How to deal with a sale falling through
When selling your property there is always a chance that your sale could fall through.
As any agent will tell you, a sale is not a sale until the deal is sealed - and they are right. As a seller this could cost you time, money, stress - and it also means you miss out on other prospective buyers who were ready to transact.
This is why it is important to plan for this possibility, so you can protect yourself if the deal falls through, and avoid the disappointment and stress this involves.
Can a house under contract fall through?
Many people, mistakenly, think that once you have a contract the sale is in the bag. Wrong!
Having an offer does not necessarily mean you have sold the property, and buyers can also back out of a sale after signing the property contract. Even then, contingency clauses written into contracts give buyers a legal way of withdrawing from the sale, like if they can’t get financing. A home sale is not final until you and the buyer have signed all the necessary legal documents, which transfer ownership of the property.
A 2019 study found that 24 per cent of property sales fell through, or did not move to the ‘completion stage’
How often do house contracts fall through?
There is actually very little reliable data on the percentage of house sales that fall through in Australia, but UK-based Mortgage Finance Gazette reports that in 2019 24 per cent failed to move to the completion stage in that market.
‘Buyer changed mind’ was the most common reason stated (34 per cent), with ‘difficulty securing a mortgage’ the next most common reason (17 per cent). A number of other factors can also influence buyer behaviour, including economic conditions or a change in interest rates.
Now let’s understand why real estate sales fall through.
Why do property sales fall through?
There are a handful of reasons why a buyer can back out of a sale, including:
- Change of mind: people do change their mind for a multitude of reasons, including having found another property they prefer. Their personal circumstances can also change - people lose their jobs or can reevaluate their finances over time.
- Property survey: the buyer’s property survey can often reveal a whole host of problems with your property. You may not have known about these, but if they are likely to be expensive to fix they could revise their offer (lower) or pull out.
- Buyer financing fell through: buyers can have problems securing a mortgage, even if they have been approved in principle. When it comes time for the lender to process their application they come up short in one way or another.
- Chain reaction: if buying a new house is contingent on selling yours, this could delay the sale, and your buyer could get impatient and withdraw their offer.
- Appraisals differ: if a buyer’s appraisal comes up with a much lower value for your property they could decide to pull out if you don’t compromise on the price.
You also need to know what signs to look out for when a buyer is pulling out.
Warning signs a buyer is pulling out
If your prospective buyer is getting cold feet, these are the signs to look out for:
- It becomes difficult to get in touch with them.
- They delay signing important paperwork or return incomplete paperwork.
- They fail to make critical payments.
- They miss appointments.
- They want a lot of changes made to the contract.
Let’s now look at what you can do to prevent a sale falling through.
How to prevent a sale falling through
To minimise the risk of a buyer pulling out of the deal, here are some steps you can take to prevent your real estate deal falling through.
Make sure your agent communicates regularly with buyers
…In fact, make sure you choose a great agent to manage your sale in the first place. Usually there will be warning signs that an agent clearly isn't right for you from the beginning, so pay attention when it comes to choosing who to entrust with your home.
A great agent will regularly communicate with prospective buyers to make sure they pick up on any warning signs early. Having an engaged and professional real estate agent can help ensure they are in regular contact with the buyer’s legal team. Their experience also means they will be able to spot any warning signs before you do.
Make sure your property is in good condition
Ensure your property has no problems which could cause them to pull out. Conducting your own survey before you put it on sale is one way of doing this, but you can also make sure you carry out any obvious repairs and maintenance prior to listing the property for sale.
Add a 10% deposit to contract terms to attract serious buyers
Require a 10% deposit, and insist this is paid (normally via cheque or bank deposit) when you sign the contract. This will give you some certainty they are serious buyers.
How to deal with a sale falling through
If your sale does fall through, an experienced real estate agent should be able to tap into the base of other buyers interested in your property. While you might lose some potential buyers when you place your property ‘under contract’, you should still expect a certain level of interest in your property during the fallout of an unsuccessful sale.
For every person unable to meet the terms of a contract there are usually two qualified buyers that can, which can allow you to put you property back on the market and try again for another sale.