Why Do Buyers Walk Away from a Home Purchase?
A homebuyer’s main objective is to find a new home, submit an offer, have their offer accepted, and close. However, not all buyers make it to the closing table because they choose to walk away before that happened. There are many reasons why a buyer might walk away from purchasing a home but why? Here are the 4 most common reasons why a buyer might cancel their real estate contract.
Top 4 Reasons Buyers Cancel a Real Estate Contract
Bad Inspection
When a buyer walks through a home for sale, visually they can see how much work the home may need along with potential repairs and make their offer accordingly. However, once a home inspector conducts a home inspection they may uncover unforeseen issues that couldn’t visually be soon. Maybe there is an active roof leak, or maybe the roof needs to be replaced altogether. Unfortunately, this isn’t something a buyer knows when they toured the home and submitted an offer.
When a home inspection uncovers thousands or tens of thousands in needed repairs or replacements it may cause a buyer to walk away from the home purchase. Sometimes it could be a minor issue, something commonly found in houses, but it could scare some buyers away. Buying a home is a big expense and not everyone is prepared to become a homeowner and take on the responsibility and expense. This is by far one of the most common reasons you’ll find first-time home buyers walking away from buying a home.
Finding a Buyer is often the easy part of selling a home, getting to the closing table is another story because some buyers will walk away beforehand #realestate #homesellingHome Didn’t Appraise
If a buyer is paying cash for a home having a home appraisal is optional. However, if a buyer is obtaining financing odds are a home appraisal will be required unless they pull a PIW (property inspection waiver). If the home doesn’t appraise for the contracted price a buyer may have the ability to cancel the contract and walk away.
Now, a low appraisal doesn’t automatically mean a buyer can, will, or has to walk away. There are alternative options when an appraisal comes in low. These options include the seller reducing the list price to the appraised price, the buyer coming up with the appraised shortfall, or both parties meeting in the middle.
It ultimately depends on how far below the contracted price the home appraised for. If it was a thousand or two thousand dollars it may not be wise for the buyer to walk away especially if they love the house. A home inspection and home appraisal can easily cost over a $1,000, which means the buyer will have to spend that money again on the next home they found. So do they really want to start their home search all over again?
Denied Financing
While a home buyer may be “pre-approved” for a loan when they go under contract on a home it doesn’t necessarily mean they’ll actually be approved for a loan. While it’s not common for buyers to be denied financing it can and does happen.
Maybe the buyer decided to buy a new car while under contract and it put their debt-to-income ratio out of wack, which can easily lead to loan denial. Then there are things out of their control, such as job loss. Without a job, not many buyers will be approved for a mortgage.
Life-Changing Events
Sometimes life-changing events, like unemployment, a natural disaster, divorce, or even death can force a buyer to walk away from a home purchase. While this isn’t the most common reason why buyers walk away from a home purchase it unfortunately can and does happen.
Final Thoughts
Not all real estate transactions make it to the closing table, it’s something both parties need to be aware of and prepare for in case it does happen. Oftentimes, finding a buyer is easy, but getting to the closing table is not. This is where a top Realtor can make or break a deal.
This is also why sellers need to be aware and understand any contingencies the buyer has and when they’re due. Many buyer’s agents will give the buyer an “out” up until the day of closing. Yes, on the day of closing a buyer might be able to cancel the contract and possibly get their entire escrow deposit back.
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Finding a Buyer is often the easy part of selling a home, getting to the closing table is another story because some buyers will walk away beforehand #realestate #homesellingPopular Questions About Canceling a Contract
When is it too late to back out of buying a house? Determining when it’s too late to back out of a real estate contract depends on the contract. Some contracts allow a buyer to cancel for any reason within a certain period of time. While others will lock a buyer in and make it extremely difficult for them to walk away from a contract.
What are valid reasons to back out of buying a house? There are several valid reasons for backing out of a contract. The most popular are home inspection issues, financing difficulties, low home appraisal, unresolved title issues, and changes in personal circumstances.
Can seller sue buyer for backing out? In certain situations, a seller may have the right to sue a buyer for backing out of a real estate contract. The legal options available to the seller depend on the terms and conditions of the contract, as well as the applicable laws in the jurisdiction where the transaction is taking place.
Can a buyer change their mind after closing on a house? In general, once the closing is complete, it is a done deal. The deed has been transferred to the buyer and the seller has their money. So a buyer can certainly change their mind but odds are they’re going to be stuck with the property unless they turn around and sell it.
Is it normal for a buyer to do a final walk through? Yes, it is common and recommended for buyers to do a final walk-through before closing. The purpose of the final walk-through is to ensure that the property is in the expected condition and that any agreed-upon repairs or changes have been made. Buyers should do a final walk-through right before closing not days or weeks in advance because a lot can happen within that period, like a leaky roof.
When should a buyer walk away from a house negotiation? There are several reasons why a buyer should consider walking away from a house negotiation. Top reasons include if the seller is uncooperative or unreasonable during negotiations, if the home inspection reveals major issues that the seller refuses to address, if the property’s appraised value falls significantly below the agreed-upon price, or if the buyer’s financing options become unfavorable or unavailable.
About the Author
Top Wellington Realtor, Michelle Gibson, wrote: “Why Do Buyers Walk Away from a Home Purchase?”
Michelle has been specializing in residential real estate since 2001 throughout Wellington Florida and the surrounding area. Whether you’re looking to buy, sell or rent she will guide you through the entire real estate transaction. If you’re ready to put Michelle’s knowledge and expertise to work for you call or e-mail her today.
Areas of service include Wellington, Lake Worth, Royal Palm Beach, Boynton Beach, West Palm Beach, Loxahatchee, Greenacres, and more.
Why Do Buyers Walk Away from a Home Purchase?
Michelle Gibson of the Hansen Real Estate Group Inc is a full-time REALTOR who has been specializing in Wellington Florida real estate since 2001. This veteran of the real estate industry has expertise in technology, marketing, and social media.