Why Do Some Real Estate Transactions Fall Apart?

A common misconception is that a signed contract means SOLD.

A signed contract is a reason to celebrate, but there’s still work to do to get to the closing table.

While most transactions that make it under contract can close successfully, there are still several hurdles between contract and closing day. A real estate contract is an important milestone, but it’s only one step in the process.

The good news? Most issues can be anticipated, managed, or solved when everyone works together.

Here are some of the most common reasons a transaction can go sideways. And what can be done to help keep things on track.

Financing Changes

A buyer may be pre-approved when they make an offer, but their financial situation can change before closing.

Something as simple as financing a new vehicle, opening a credit card, changing jobs, or experiencing a reduction in income can affect loan approval.

For buyers, this is why lenders and agents often give them a list of dos and don’ts to keep in mind until after closing. The list includes but isn’t limited to the following: Avoid major purchases, avoid opening new lines of credit, and communicate any employment changes to your lender immediately.

If financing challenges arise, there may still be options available, such as extending the closing date or exploring alternative loan programs. Options are considered and discussed on a case by case as every situation is unique.

Inspection Discoveries

No home is perfect. Even well maintained properties can have issues that aren’t immediately obvious during a showing.

Sometimes inspections reveal concerns such as roof problems, structural issues, electrical deficiencies, plumbing concerns, or other conditions that buyers weren’t expecting.

For buyers, it’s important to distinguish between normal homeownership items, negotiable repair concerns, and true deal breakers.

An inspection report doesn’t automatically mean the transaction is over. Often, it is education and depending on the results can be the starting point for a productive conversation.

Appraisal Challenges

When financing is involved, the lender typically requires an appraisal to determine the property’s market value.

Occasionally, an appraisal comes in lower than the contract price. When that happens, the lender may only lend based on the appraised value rather than the agreed upon purchase price.

Depending on the situation, buyers and sellers may negotiate a price adjustment, the buyer may bring additional funds to closing, or additional information may be submitted for review if there is evidence supporting the contract price.

This is one reason proper pricing from the beginning is so important.

Title Issues

Before a property changes ownership, the title must be reviewed to ensure there are no legal issues affecting the transfer.

Occasionally, title searches uncover old liens, unresolved ownership questions, judgments, or other encumbrances that must be addressed before closing.

Most title issues can be resolved, but they can create delays if they aren’t discovered until late in the process. That’s why the work performed by closing attorneys and title professionals is so important.

The Buyer Has a Home to Sell

In some transactions, a buyer’s ability to purchase depends on selling their current home first.

If that home doesn’t sell within the agreed timeframe, it can affect the buyer’s ability to move forward.

This is why understanding contingencies and the timeline is critical. In some cases, bridge financing or alternative arrangements may help buyers navigate the gap between selling and buying.

Sometimes It’s Simply Human Nature

Not every challenge is financial or legal.

Sometimes buyers get cold feet. Sometimes sellers experience life changes that affect their plans. Sometimes emotions run high and negotiations become difficult.

Real estate transactions involve people making major financial and personal decisions. It’s normal for stress and uncertainty to appear along the way.

The key is maintaining open communication, focusing on solutions, and working with level headed professionals who can help navigate challenges when they arise.

The Bottom Line

A signed contract is exciting, but it’s not the finish line. Successful transactions require cooperation, communication, and problem solving from everyone involved.

The role of a good REALTOR® isn’t just helping clients get under contract. It’s helping them successfully navigate everything that happens between contract and closing day.

If you want to discuss a plan of action, feel free to give me a call!