Why Did the Seller Reject My Offer to Purchase the Home?

You find a home that you love and make an offer to purchase it. But the seller rejects your offer and chooses another one instead.

And just like that, the home you saw yourself living in is gone, sold to another buyer.

It hurts ... but it's also avoidable.

This guide explains some of the most common reasons why sellers reject offers from buyers, and what you can do to avoid them.

• Home sellers can reject buyer offers for a number of reasons.
• It can happen when the buyer offers too little or asks for too much.
• This scenario is more likely to occur in a highly competitive market.
• You can increase your chance for success by doing careful research.
• Don't dwell on it. If your best offer gets rejected, move on to the next home.

7 Common Reasons Why Sellers Reject Offers

There are many reasons why a person selling a home might turn down an offer from a buyer. Here are seven of the most common reasons why this scenario occurs – and what you can do to avoid them.

1. They received a higher offer.

The seller might have received a higher offer around the same time you made your offer, or shortly before yours.

Sellers will sometimes collect a "batch" of purchase offers before reviewing and responding to them, especially in a hot market.

For instance, they might have a few bids come in on Friday, and then more over the weekend. So on Monday, they would choose the strongest one and reject all others.

If another buyer offers to pay 5% more than you, and does not ask for any additional concessions, the seller would be wise to accept the stronger bid.

Homeowners who are selling a house all have one thing in common. They want to make the most money while doing the least amount of work. So they typically choose the highest offer that doesn't make unreasonable requests.

You might not even know if this was the reason. Homeowners are not required to tell you why they turned down your offer. They can keep it to themselves.

Most of the time, however, the listing agent will share the seller's reasoning with the buyer's agent, who will pass it along to you. Just know they are not required to do this.

2. They have unreasonable expectations.

Some sellers are realistic about local market conditions. They understand supply and demand. They have a pretty good idea of what their homes are worth in the current market and set their asking prices accordingly.

Other sellers might seem to have their heads in the clouds, pulling a number out of the clear blue sky.

Unfortunately, you never know which type you're dealing with until you actually make an offer to buy the house.

Sometimes the seller will ask for more than "fair market value" for the home. Some homeowners set their asking prices based on the amount they need to pay off their current mortgage balance, or the amount they paid for the house when they first bought it.

But these figures might be different from the current market value of the home (and probably are).

Ultimately, all you can do is make your first offer as strong as possible. If the seller has listed the home well above market value and refuses to come down, you might have to move on to the next property.

3. You don't have your financing lined up.

Have you been pre-approved for a home loan? Or, do you have money in the bank to make an all-cash purchase?

If you've answered "no" to both of these questions, you've given the seller a good reason to reject your offer.

Homeowners want to know that you have some kind of financing lined up, and they'll want to see proof. If that proof is lacking, they'll be less inclined to take their home off the market.

• Mortgage-backed buyers: If you're using a home loan to finance your purchase, the seller will want to see a pre-approval letter from a lender. This kind of letter shows that you've been evaluated by a lender and will likely receive financing.
• Cash buyers: If you're paying cash for the home, the seller will want to see bank statements or other proof of your assets, before they accept your offer.

4. You asked for too many concessions.

Did you ask the seller(s) to pay some, or all, of your closing costs? If so, that might be the reason why they turned you down.

When you ask the homeowner to do or pay something above and beyond the purchase price, it is known as a "concession." They are also referred to as seller-paid contributions.

Whatever you call them, homeowners don't like them. After all, concessions essentially chip away at their profits (unless they raise the sale price to compensate for it).

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.

This is why it's so important to familiarize yourself with local market conditions. A real estate agent can get you up to speed on local trends. Armed with this knowledge, you can make a smarter offer that has a better chance of being accepted by the seller.

5. You insulted them by offering too little.

Home buyers often use comparable sales in the area to determine the offer amount. This is a smart strategy because it takes current market conditions into account.

But for educational purposes, let's assume you offered an amount that was well below the asking price.

Let's further assume that the asking price was reasonable in the first place, based on recent sales data.

In real estate lingo, this is known as a low-ball offer. It's an amount that is well below the fair market value of the home.

If you make a purchase offer of this nature (one that is well below the actual market value), you are giving the sellers two reasons to reject your offer:

1. They can reject it for financial reasons, because there's a good chance another buyer will be willing to pay market value for the property.
2. They might also feel insulted by your low-ball bid. This gives them another reason to turn it down.

Real estate experts often tell buyers and sellers to "leave their emotions out of it," and to negotiate with cold, hard facts and figures. This is good advice, but sometimes easier said than done.

Homeowners, in particular, tend to get emotional during the negotiating stage. After all, they have a direct emotional attachment to the property, while the buyer does not.

If you offer an amount that is well below the asking price (and, more to the point, well below the actual market value of the home), you could insult the sellers and end up with a flat-out rejection.

This all depends on local market conditions. As a home buyer, you can get away with more in a slow market, but less in an active one. So you need to know where you stand, in terms of leverage.

6. You skipped the earnest money deposit.

In a typical real estate scenario, the buyer will put a certain amount of money down in the form of a deposit. It shows they are serious and earnest about buying the house, and is therefore referred to as "earnest money."

The amount varies from a flat $500 - $1,000, up to 2% or 3% of the sale price.

Generally speaking, buyers make larger deposits in hot markets due to increased competition. On the contrary, buyers tend to pay less earnest money in slow markets (where there is less need for it).

When a seller signs a purchase agreement and puts the house under contract, it means they won't receive offers from other potential buyers. They're essentially taking the home offer the market, and that's serious business.

So the homeowner will want to know that the buyer is equally serious about buying the house. That's the purpose of the earnest money deposit.

The bottom line is that an offer without earnest money is more likely to be rejected by the seller, especially if they can reasonably expect another offer to come along soon.

7. They didn't like the type of loan you were using.

Some sellers (and their listing agents) are biased against certain types of financing.

For instance, some real estate agents feel that FHA loans are harder to deal with because the appraiser is required to inspect all sorts of things to meet FHA's minimum property standards. There is some degree of truth to this, but it's largely blown out of proportion.

Such agents might share their biased views with their clients. As a result, the seller might be more likely to reject an offer based on the type of loan being used.

These actions don't always align with logic, but they do happen. It's just a cold, hard reality of the real estate world.

Our advice: As a home buyer, you should use the type of mortgage product that works best for you. If a seller takes issue with your financing method, for whatever reason, then that's their problem — not yours.

Counteroffers Typically Happen Before Rejection

Rational home sellers want to make a deal. Their twin motivations are to sell for the highest possible price and as quickly as possible.

From a homeowner's perspective, there is nothing worse than a long listing period that drags on for months. The constant showings, the house cleaning and staging — it gets old fast.

As a result, sellers typically don't reject initial offers. More often, they will negotiate to reach common ground.

Both parties want to make a deal. And real estate deals usually require a bit of back and forth, where the sale price is concerned.

In a typical real estate scenario, a seller will be more inclined to counter an unacceptable offer, rather than rejecting it outright. So, as a home buyer, you should be equally prepared for counteroffer situations.