While current market trends show an increase in bidding wars and home sales, and a decrease in how long homes are taking to sell, there is also another trend which has inadvertently popped up- the fallen deal.
Some real estate deals hit a few rough patches on the way to closing. These are usually just little speed bumps. But sometimes the problem is serious enough where one party feels the need to cancel the contract.
For sellers who have a deal that falls through, the number one thing they should not do is panic. I know, I know. I can hear you saying it now, “easy for you to say…” But it really isn’t that easy. I know how painful it can be to have had hope that your home was sold, and suddenly, it’s not.
It may feel like the end of the world, but it's not. A home that was good enough to sell once will sell again.
There are a variety of reasons why deals fall though. In regards to coops, perhaps the buyer was rejected by the board. In this case, a seller should try to find out why. Remember though, many coop boards are not required to reveal their reasons for rejecting an applicant.
In many cases of a home sale, the bank appraisal could have come back lower than the purchase price. Real Estate agents have seen an increase in these cases. Just the other day, I had an appraiser walk into my office asking for comps. He was from Long Island and was hired to conduct an appraisal on a home in the area. Not only was he not familiar with the neighborhood, he did not have access to any of the databases which would provide him with information about neighboring home sales. He wanted to know if I could sit down with him and print out the information he needed. Not only was it not my listing, it wasn’t my sale either. When I asked him for a business card, he ran out the door.
While banks are starting to loosen their belts and are making more loans, their position of hiring appraisers has not changed. Unfortunately, large banks can hire anyone from Timbuktu to come and appraise a home, as long as they have a license, of course. However, this does not mean they know anything about market trends, the neighborhood, or even have access to this much needed information.
More and more often, agents are seeing some crazy appraisal numbers coming back, and they don’t even come close to the purchase price. If this happens, it is completely acceptable for the seller and buyer to request a new appraisal be completed, preferably by someone more local. Almost always, the bank will respect this. However, sometimes the buyer will believe the appraisal, and will want to cancel the contract if a new sales price cannot be renegotiated. In this case, there is little a seller can do.
Another situation that will cause a buyer to cancel the deal faster than you can blink is a bad inspection report. If there is a problem with a home that a buyer was unaware of before they signed the contract, they will often want to renegotiate or cancel the deal.
Unfortunately, some inspectors are notorious for alarming home buyers unnecessarily by scaring them about minor repairs. If a seller has had this happen, they can obtain their own inspection report by hiring another inspector to confirm or reject any issues.
Cold feet is yet another reason a deal can fall through. A buyer may begin to regret their purchase, and they try to cancel the transaction. After the initial “wow” factor subsides, buyer’s often feel “buyer’s remorse.” They start to get antsy and feel they made a mistake. That little voice will pester them throughout the purchasing period, and they will start to nitpick every little detail of the transaction.
If the buyer didn't fulfill all of their contractual obligations, such as changing their minds or applying for a mortgage on time, a seller can have grounds for keeping the contract deposit.
What to do?
While you might be emotionally reeling from the loss of a deal, time is of the essence. Do not waste too much time placing the property back on the market. There are other buyers out there, and you wouldn’t want to miss the one who would absolutely love your home.
Try taking new photos to give it a fresh new look- especially if some time has passed since it was actively on the market, and the seasons have changed. You can even try changing the furniture around. If you didn't declutter or stage the first time, do it now.
Re-evaluate the market price with your agent. Is it still right for the current market? There’s a chance it could now be too low. Consider tweaking your price so that it falls into a new online search range and attracts a new set of buyers.
Your agent should contact every agent who has shown the property in the past to let them know it is going back on the market. They should also contact anyone who signed in for open houses. Be open to having another broker open house to reintroduce the home to the agent community, as well as public open houses.
Keep your chin up. There is certainly another buyer out there who will be interested in the property. Sometimes, a seller can get lucky and the purchase price ends up being higher than the deal that fell through.