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A home seller's worst nightmare is selling to a buyer who disappears mysteriously at some point during the transaction. The deal never closes, leaving the seller in the lurch just before moving day. As worrisome as this scenario seems, in reality this sort of calamity rarely happens.
Occasionally a buyer gets cold feet soon after his offer is accepted and backs out of the deal. This can happen if a buyer gets caught up in the frenzy of a multiple offer competition. When he realizes that he's in over his head, he regrets his decision and asks to be released from the contract.
Although disappointing, the damage is usually minimal when a transaction collapses early on. In a multiple offer situation, the seller may have negotiated a back-up contract with another eager buyer. In this case, the seller moves directly from the primary contract to the backup contract without having to market the property again.
HOUSE HUNTING TIP:
Usually when a real estate transaction falls apart it's for a good reason, and not due to the buyer's whim. Typical problems involve property inspections and financing. But with a good team of real estate professionals on your side, many of the problematic issues that arise during a transaction can be resolved satisfactorily. The key is to anticipate what could go wrong. By anticipating potential problems, you can often safeguard against them.
Buyers can avoid most financing problems by getting preapproved for the financing they need to complete the purchase before they even make an offer to buy a home. A preapproved buyer has already been approved for a mortgage by the lender. His credit has been checked and his employment and down payment funds have been verified. He's ready to go.
Sellers who receive an offer they like from a buyer who hasn't been preapproved should include a provision in the contract for the buyer to be preapproved within a day or two of acceptance of the contract. This way, if the buyer is unable to do so, you haven't wasted much time.
Even with a preapproved buyer, there's always a chance that the property won't appraise for the purchase price. A low appraisal can put a transaction in jeopardy. It's a good idea for the buyer's agent to meet the appraiser at the property armed with recent comparable sales. This helps to insure that the property does appraise for the sale price.
The most common reason that real estate transactions fall apart is inspections. Buyers should include an inspection contingency in any home purchase contract. A home inspection will almost certainly reveal defects. Even brand new homes have defects. If defects are discovered that the buyer can't live with, and that the sellers are unwilling or unable to correct, the transaction can collapse.
Sellers are wise to disclose any known defects to the buyers before an offer is made. Most states have seller disclosure requirements that require sellers to disclose material facts. A material fact is anything that will effect a buyer's decision to buy or the price he'd be willing to pay.
In addition, sellers should consider having pre-inspections done before their home goes on the market. For example if the roof leaks, disclose it. Then take the next step and find out what it will cost to repair it, and make the estimate available to the buyers before they make their offer.
THE CLOSING:
The more information the buyers have upfront about the property they're trying to buy, the better. This minimizes the chances of the deal falling apart due to inspections.
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