Reasons Real Estate Transactions Fall Apart
Real estate transactions fall apart for many reasons and a real estate transaction is never a done deal until the deed has been recorded at the title company. That is why doing due diligence on any property is extremely important by the buyer, the seller, the loan officer, the title company, and the Realtor.
Appraisal Problems
This is one of the most common reasons real estate transactions fall apart. Appraisal issues are more common now than ever because the market is appreciating in value. When someone sells a home, they may get multiple offers and the price of the house can get driven up. This means that a house can be the highest priced property in the neighborhood and all the surrounding properties will have sold for less.
That is why having someone present at the home for the banks appraisal is important to paint the picture for the appraiser. If the house had 50 showings and 4 offers, it is vital that the appraiser know this so the house gets appraised accordingly. It is equally important to show the appraiser all the updates improvements that the home has.
Inspection Issues
Every buyer is entitled to an inspection and should get one done. A home inspection however is one of the most common reasons real estate transactions fall apart.
If a major issue is found with the home, buyers will typically walk or negotiations will get opened back up (a price reduction or credits are typical). It is important that the seller does not become emotional or they may lose the buyer and have to relist the property. If the seller has to relist, the new buyers will get an inspection and will probably find the same issues. That is why it is important for sellers to do some due diligence on their home so they can address these issues before selling or price the home accordingly to account for the issues.
Unforeseen Events
Sometimes unforeseen events come up when selling a home. For example a sump pump may fail and the basement may flood during the closing process and scare the potential buyers away. Another example may be that a home inspector turns off the gas to the furnace which causes the pipes to freeze and burst which scares the potential buyers away. Watch the video below to see this very example at one of our projects.
Title Seasoning/Deed Restriction
If the previous owner flipped the property you may run into this issue. Most underwriting criteria for loans require that the previous owner held title to a property for at least 3 months before an offer was presented from someone new. This is referred to as title seasoning. A deed restriction is common when someone buys a REO property or short sale property. The bank may put a deed restriction on the home stating that they cannot sell the home within a certain amount of time (90 days is typical).
Attorney Review
Attorney review is a time period where either party may cancel the contract for any reason. This is perhaps the most common reason that real estate transactions fall apart because the buyer does not need to give any reason for getting their earnest money back or cancelling the contract besides attorney review. Buyers or sellers remorse is typical when contracts are cancelled due to attorney review (sometimes the buyer finds a different house that they like more or the seller gets a higher offer).
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