Education and news for smart DIY landlords!
The most annoying thing homebuyers face when purchasing a property is a seller backing out of a deal. This doesn’t only make an investor lose an opportunity to buy a property that has a huge potential of increasing its value in the future, but it also causes first-time homebuyers to lose their dream homes.
These scenarios are already heartbreaking enough. It’s even sadder to say that out of all property sales throughout the country, the percentage of deals failing after a buyer-seller agreement is as high as 20-50%. Yes, even if you’ve presented the best offer and are confident that the deal will succeed, it’s possible for the seller to back out of the agreement.
You may have experienced this before or it’s probably your first time getting into real estate and want to prevent this from happening. Therefore, you must understand the reasons that cause home sellers to get cold feet and what you can do to legally lock both of your parties to a deal.
Now, this is the most common and easily understood scenario. After all, if you put yourself in the shoes of a home seller, wouldn’t you cancel a deal if someone presents you with a better one?
This could mean anything. Common examples are that the seller failed to find a replacement home, lost their job, a family member died, or any scenario that makes it difficult for a home seller to close the deal.
We’ve all been there. Sellers can change their minds about selling their property if they suddenly got emotional and decided not to let go of a home they’ve made so many memories in.
You can only experience this type of backing out if the property you’re about to buy has residents (except for the real owner) refusing to leave the home. This is very true in a house that has extended family members who have no other place to live in.
If a seller can back out of a real estate purchase contract due to some personal reasons, they can also do the same if you’re at fault. A common buyer mistake that would breach the contract would be failing to pay a downpayment or showing a lender’s letter of approval within a specific deadline.
Always read the purchase contract thoroughly before signing. Because breaching a legal agreement will cost you a lot in fines and the legal process to defend yourself is a drag.
In some extreme cases, a seller can back out of a deal if they were presented with a lowball offer and agreed to it. This scenario is common among elderly sellers because they are more susceptible to scam deals. Although you’re not a scammer, presenting a lowball offer can still put you under the category of swindling.
If you want to get as much purchase discount as you want, it’s best to do it legally. One strategy I would give is through an inspection contingency - this is a condition that allows you to ask for a reduced purchase price or back out of a deal if there are concealed damages in the property and the seller refuses to fix them.
Like getting a higher offer, sellers will also back out of a deal if their home has an appraised value higher than your offered purchase price. Seasoned home buyers will tell you to never waive an appraisal contingency as it will help you buy the property with your initial purchase offer even if the home for sale was appraised for more.
Shortly speaking, you’re at an advantage because of instant equity and the seller cannot back out unless they find a different yet valid reason. If the house gets appraised for less than your offer, you can still back out of the deal if they don’t lower their sale price to match the appraisal value.
All in all, purchase contract contingencies are your greatest asset as a buyer to ensure that a seller doesn’t back out of your deal. It’s even better to state that whoever breaks the contract should be fined. This way, you can sue a seller for wasting your time.
However, you also must read your contract thoroughly and hold your end of the bargain so that the seller cannot turn your strategy against you. And lastly, contingencies scare sellers into making a deal with you, that’s why you must pick which to waive and which not to.