated and expensive if the deal falls through; sometimes this can be a result of buyer retracting their offer at the very last minute. As a seller, here are some things you need to know about late-stage exits. In a real estate transaction process, a buyer will make an offer on your home. When it’s accepted, a contract is signed between the two parties. At that point, the property goes under contract.
This tells buyers and other agents that the seller has a buyer and is in the process of closing the deal. However, a home sale or purchase is not complete until both parties have signed all necessary legal documents transferring ownership of the home at closing. Buyers often have contingency clauses written into their contracts which are legal ways of backing out of the contract at no cost to them. The most common contingencies include:
• Mortgage Loan Contingencies: The buyer must be able to obtain a mortgage loan for the property, usually within a specific period of time of signing the contract.
• Home Inspection Contingencies: The home for sale/purchase must either pass inspection or the seller must agree to make any necessary repairs noted by the inspector.
• Sale Contingencies: The home purchase depends on the buyer selling his or her property.
• Appraisal Contingencies: The price of the home for sale must either meet or be less than the official appraisal price.
If you’re under contract and your buyer is trying to exit it, here are a couple of things you stand to lose in the interim.
Interest from other buyers. Other buyers that may have been interested in making an offer on your home will begin looking at other properties. One of those buyers may have been able to meet the terms of the contract within your desired time frame, but by then, they are already gone.
Precious time. One of the most frustrating aspects of a housing deal falling through is that you have to find another buyer. This takes time and could also complicate your plans to purchase another home and/or your moving timeline.
Your next house. If you are buying another house and the contract on that property was based on selling your current house, you may find yourself unable to financially proceed. You may have to back out of the purchase of your next home or figure out another way to finance it if you were depending on the proceeds from your current home to purchase the next.
Money . You may lose money as a result of the deal falling through if you:
• Failed to include a contingency in your next home purchase contract and you need to break it
• Need to continue making the mortgage payment on your current home and make a mortgage payment on a new home or pay rent
• Have to continue paying to keep the property up to show the home when it’s put back on the market
There are steps you can take if your buyer wants to back out. First, make sure that both of the real estate agents involved are communicating and that both you and your buyer are getting copies of all changes or communications in writing. See if there are concessions you could make to keep your buyer on track to close. While you may not want to reduce the sale price of your home or lay out more money to make repairs, it may be worthwhile.
Also check if the potential losses due to a broken deal would be more costly than making desired concessions.Be sure to read your contract to determine what recourse you have as the seller. There just may be a clause in your contract that gives you legal grounds to sue your borrower for breach of contract and obtain a set percentage of the originally agreed-upon selling price. Check out this article on, Home Sale Falling Through? Here’s What to Do.