Maybe you’ve found the perfect home in the Vail Valley that has everything you need. You put in an offer but are heartbroken when it gets rejected. This is, unfortunately, quite common in the current seller’s market. Sellers are receiving so many offers on a home that it’s not surprising that yours may be rejected. Sometimes this is out of your hands. But you may still be left wondering why your offer got rejected. There are a variety of reasons, I’ll try to list the most common ones for you here.
Offer Too Low
A very common reason that your offer is rejected is simply that your offer is too low. In the current market, it is very common for buyers to offer over the asking price. So if you tried to save some money and offered less than asking, it’s not totally surprising that your offer may get rejected. A seller will see your lowball offer as devaluing their home, especially if they have other higher offers on the table. They will consider your offer to be less serious and don’t want to deal with the hassle of all of the negotiations. Your real estate agent should be well informed on the value of the home and the current market when advising you on what an appropriate price to offer is.
Too many Contingencies
It is possible for you to offer the ‘perfect’ amount for the home and still have the offer be rejected. Another common reason that sellers turn down an offer is that it has too many contingencies. When you include a lot of contingencies, which are what-if clauses, your offer may be considered weak. It can show hesitancy on the buyer’s part and there are now a lot of ways for the deal to fall through. Contingencies are a great way to protect a buyer, but they also complicate a deal. If the seller receives an offer with no or fewer contingencies, they are probably more likely to choose that particular offer.
Think carefully about which contingencies you really think need to be included and what you can do without. It can be tempting in the current market to make a big offer with no contingencies just to get the house, but that’s not always the smart choice either. I generally advise my clients to stick to as few contingencies as possible to keep things simple but still do the due diligence necessary to protect my buyers.
Mismatched Time Frame
Sometimes you can make the very best offer in terms of price and with few contingencies, but the timeframe will still get your offer rejected. Every seller’s situation is unique and some may be trying to sell very quickly whereas others are wanting to stay in the home until they’ve bought a new home of their own. It’s important that your buyer’s agent is in communication with the seller’s real estate agent to see what timeline the seller is expecting or hoping for. Ideally, they would have this information before you make your offer so you can include this information and make your offer more favorable.
But it is possible for a seller to reject your offer if your timeframe or timeline does not match what they want or need. Discuss with your own agent what your timeline looks like for buying your home and they can help you find a seller that is on the same page as you.
No Preapproval Letter
Finances, including the price, are one of the biggest reasons that your offer may be rejected. We always recommend that buyers have a preapproval letter ready before they start looking at homes. But it is more important now than ever!
A preapproval letter is a letter that proves you are preapproved for a mortgage of a certain amount. It shows a seller that you are indeed very serious about buying, and it proves that you can afford the home. If you make an offer without a preapproval letter a seller has no proof or guarantee that you even have the funds for the home. Having to get the mortgage approval after making the offer also lengthens the process, something a lot of sellers want to avoid. Getting preapproval is also better for you as a buyer. You will know exactly how much you can afford to spend on a home and won’t waste your time with homes that aren’t in your budget. If you submitted an offer without a preapproval letter and it got rejected, this was most likely the underlying cause.
Wrong Lender
Now, you might’ve had an offer with the perfect price, few contingencies, and a preapproval letter and still gotten rejected. It is possible that a seller rejects your offer based on the lender you were planning on using. Your preapproval letter indicated which lender and what kind of loan you were going to be using. Some sellers, and their real estate agents, won’t accept just any lender or type of loan.
I recommend to buyers that they use a strong lender that is reputable and well known. If a seller sees an offer using an online lender they’ve never even heard of, this can make them a little wary. A local mortgage lender is usually a good choice because they will be known in the community and have a good understanding of local laws and customs. I often give recommendations to buyers of lenders we know are well respected and have worked with in the past.
Low Appraisal Gap
The final common reason I see buyer’s offer get rejected is a low appraisal gap. An appraisal gap is the difference between the offer and the appraised price of the home that the bank will lend on. Given the current seller’s market, it is not unusual for an offer to be quite a bit higher than the appraisal of the home. Writing coverage of the appraisal gap into an offer or contract has become fairly common in the last few months. It’s a good way for buyers to set themselves apart in their offer. You need to make sure that the appraisal gap amount is sufficient, however.
A buyer’s real estate agent will be able to help you decide on an amount that is appropriate for the appraisal gap. Keep in mind that this is separate from the down payment. As such, you need a considerable amount of cash funds available dedicated to cover this gap. If you have included an appraisal gap in your offer but it was still rejected, it’s possible that the seller and seller’s real estate agent considered the coverage to be too low.
How Can I Help?
I hope that you’ve found this information useful. Please reach out to me if you ever want to know more or if you are interested in buying or selling a home. I want to provide my clients with interesting and up-to-date information so they can make informed decisions. If you think that my expertise and positive attitude might be of service to you don’t hesitate to reach out and contact me.
Would you like more information on the Vail Valley/Cordillera area or the real estate market specifically? To receive my detailed monthly market report immediately, click here!
Robert Schilling
Coldwell Banker Global Luxury Specialist
Coldwell Banker Distinctive Properties
(970) 390-0705
[email protected]