One of the questions we get asked quite frequently is about conditional offers and how often they don’t pan out or fall through. There are many factors that play into an offer falling through so if you’re planning on selling your home, you should be educated in some of these factors in case you are forced to face one of them.
Home Inspection
Many offers on detached and semi-detached houses come with the condition of a home inspection. If the owner of the house has been diligent with maintenance and truthful with the current condition of the house at the time of sale, then there should be no unexpected surprises found in the home inspection. Many good brokers will have a home inspection done in advance of the listing going live, to show the house worth and offer convenience to potential buyers.
If there are issues with the house, the buyer has the option to walk away from the offer they submitted negotiate the price based on the necessary repairs required. There are many options to help address home inspections issues, and an experienced broker can help you navigate this situation if you are the seller or the buyer.
Mortgage Financing
At times, offers come with the condition of mortgage financing. These types of conditions are outside of the sellers’ control as it’s 100% up to the buyer and their financial situation. The buyer and their agent may or may not have done their due diligence before making an offer. A good agent who is representing a buyer will encourage them to get pre-approved for a mortgage, so they are aware of their spending power. But at times, this doesn’t happen.
Without a pre-approval in place, the buyer and their agent have no idea what they can afford and when it comes to making an offer, it can fall through if they are not approved for the amount they offered.
Bank Appraisal Issues
Real estate deals that involve a buyer who is obtaining a mortgage will be subject to a satisfactory bank appraisal. A common reason a real estate deal falls through is because there are issues with the bank appraisal.
Some of the bank appraisal issues are more common than others and some of the appraisal issues also increase the chance a real estate deal falls through. Generally, if a bank appraiser cites some minor repairs that need to be completed prior to a closing, this will not cause a deal to fall through.
If a bank appraiser determines that the value of the subject property is thousands of dollars less than the sale price, this is typically when a real estate deal can fall through. The amount that a home under appraises often will determine whether a deal will fall through or not. If it’s only a couple thousand dollars, normally a buyer and seller can come to terms. If a home under appraises by $10,000, the chances that the deal falls through will go up exponentially.
Status Certificate Review
This condition only exists for those buying or selling a condo. A status certificate review exists so the potential buyer can inspect the documents pertaining to the health of the condo building. A status certificate clearly states the condo finances, the overall state of the building and if there are any lawsuits pending against the building. It’s a critical condition to any offer for a condo, so sellers should not be surprised to see this. As listing agents for a condo, we are selling, we always call the property manager to have a clear picture of any current or potential issues that may be on the horizon.
How often do conditional offers fall through depends on many factors. But the one thing both buyers and sellers can control is what broker they work with to represent them. If you work with a skilled broker who has experience on both the selling and buying side, you’ll be educated to the risks associated with conditional real estate transactions.