Warning To Sellers: Having A Ratified Contract Does Not Mean You’ll Actually Sell Your House
September 14, 2007 by Danilo Bogdanovic
Filed under Mortgage/Lending, Seller Resources
If you’re a home seller in Loudoun County who has a ratified contract on their property, you’re probably elated. Buyers are getting harder and harder to come by, let alone getting one to buy your particular house. But don’t rejoice quite yet. Just because you have a ratified contract, even if all the contingencies are removed, don’t be shocked if your prospective buyer(s) walks away from the deal even if it means possibly losing their earnest money deposit.
In fact, according to a recent survey of mortgage brokers, one-third of home buyers who had signed a purchase agreement (aka ratified contract) in August ended up cancelling. At the top of the list of why – mortgage related problems.
To help avoid this happening to you, make sure you do your homework prior to accepting an offer. For starters, you and/or your real estate agent should check out these 3 things:
- Does the loan officer they’re using work for a retailer, wholesaler or correspondent lender? Make sure that the lender is a retailer (has money and underwriters within and does not have to fund the loan through an outside source).
- Is the letter a lender letter of just a pre-approval letter? Make sure that it’s a lender letter meaning that the buyers have filled out the necessary paperwork, credit and assets/liabilities have actually been verified and that final loan approval is contingent upon a ratified contract, title work, appraisal and final underwriting.
- Is the buyer’s lender letter dated within the last 7 days? Conditions change very quickly in today’s financial world so the buyer may or may not still be eligible for the same rate and/or loan program as before.
Though these three things will help, they are not a guarantee that the buyer won’t walk-away. Sometimes, it’s just a crap shoot. Do what you can to cover yourself, throw in a little luck and you should be able to breathe a sigh of relief once settlement is over.
Further Reading:
Cascades on Fri, 14th Sep 2007 6:20 pm
It happened to us.
Danilo Bogdanovic on Sat, 15th Sep 2007 11:15 am
Sorry to hear. Did you address all three of the things I mentioned in the post and it still happened? What was the final reason behind the buyer walking?
Cascades on Sat, 15th Sep 2007 5:34 pm
I think they just got cold feet, or had a brush with reality. They never had an approval letter from a lender.
Danilo Bogdanovic on Sun, 16th Sep 2007 11:55 pm
Along with telling you that they can actually afford to buy your property, it deals with the two issues you described. Here’s how:
A lender letter tells you that they dove even further into the home buying process, saw the numbers and are still serious about moving forward. This helps lower the chance for cold feet and places the reality (part of which are the numbers) of owning a home in front of them before they place an offer on a property rather than afterwards.
Mary on Thu, 24th Jun 2010 4:16 pm
By law, after a contract is ratified, what about HOA document? We sighed on June 19, and today that the is a $2k fee to new H/O to join HOA. This was not stated in sales contract only the monthly dues were on sales contract. Do we have an out?
Danilo Bogdanovic on Tue, 6th Jul 2010 4:25 pm
I do not know which state you’re in nor have access to the contract nor can I comment on legal matters. You should consult your real estate agent/broker and/or a real estate attorney. Speaking from personal experience here in Northern VA, the fee for new home owners is stated in the HOA document package which is supplied to buyers prior to settlement. There is typically a 3 to 6 day review period in which the buyer(s) can void the contract should they not agree with the HOA rules/regulations. But once again…I have no idea what your contract states nor can I give legal advice.