Most real estate sales close. There may be delays but when all parties are motivated to get a deal closed, necessary compromises are made and sales close. Not all, however. Today, about 10 to 15 percent of sales don’t close. That percentage had been as high as 25 percent back in 2009 and 2010, when lenders had no procedures for handling short sales, but historically one in 10 escrows will cancel. The house was listed for sale, the seller accepted the buyer’s offer, escrow was opened and then something happened. The sale fell apart and the property came back on the market or the seller decided not to sell and cancelled the listing.
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When a real estate transaction unravels they all have similarities. They usually fall apart within days of the escrow opening or during the last two weeks of the scheduled closing. The reasons they unwind are generally the same and most could have been avoided. Naturally, there are some exceptions. Every agent has had a unique deal killer that caused their sale to derail. Mine was an elderly seller who died a few days prior to the scheduled closing date. It would take a year for the estate to be settled and the buyers bailed.
Since most deal killers are the same, preventive action can be taken to ensure that things happen as they should. This is where having an experienced agent on your side pays off. Any agent can install a “For Sale” sign, enter the listing information into the MLS and wait for the offers to roll in. But seasoned veterans have developed keener survival instincts than rookies. They have been battle tested and know what terrain to avoid. They are better prepared by their past missteps or have learned from others. Having more experience, they are more vigilant watching over their client’s real estate and their commission. Real estate sales isn’t brain surgery. The mechanics are pretty simple but when the alarms begin to go off, signaling a potential problem, having the most experienced professional on your side can be the difference between closing a deal and starting over again.
Most agents are conscience about keeping their escrows on track by following a certain timeline as to when things are supposed to happen such as: disclosures furnished to the buyers, inspections, appraisal, loan qualification, closings and possession. There are always a few, however, that, at best, have other priorities or, at worst, are incompetent. The challenge with thousands of real estate agents is knowing the good agents and which ones to avoid. My success at closing a deal is greater with an experienced, competent agent who knows the area than with an inexperienced part-time, incompetent agent from out of the area.
The Internet is a big help in discovering the experience level of another agent who has an offer on one of my listings or I have an offer on one of theirs. This is especially helpful when there is more than one offer. Selecting the highest net price is important only if the deal closes. A few months ago, I had an offer on a property that I discovered was listed by an alumnus of the same college I attended. After reminiscing for 10 minutes about shared experiences, he revealed where my buyers would need to be to have their offer accepted over another one.
Low appraisals or the uniqueness of the property are still common a deal killers. Believing they have little influences with either process, some agents will take a passive approach and react only if either becomes an issue for the lender. Other agents will be proactive. They counsel with their sellers about staging the home for the appraiser. They compile comparable sales. They have their seller prepare a list of the extras in the home. They work on a back-up strategy if the appraisal is less than the purchase price or the home doesn’t qualify.
Qualifying for a loan has never been more difficult. Back in the days of easy credit and 80/20 loans, it was rare that the buyer didn’t qualify for some type of loan. It was nearly guaranteed. There was little reason for either the listing or buyer’s agent to have a thorough understanding of the buyer’s financial situation. That’s changed. Pre-qualification letters are no guarantee of the buyer’s qualifying for a mortgage. Asking buyers for access to their financial information is no longer an unusual request. When the offer is all cash, show me the money.
The condition of the property is a pretty common deal killer. The septic may need upgrading, the pest inspector discovers bugs and the home inspector cites problems with the roof and air conditioner. The already anxious buyer imagines the worse and cancels escrow. Those surprises could have been avoided by the seller conducting a few preliminary inspections before the house was listed.
Every sale has a number of potential deal killers waiting to scare off buyers or prevent the sale from closing. In rural areas, obtaining new homeowner’s insurance policies has been a challenge. A common affliction experienced by many first-time buyers after their offer has been accepted is “Buyer’s Remorse.” County records don’t show the new room addition as being permitted. The neighbor’s fence is encroaching. Most of these deal killers can be prevented by addressing them before the property is listed. If that’s not possible, they all have solutions experienced agents have already discovered.
Ken Calhoon is a real estate broker and can be reached at [email protected]