According to a 2022 survey by Cinch Home Services of 1,000 Americans who have tried to buy or sell a home in the past year, more than half of buyers say they had a home purchase contract fall through.
Doesn’t that drive you crazy? We’ve got a few reasons why these deals might not be going to completion. Read on to learn more!
1. Rising interests rates cause financing to fall through
When buyers begin looking at homes, they research mortgage rates. However, interest rates can easily rise in a short time, causing buyers to have to pull out of home deals. And almost 42% of buyers had to!
Interest rates rise and then buyers aren’t approved for the amount of home they are purchasing.
What to do? Try to lock in a low interest rate or pay upfront for points!
2. The house doesn’t appraise for what the buyer offered
Another scenario that homebuyers may encounter is that they’re forced to pay way over the asking price to get the house. Yet, once the lender sends an appraiser to deem how much they think the house is worth, the appraisal comes in lower than what the buyers had offered.
Approximately 35% of property purchases fell through because of appraisal problems. (Source: Cinch Home Service)
What to do? Keep in mind how far above the purchase price you think you can go and still cover the mortgage if the house doesn’t appraise for that amount. (AKA try not to bid over your head)
3. Buyers have racked up too much debt
If you’re a homebuyer, keep your eye on your debt-to-income ratio. Your DTI is the percentage of your gross monthly income (before taxes) that goes toward payments for credit cards, car loans, college loans, etc. The lower your DTI, the less of a risk you are to lenders and the more you can borrow.
What to do? Try and get your debts down before applying for a mortgage!
4. Home prices have dropped—and buyers have found a better deal
In certain cases, buyers are actually deciding to back out. 23% of buyers have pulled out of a contract because they found a similar house at a better price.
The recent real estate market has some buyers questioning their bids, which can affect you.
What to do? You can negotiate a lower home price with the seller (making sure it makes sense financially for you!)