June 21, 2021
Picture this: You go house hunting, fall in love with your dream home, make an offer, and plan precisely how you will transform the house into your home. All of this happens just for you to find out your purchase offer was rejected. While losing a house over an offer is not an ideal scenario, the truth is, it happens.
To understand what could happen, or to learn more about why it may have already happened to you, let’s run through some of the common reasons why sellers choose to pass up an offer. Although it is difficult to come to terms with losing what you dreamt would be your new home, rest assured knowing there are ways to overcome the initial pang of disappointment.
Recently, while mortgage interest rates have remained low, the booming housing market has seen an overall increase in the price of homes. In a competitive, seller’s market (which much of the nation is experiencing today), housing inventory is low and buyer demand is high. Because a seller’s market typically drives home sale prices up, buyers are faced with fast-paced, multiple-offer scenarios, and often bid above the asking price just to be considered.
Regardless of current market conditions, know that any time you are bidding on a home, it is always possible for competing buyers to come in higher than you.
In this scenario, you are selling your home and anticipating it will take no longer than the next couple of months to finalize. You are still approximately 60-90 days out from closing at this point, depending on the timing of the offer on your home, the buyer’s approved financing, and additional factors. If you submit an offer for a new home and the seller needs to move out in the next month, there lays a timing issue for the seller; therefore, the seller may not accept your offer.
Anytime you are ready to purchase home, and in today’s market especially, a pre-approval letter puts you at a competitive advantage. A pre-approved buyer is one step ahead in the eyes of the seller because the buyer has already met with a lender and knows exactly how much they qualify for. And as a buyer, when the file is already underwritten, the journey to closing is smoother and faster.
When the seller looks at the offer, they are likely to think you are asking for them to pay for too much (i.e., Seller concessions). “Too much” varies based on the seller, but common examples include the home buyer requesting the seller to pay for the closing costs (some or all), the appraisal fee, or repair costs.
According to the Home Buying Institute, “As a general rule, home buyers can get away with more in a slow market, and less in a hot market. If your local real estate market is sluggish, and homeowners have to wait a long time for a solid offer, you have more leverage when requesting concessions. If you're in a hot market with rapid sales, the seller might simply reject your offer because you're asking for too much -- and because they have other offers in hand.”
Conversely, a seller may have expectations that are too high. Note: This is out of your control. In this case, it is the seller’s own thoughts or perception that leads them to reject your offer. For example, if the house you are pursuing has multiple offers in a few hours after being listed, the seller may believe they underpriced their home. They would likely think that there’s potential for a bidding war or buying frenzy that would result from increasing the price, with presumably would yield a higher profit.
It is always a smart move to review comparable sales in the area and check to see if the asking price lines up accordingly.
Whether the offer came in too low, or the seller is simply slow to respond, your real estate agent can follow up with the seller’s agent and try to gather more information. At that point, you can walk away with either closure or a new experience in hand. Unfortunately, sellers do not always have an interest in countering.
While it would be ideal for buyers, sellers are not required to respond to an offer. Keep in mind, a seller can counter an offer with changes of their own, including revisions to the earnest money deposit amount, closing costs, closing date, home inspection requirements, the purchase price, or repair requests. In this case, your agent is the best point of contact to assist you through potential negotiations.
If a seller passes on your offer, “keep on trucking” along until you find another home. In the interim, focus on building up your savings, maintaining or improving your credit, and remember that you will find your dream home eventually. It is important you don’t get caught up in stress and spend too much time dwelling on disappointment; the home buying process is meant to be enjoyed!
At the same time, we get it. Being within arm’s reach to your perfect home just to have your offer rejected and exciting plans fall through is no easy feat. However, now that you are equipped with the knowledge on some of the “whys” behind purchase offer rejections and tips on what-to-dos if or when that happens, you can be more confident knowing that there is no reason to give up on your homeownership dreams.
To learn more about making a competitive home offer, head to our blog post that covers everything you need to know.