Contracts Falling Apart

There seem to be a large number of contracts falling apart recently. This is purely anecdotal, but it seems like more than normal are failing to move from contract stage to settlement successfully.

There could be a number of reasons for this. The most obvious one is that they may be contingent on the sale of the buyers home and in this market many of them simply aren't selling.

Interest rates have increased very moderately in the past few months and there are some buyers who, even if they still qualify, are getting worried about handling the monthly payments and back out. And lending institutions are becoming less interested in some of the more exotic financial instruments!

Buyers are also backing away from contracts occasionally because they fear prices will go lower still and they won't get the best deal. While prices may still go lower, I believe you'll have trouble justifying the money you'll lose on rising interest rates versus what you gain by falling prices. There's a caveat there. If you're not planning on staying more than three years I'd still be careful about buying right now.

And then there are the deals that fall apart in any market over home inspection issues. But I wonder if some sellers are more reluctant to agree to fix any home inspection items because the contract price is already so low?

That's what I'm seeing. What are you seeing out there if you're an agent? If you're a buyer or seller, share your experiences!

re: Contracts Falling Apart

We have had more problems lately. Some because of inspection issues and sellers being unreasonable and some because the buyers even though they were already getting a very good price, took advice from well meaning friends and relatives and wanted every single item on inspection report.  Believe me, we go over the inspection process thoroughly with our buyers and remind them that  many of the items on an inspection report are maintenance issues and not major items and they are not buying a new home. Our MLS purchase agreement spells out the inspection contingency and process very thoroughly. Sometimes, it just helps to go over it and read it word by word to the buyers if there is a conflict. Also, reminding the seller that they will now have to disclose items they did not know about before the inspection if they choose to let the buyer walk and the next buyer will probably want items taken care of too.

Never a dull moment!

Dee Miller

Re/Max Real Estate Centre, Iowa City

re: Contracts Falling Apart

Dee,

It's always interesting to hear what's going on in other parts of the country! Real estate is so very local I'm not always sure how much what we're seeing mirrors the bigger picture. Thanks for the report from the midwest!

Julie