Why Do Some Real Estate Deals Fail?
There are many moving parts when it comes to a real estate transaction. Not only are there buyers, sellers, agents, lawyers, and lenders involved but the process itself goes through many steps to finally end up at that sweet closing day. So what are some things you should be aware of that could sour that sale?
1. Problems with the home inspection
While there is always room for negotiating in real estate, there are some items that come up during a home inspection that may send a buyer running.
Foundation issues: large cracks in the foundation can be scary to buyers in addition to structural beams in less-than-stellar condition.
Pests: while every home is going to have a bug or two, droves of termites can be dangerous to one's home
Water damage: Sometimes the source can be hard to locate and the damage can be extensive, especially in the walls or roof.
Electrical system: retro is cool except in your electrical system and wiring - upgrading the wiring and the electrical panel can cost a pretty penny.
Septic system: The real issue here is the cost of a new septic system ($10k to $50k!) Minor problems can be worked out but needing an entire new system or leaching field adds up quick
Former meth lab/chemicals: The only way you should buy this is if you plan to start your own meth lab as well*
*do not do this
2. Buyer gets cold feet
In Connecticut, once a house goes under contract, the buyer usually has an inspection period (generally 7-10 days). Within that period, if the buyer decides they didn't like the results of the inspection, they're allowed to back out and retain their earnest money deposit. However, if they back out after that (not because of their loan) they will lose their earnest money. If the buyer backs out too close to the closing date, the seller can actually sue for damages as well so it's always best to only put in an offer on a house you truly want!
3. The buyer can't get a mortgage
Many buyers will use financing and most of the time spent waiting for closing day is waiting for the loan to be approved. "How can it fail if I was pre-approved?" There are situations where maybe something changed with your job, your income, your debt-to-income ratio, car or student loans, or mortgage rates. Maybe you paid off or didn't pay a credit card bill, you didn't disclose a gift or source of income, etc. All of these things can have an influence on whether or not you'll be approved for your loan in the end.
4. Title issues or liens
First, what is a title? From Discover.com,
A title is the legal documentation that includes the specifics about the property you are purchasing and who owns it, often in the form of a deed.
So, issues with the title can be things like misspellings, incorrect owner information, undisclosed or un/mis-recorded mortgages, lack of signatures, etc. On any CT purchase, your lawyer will always complete a title search for this reason. They will also check for existing liens such as unpaid mortgages, taxes or unpaid HOA fees. FYI, home repairpersons and medical facilities can put liens on homes for unpaid bills as well!
"Back on Market"
When you see this status online, it's likely that it was due to one of the above issues. If you're nervous when you see this, feel free to ask your buyer's agent (i.e., me, I hope!) to find out why it's back on the market. Many listings will also include a small update to explain why it's back on the market (I frequently see "Buyer could not secure a mortgage" as a cause).