Oh No! My Buyer Was Turned Down For a Mortgage — Now What?

You’ve accepted an offer on your home and have signed a purchased agreement with the buyer. While most real estate deals will get to the closing table without any major obstacles, sometimes the purchase does fall through. One of the most common pitfalls in the closing process happens when your buyer does not get approved for their home loan. If you find yourself in this situation, then these are your options.

Most common reasons they weren’t approved

It’s extremely common for potential homebuyers to get preapproved for a mortgage. It’s certainly one of the first pieces of advice that any real estate agent will give to those shopping for a home. Today’s market is competitive, and anyone who isn’t preapproved will likely not have their offer accepted. Nonetheless, just because your buyer was preapproved doesn’t mean they will ultimately qualify for their home loan. The most common reasons they don’t get approved include:

• They lost their job or their income changed in a substantial way.
• Their credit score was too low.
• Their debt-to-income ratio was too high.
• They don’t have enough money for the down payment.
• The appraisal for the home came in low.

Should you still try to work with this buyer?

It can be a real challenge to have a deal fall through before it closes — especially if you have a tight timeline. If you struggled to get an offer on your home, then it may make sense to try to work something out with this buyer. They may be able to find another lender, or you can renegotiate the sales price if they had a low appraisal. However, it’s important to know that we are in a seller’s market and housing inventory remains low. Chances are there is another buyer ready to jump in. In fact, you may already have a backup offer on your home that you can turn to if your original buyer falls through. If there’s no backup offer and your listing agreement is still valid, then your home can simply go back on the market.

Do you need to return their earnest money?

When an offer is made on your home, it will often include an earnest money deposit. This is usually one or two percent of the purchase price. The buyers use the earnest money to show the seller that they’re serious about their offer. This money is kept in escrow until closing and then applied toward the down payment. The earnest money is typically non-refundable unless there are contingencies in the contract, such as a financing contingency. This type of contingency allows the buyer to recoup their earnest money if they don’t qualify for their loan. If you’re in doubt about whether or not you need to return the earnest money to the buyer, then talk with your agent.

Contact Agent inc. today!

2021 is an amazing time to sell your home! If you’re ready to get started, then contact the experts at Agent inc. at 949-791-8160 or [email protected] to get started. Let’s open your world to new possibilities!