It happens more often than you might think. A buyer is excited because she is on the verge of making a deal for a new home. And then, often inexplicably, the seller backs out.
It can happen for any number of reasons, both rational and purely emotional. You can’t do much about the emotional reasons, so let’s take a look at the ones you can be prepared for: the 5 reasons a seller might back out on your offer and how to avoid them in Los Angeles.
5 Reasons A Seller Might Back Out On Your Offer And How To Avoid Them in Los Angeles
1. You don’t have your financing in order.
Sellers want to know that you have some kind of financing – home loan or cash – lined up and ready to go. If you don’t have pre-approval for a loan or proof of sufficient cash, then a seller might back out on your offer.
To avoid such a situation, make sure you have a pre-approval letter from your lender, which you can produce on request. Or if you intend to pay cash, you need to be able to produce bank statements or other proof of assets to set the seller’s mind at ease.
2. You neglected the earnest-money deposit.
An earnest money deposit is a small deposit – usually $500 to $1,000, but no more than 2% to 3% of the sale price – a buyer puts up during the offer stage. Its purpose is to show that you, as the buyer, are really serious about the offer and are willing to “put your money where your mouth is.”
Sometimes, through sheer oversight or just over-eagerness to get on with the deal, a buyer neglects the earnest-money deposit. In that case, the seller will continue to receive and consider other offers. So don’t forget this crucial step.
3. You offered too little.
This is where emotion begins to play a part in the reasons why a seller might back out on your offer. If you make an offer well below a reasonable asking price, a seller will reject it not only because it is well below market value, but may also be offended at the low offer. Either way, the seller will likely back out pretty quickly.
The way to avoid this scenario is to do your research. Be sure to take a look at sales of comparable homes in the area. Although you may want to make an offer slightly lower than some, just make sure your offer is based on recent sales data in the local market.
4. You wanted too many concessions.
Sure, you want to get as much as you can for your offer, but you can ask for too much. Some concessions, or seller-paid contributions, are expected, for example, paying a portion of closing costs and/or paying for roof repair.
Just don’t go overboard: the seller wants to get as much for the home just as much as you want to pay as little as possible. Again, research is key. If for example, the local market is sluggish, you will have a better chance of getting the concessions you want.
5. The seller has unreasonable expectations.
Sometimes sellers just don’t have enough knowledge of local market conditions and so have unreasonable expectations, basing the asking price on something unrelated to the market like the amount needed to pay off the mortgage. And in this case, if your offer doesn’t meet the seller’s expectations, she is likely to back out at some point.
The best solution here is to call on the expertise of experienced real estate professionals who can tell you whether the seller’s expectations are reasonable or not – before you make an offer.
Buying a home in Los Angeles is a lengthy process even when everything goes smoothly. It may help, then, to know about these reasons a seller might back out on your offer.