In recent months, more than 15% of home sales fell through nationwide, according to a Redfin analysis. If you’re a Phoenix, Las Vegas, or Tampa agent, you’re undoubtedly familiar with this, as these cities have the highest number of incompleted real estate deals.
According to a survey from Cinch Home Services, the top 5 reasons for these derailments include:
- The buyer walked
- The buyer’s mortgage application was denied
- Seller backed out
- Home inspection issues
- The home didn’t appraise
Don’t wait for your deals to start falling apart. Being proactive rather than reactive will help avoid some more common problems.
1. Vet the buyer
According to the aforementioned Cinch survey, 42% of derailed deals in recent month’s resulted from a denied loan application.
Buyers’ agents should thoroughly vet their clients to ensure they qualify for a loan and are prepared to financially complete the deal.
Listing agents might want to consider requesting “… a recent pre-approval letter from the lender, written within the last 30 days,” suggests a Boulder, Colorado agent at realtor.com.
Additionally, ensure that the buyer has a lock on the interest rate. “Buyers that have a mortgage rate lock are more likely to close the purchase versus those that still need a rate lock,” according to zondahome.com’s chief economist Ali Wolf.
Jason Gelios, author of “How to Think Like a Realtor,” offers up some signs for a listing agent to be on the lookout for that might indicate that the buyer isn’t as strong as you might hope. These include:
- A small down payment
- Requests for credits or concessions from the seller
- A pre-approval letter from an unfamiliar lender
2. Tighten up those contingency timelines
Not too long ago, we were engulfed in a hot, hot, hot sellers’ market, so much so that the word ‘contingency’ almost became obsolete.
“Now, the supply and demand balance has changed,” Aly J. Yale at money.com reminds us. “Buyers have leverage, ushering in a new age of contingency-laden deals.”
“Homebuyers now will agree to buy a house and be doing the inspection, and then back out because they found another home they love more,” cautions a Redfin agent in Las Vegas.
Before accepting a contract, counsel your client to counter with a request to shorten any overly-long contingency timelines. The less time the buyers have to shop around for another home while still under contract on your listing, the better.
3. Consider a pre-sale home inspection
Nearly 40% of failed real estate deals can be blamed on home inspection results.
We get it: Many agents hesitate to recommend a pre-listing home inspection to their clients. Some say it’s because it presents additional disclosure items. Whatever the reason, the truth about the home will come out in the buyers’ inspection report anyway.
Be proactive so your client has the full picture of what she’s facing when the buyer’s inspection results come in. This allows your client to fix or replace anything you’re sure will be an issue for the buyer.
At the very least, you’ll have time to strategize how to handle negotiations if there are problems with the home.
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