Lucky you, youve received an excellent offer on your house, and youre on the home stretch to selling your home. Unfortunately, theres always a chance, however small it might be, that your offer could fall through. This can especially happen if there are contingencies involved. But how often do contingent offers fall through?
How often do contingent offers fall through?
Sadly, its true that a small amount of contingent offers do sometimes fall through. This can be a result of either the buyer or the seller. According to Homego, roughly 1.4% to 4.3% of home sales fall through. Zillow states that 3.9% of home sales fall through, and this number has been increasing over time.
Based on these two ranges, it looks like about 4% of home sales hit the skids. That means that the vast majority of offers still go through, however, 4% is not an insignificant amount, and offers do still fail.
What does it mean when an offer is contingent?
During the time your home is under contract, many different things will be going on. The buyer and seller are working together with their real estate agents to resolve any possible contingencies on the offer. If the word contingent is used with your listing, it means the buyer and seller are working through any contingencies that were a part of the offer. There are a number of different kinds.
How often do contingent offers fall through: affecting buyers
Here are some of the more common contingencies facing buyers on their purchase of a house.
One of the most common reasons an offer can be tricky is an unanticipated issue with the buyers financing. Typically, if a buyer has already been pre-approved for a mortgage loan by their lender, this is something that happens post pre-approval. It can be a result of a change in the buyers employment status, a new negative credit issue that wasnt determined, accrual of additional debts, or a change in lender guidelines that suddenly no longer allow the buyer to qualify for the loan.
If the buyer is unable to work through this contingency, then the seller can back out.
First right of refusal
This is often where the buyer is trying to sell their own house and buy a new house at the same time. The seller is trying to protect themselves from waiting for the buyer to sell their old house. The seller and the buyer therefore agree that the seller can accept additional offers. This provides the prospective buyer with a first-right-of-refusal notice to perform in the event the seller receives an additional offer. The perform in this contingency typically means that the buyer must sell their previous house prior to being able to continue with buying the sellers house. It must happen in a particular period of time that satisfies the seller.
If the buyer is unable to perform, then the seller can back out.
Similar to the first-right-of-refusal contingency, this is when the seller builds a clause into the contract that allows the seller to get out of the contract. This will generally happen if the buyer is taking too long to sell their previous house. The difference between this contingency and the first-right-of-refusal is that the seller isnt always continuing to market their house. They are still waiting for the buyer to perform.
And if the buyer isnt able to perform under this contingency as well, then the seller can again back out.
How often do contingent offers fall through:
Here are some of the more common contingencies facing sellers on their sale of their home.
In markets where theres limited housing inventory, bidding wars can potentially raise prices beyond actual home values. This can at times lead to financing trouble for the buyer when the houses appraisal report comes back. Often, the buyers lender wont finance a home for more than the appraised amount. This ultimately leaves the buyer in an awkward position.If the buyer really wants the house, then they can fill the gap with cash, request the seller lower the price, or the buyer can back out.
An important part of just about every home purchase is the inspection of the house. This ensures everything is in working order and that the seller has disclosed everything to their knowledge. A home inspection contingency allows potential buyers to renegotiate the price, should the inspection reveal unexpected flaws. A buyer can also ask for the seller to make necessary repairs to keep the offer price the same.If the seller doesnt satisfactorily meet the requirements of the buyer, post-inspection, the buyer can back out.
Before closing is reached on a house, the buyers lender will check the house to ensure there are no liens or outstanding financial responsibilities on a property that could face the buyer, should they take over the house. If these liens or other financial issues are major and previously undisclosed, then this can seriously affect the length of time it takes to close. If a title report reveals issues with the title for the seller, the buyer can back out.
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How to keep contingent offers from falling through
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Christopher has been been in the Real Estate industry for 8 years and has had the opportunity to close over 1,000 deals while acting as the Managing Broker for thousands more. Christopher is passionate about continuing to find ways to simplify, maximize, and serve Treloras clients exceptionally well and spends his time building teams to deliver high levels of service. When not doing real estate Christopher can be seen training for marathons and ultra relays with his 2 year old daughter, eating pizza, and drinking a steady stream of Diet Coke.