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The Top 5 Reasons Deals Fall Apart


I’ve been told that 29% of all contracts signed never make it to the closing table- that nearly 3 in 10 transactions where a buyer and seller have come to terms (no easy feat in this market) fall apart. In a more normal market, I would say 90% of deals close. So, I figured if I could point out some of the reasons deals are crumbling, maybe those putting them together could prevent some of the challenges.

  1. Short Sales - In theory, they sound terrific because the buyer can low-ball an offer. They get little resistance from the seller (because the seller isn't getting any money out of the deal anyway). However, the existing lender isn’t just accepting any offer. Appraisals are done and scrutinized. Lenders are not agreeing to deep discounts. Additionally, the lenders are still, in many cases, taking months to make decisions and many buyers are losing patience and withdrawing offers (and finding another house).
  2. Appraisal Issues - It seems that there are more appraisals coming in short than has been the case historically . Conceptually the value of a home has been loosely defined as “what a reasonable buyer would pay to a reasonable seller”. With the market including so many “unreasonable” sellers (short sales, foreclosures, distressed situations, etc.), many of the comparables used for an appraisal are dragging the numbers lower than they should be.
  3. Title Challenges -  The analysis of Permits and Certificates of Occupancy are at an all time high. Judgments and liens are more prevalent amongst buyers and sellers. The complications on title are messing up and delaying deals.
  4. Poor Pre-Qualifications - Many deals were never really deals to begin with. Loan officers need to take more care in reviewing tax returns, pay stubs, bank statements, contracts, and such before issuing pre-approvals and taking in applications. Simply not seeing unreimbursed expenses on the tax returns can kill a loan.
  5. Unforeseen Circumstances - It seems there is an inordinate amount of unusual stuff coming up- buyers losing a job, credit challenges arising as a loan is in process, property damage, buyer’s remorse. Everyday seems to bring a new one.

Many issues are visable up front if people really look at them (some are not). Those that can be seen usually are seen by the top professional real estate agents, loan officers and attorneys. Many, when addressed in the beginning, can have happy resolutions. It’s just another reason why you need to be associated with the best people you can find.

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About Dean Hartman

Dean Hartman is a 25-year veteran of the mortgage banking industry. He has achieved the designation of Certified Mortgage Planning Specialist (CMPS), and also specializes in sales leadership, seminar presenting, and team building.

One Response to “The Top 5 Reasons Deals Fall Apart”

  1. Timslatt May 25, 2012 at 9:17 am # Reply

    Probably shouldn't have read this the day after we received a signed P&S back from the bank......

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