7 Reasons Why Your Offer To Purchase A House Was Rejected
Congratulations – you have finally found your ‘dream home’!
It took you 3 offers, 5 months, and 27 house viewings to get to this point!
Who would ever have thought that buying a house would be this stressful and time intensive?!
Now that you’ve submitted this most recent offer to purchase on your ‘dream home’, what do you think the realistic outcome will be?
By now, you probably know that some offers get rejected for no particular reason. Fortunately, most of the time, rejections do get substantiated by the other party (or their representatives).
There are quite a number of reasons why your offer to purchase a house was rejected!
Having the knowledge as to why your offer was rejected will hopefully result in you making your next offer more attractive!
Chances are, if you’ve put an offer to purchase in and been rejected before, that the reason will be one (or combination) of the following:
Read through the summarized 10-slide version on SlideShare:
Reason #1: The sellers received a better offer
If there’s one thing about home sellers you ought to remember as a home buyer, it is that:
Home sellers want the most money for their property, with the least amount of inconvenience.
If you thought this house was your ‘dream home’, there’s a very good chance there are other home buyers who think exactly the same! This additional interest in the same property might result in a number of offers being put in.
Besides the price level of the offer to purchase, you might also be looking at home buyers with offers containing better terms than yours: lesser mortgage amount required, pre-approved buyer, bigger or all cash component, no contingencies, to name but a few.
It’s no surprise to hear that this is the most common reason why purchase orders get rejected!
Simply put, the home seller received a better offer than yours, whether it’s because of better terms, or just more money, or both!
Keep in mind that the seller doesn’t need to inform you why the offer to purchase was rejected – most of the time though, the real estate agent is able to find out and tell you.
Bottom line: make sure you’ve made all the necessary calculations and supporting documents ahead of time in order to put your strongest offer forward!
If you were to find out later that the property went for an amount you could easily have trumped, will you regret not having put in a better offer from the start?
There are two ways to look at this: you have offers which are ‘just below’ asking price, and then you have the low ball offers (that’s an offer way below the fair value of a property).
In the case of the latter, as much as you may genuinely have an interest in purchasing the property (eventually), behaving in such a fashion will immediately alienate the home seller.
So think before you act!
Your low ball offer to purchase will be rejected outright, without even mention of a counteroffer, plus you risk further defensive behaviour once you do decide to put in a market-related offer! And how do you think the home sellers will react once they see your name on that contract?
Whereas low ball offers do happen on a regular basis and tend to be a common reason for rejection, offers which are slightly below asking price (fortunately!) do happen more often!
Most of the time, home buyers have done their homework (with or without the help of a real estate agent), and have a pretty good idea of how much your house is worth. A Comparative Market Analysis (so-called CMA) goes a long way in preparing oneself prior to putting an offer to purchase in, as your offer more than likely is now considered to be reasonable, and negotiations can commence!
Obviously, each and every local real estate market conditions will dictate how much wiggle room there will be, whilst in a seller’s market, your offer might get shot down right away, but your offer might stand a better chance of succeeding in a buyer’s market!
Reason #3: Your offer to purchase contained too many contingencies
Something most home buyers aren’t aware of the fact that the best price doesn’t always win!
Yes, I’m serious!
What I mean by that is, if you’re thinking of putting an offer in which isn’t at full asking price, but it includes a number of contingencies, don’t be surprised to see that your offer got rejected by the seller as they might have accepted an offer to purchase with a slightly lower price than yours, but doesn’t have as many demands!
Fair point, no?
How would you see it as a home seller: take Offer A at 100 but being asked to still fix X, Y, and Z; or take Offer B at 100 where they’ve only asked to fix X?!
It isn’t uncommon to have multiple offers being presented around the same time (say, over a stretch of a few days heading into the weekend), and then by Monday, the seller will have accepted the offer with the best terms, while rejecting all the other offers flat out.
Are those carpets really in such a bad shape that you need to refer to them in the offer, on top of some unnecessary repairs to the house or wanting some tiny chandelier in the guest bathroom, or some other odd demands?
As long as you, as the home buyer, are aware if you’re using stipulation after stipulation, that you’re reducing the likelihood of your offer to purchase will be accepted!
After all, with every contingency put forward, the home seller is now looking at extra costs and inconvenience (remember what I said about that earlier in the article)!
Uncertainty on behalf of the home seller might start to kick in now: will the house ever sell with such a long list of contingencies? Does the home buyer have too many “outs” of this deal?
Once again, the local real estate market conditions will dictate whether more or fewer contingencies are likely to be accepted by the seller. In a fast moving market, more contingencies will negatively affect your offer to purchase a house, whilst in a slower market, you’re more than likely to get away with it!
Reason #4: The sellers have unrealistic expectations
Once the listing mandate is signed, professional pictures are taken and the marketing plan gets executed, right off the bat, you might have interested buyers responding right away as they’ve been waiting on the sidelines for weeks now until “their perfect home” comes onto the market.
Now that they’ve found what they want, multiple showings can go very quickly and subsequently, market-related offers get put in within days of listing the property!
So far, so good, no?
Unfortunately, some home sellers see it somewhat differently: how come we are already seeing offers on the house within hours/days of ‘going live’? We must have under-priced the property for so many people to jump on it like that! There’s no way we should be accepting these offers now – imagine how high the offers will be in a few weeks with this type of buying frenzy!
Even though this conversation may have taken place at the time of signing the listing mandate with the real estate agent, once some home sellers are being exposed to this activity, they’ll change their minds! Dare I say greed is kicking in?
Your offer to purchase a house might be at full asking price, without any particular unreasonable contingencies, yet the home seller deems the offer to purchase too early, too little!?
Unbelievable, isn’t it!
In such a scenario, there’s not too much a home buyer can do, other than being patient – either for the home seller to finally realize what’s happening or for the home search to continue until you find your next gem!
Hopefully, your real estate agent has explained to you beforehand that sometimes it’s possible to run into difficult and/or unrealistic home sellers, so this shouldn’t come as too big of a surprise (and/or disappointment) to you!
Reason #5: You don’t have your financing figured out
If you’re a serious home buyer, by now you should be aware of the importance of getting pre-approved for a mortgage!
Don’t be fooled into thinking that getting pre-qualified is the same as pre-approved!
The latter is way more powerful when it’s accompanying an offer, as the home seller can rest assured that this buyer has been vetted by a financial institution for the necessary funding needed to purchase the property!
Not only that, let’s hope your real estate agent has pointed out some of the biggest mortgage mistakes you can make!
Obviously, nothing stops you as the home buyer to put in a pre-qualified letter along with your offer to purchase, but let’s get to the point: it is far from a sure thing for the home seller that your financing is a ‘done thing’!
I always like to put the shoe on the other foot: what if, you as the home buyer, are now the home seller being faced with two great offers, the first one being an offer at full asking price, yet without any pre-approval, and the second one being slightly below asking price, but comes with a pre-approval letter.
Which offer would you accept?
Will you risk accepting the former, at full asking price, but whose buyer still has to go through the mortgage approval process? How comfortable will you as the home seller be that this total stranger has the necessary means to afford your home?
And, let’s not forget, you’ll need to reject the other (pre-approved) buyers, potentially turning them off forever.
Chances are that you’ll go with the lesser offer (which one could always counteroffer against), but which has the pre-approval letter from the bank!
Let’s go back to being a home buyer, and let me ask you the following question: do you see the importance of getting your financing figured out prior to house hunting?
A very common reason that purchase offers are rejected is that a pre-approval or pre-qualification letter has not been submitted or obtained. It’s understood that a pre-approval is more desirable, however, at the very least a pre-qualification letter should be submitted with an offer to purchase. Without a mortgage pre-approval or pre-qualification letter, a seller has absolutely no idea if the buyer can obtain a mortgage for their home.
Another upside of going the pre-approved route is that you’ll have a very good understanding of how much you’ll be able to borrow. No need to get all emotional and excited about some amazing property, if it turns out that you couldn’t afford it from the get-go anyway, thereby saving a lot of valuable time for yourself, the sellers and real estate agent!
Depending on your location, it may not allow for a dual agency, which is defined as “a real estate transaction in which the listing agent represents both the seller AND the buyer.”
However, say if it were the case and your high in demand dream house turns out to get a few offers in around the same time, it is quite possible that one of those offers might have been written by the listing agent himself.
Let’s think about this one out loud for a second!
Most of the time, the listing real estate agent is getting half the commission if he sells the property, and the other half will go to the buying real estate agent.
Could it be that the listing agent, who has a competing offer (with somewhat similar terms and price than your offer), has a financial interest in getting his own offer closed with the home seller?
There are a lot of things which can be said at the negotiation table, which may sway the home seller into accepting the listing agent’s offer!
There’s no doubt about it!
Perhaps this agent will offer to reduce his dual rate commission to make it financially more interesting for the seller? Instead of paying 6% commission (3% seller agent vs. 3% buyer agent), the listing agent working with his own buyer might propose a commission structure of 5%!
Your offer may have been used to get an improvement of the other offer, and eventually lead to a better deal. Unfortunately, there’s very little you as the home buyer can do in a situation where the listing agent has a dual role!
Reason #7: There is a mismatch in time frame
Are you excited to move into that ‘dream house’ of yours?
Can’t you wait till you can get started with the planned renovations and re-decorating of your new place?
Or, do you need to hang tight a bit longer as your offer is contingent on you selling your current home, which shouldn’t take longer than say 1-2 months?
Well, you might be jumping the gun a bit, as the home seller has somewhat different plans!
The home seller has already bought elsewhere and can’t wait for the sale his current property to finalize (and close!), so he can start the next chapter in his life!
Maybe, the home seller hasn’t found anything himself yet, so he’ll only be able to move out of the property in a couple of months.
Whichever way, your time frame as the home buyer could potentially be conflicting from the home seller’s time frame!
Unless the seller is in hurry and needs to sell sooner rather than later, odds are stacked against you that the home seller will agree to the terms stated in your offer!
I’m afraid this might be another reason why your offer to purchase a house was rejected, but where you can’t necessarily do much about! (obviously, other than one party completely changing his terms regarding timing!)
In the end, you as a home buyer need to come to terms (pardon the pun) with the reality of offers being rejected by the home seller! It might take you a couple of purchase offer attempts before there’s one that’s accepted!
Try to put on the hat of a home seller during negotiation and try to see it from his point of view! Knowing this will more than likely benefit you as a home buyer as well! After all, it needs to be a win-win situation before both parties will agree to a deal, no?
I’m sure you have been in situations where you’ve rejected purchase offers yourself as a home seller!
Do you recall why you decided the way you did? Was there anything in particular which stood out for you to decline the offer?
Nobody wants to go through months of keeping their house neat & tidy for those last minute showings, open houses, numerous offers, negotiations, and so on. Whichever reason you may have had to reject the offer to purchase in the past, home sellers nowadays don’t just reject offers willy-nilly either!
Be prepared as much as you as the home buyer can be! Learn from your previous rejected purchase offers and I’m sure your next offer will be received more favorable!
Before your real estate agent writes an offer to purchase, make sure you’ve all done your homework, understand the seller’s situation, know what’s included and what’s not, so that your purchase offer has a better chance of being accepted!
This “7 Reasons Why Your Offer To Purchase A House Was Rejected” article was hopefully enough of a serious reminder to all home buyers out there to show what home sellers are thinking about when rejecting purchase offers, and how you can sometimes quite easily avoid these reasons for rejection, so you can get your “perfect home.”
Other Helpful Home Buying Resources:
- I Made An Offer On A Home, But I’ve Changed My Mind via Teresa Cowart
- Why Do I Need To Get A Mortgage Pre-Approval? via Lynn Pineda
- How To Deal With A Low Ball Offer On My Home via Bill Gassett
- Home Buying Contingencies To Consider Including In Your Purchase Offer via Kyle Hiscock
Again, as a home buyer, please make sure to do your homework prior to getting into the house hunting search! There are so many pitfalls you might initially not be aware of! The more you’re knowledgeable of what could possibly happen in particular circumstances, the better your chances of getting that ‘dream house’ without too many disappointments along the way!
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— Xavier De Buck (@XavierDeBuck) February 24, 2016
About the author: The above article “7 Reasons Why Your Offer To Purchase A House Was Rejected” was written by Xavier De Buck, your top-producing Johannesburg real estate agent with Luxury Division of Chas Everitt International Group. Xavier has been nationally recognized and awarded for providing service excellence, exceptional property sales, whilst exhibiting the highest level of professionalism. With over 15 years combined experience as a real estate agent and real estate investor, if you’re thinking of buying or selling a home in Johannesburg, Xavier would love to share his property knowledge and expertise.
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