Real estate agents everywhere know the pain of this situation: the deal doesn’t close. After all the time and work invested in the property transaction, it all comes to no good end. Realtors tell us how disheartening this scenario is and also how many serious problems it can create for them. The main problem, of course, is financial. Work equals money, right? Well, not in every sector and real estate certainly tops that list. What is a realtor to do when their investment collapses and the weeks, months put into the deal leave them empty-handed? One deal that does not close can set you the agent back hard.
First, let’s look at why deals can fail. On the side of the buyer, some of the most common reasons are:
- financing falls apart
- rescinding of the offer
- personal or family emergency
- buyer’s remorse
On the side of the seller, some of the most common reasons are:
- inability to clear title – due to back taxes, excess debt, construction liens, etc.
- death of seller which will require Probate
- Seller was an Estate, and you learn at closing that is no Probate Certificate
- personal or family emergency
- seller’s remo
- Substantial damage to the property (fire, flood etc.)
Unfortunately, these lists exemplify how many reasons there are for a deal falling through. Real estate is not always an easy or stable livelihood!
The top reason for any deal collapse is usually financing. People often don’t realize how much cost is involved until they are well along in the process. Mortgage rates are a big issue. Despite current low rates, this is a large and long-term debt to shoulder. Rates can and will fluctuate, which means that the financial future is unpredictable. First-time home buyers in particular find this element daunting. Psychological reasons aside, the financing often comes down to a simple no from the bank. Canadian lending institutions have tightened up their credit; and whilst your buyer may have initially been approved, the financing may be withdrawn before closing for a number of reasons. Buyer’s credit worsens; lender re-evaluates appraisal; buyer has not satisfied lender with downpayment requirements or other conditions. Most mortgage approvals provide for the Lender to walk away at the lender’s discretion before closing. So a mortgage approval is not a guarantee!And for sure a ‘financing waiver’ is no sure thing! Other financing issues include the peripheral needs of buying and selling: inspections, land transfer taxes, legal fees, commissions and taxes. It all adds up to an inflated price-tag.
The next most common reason for deals failing to complete is complications on the Sellers end. Simply stated seller cannot clear title or owes more on the property than receiving on sale.If there are property-taxes owing there will be a problem. Any liens against the property will rear their ugly heads.Probate can be a complex and very lengthy affair if not dealt with properly before closing.
Psychological issues are another factor in deals falling through. These can be difficult to identify; nobody wants to admit to their paralysing fear of a big transaction. So, often these psychological obstacles are disguised as something else, usually a softer version of what we detailed in the previous 2 paragraphs. When people are looking for a ‘way out’ of the deal, they may not have to look too far to find one. But whether it’s due to cold feet, sentimental attachment, fear of debt, displeasure with the offers, etc., this one is a deal breaker.
One deal that does not close can set you the agent back hard.