The process of buying or selling a home should be a pleasant experience, however a little known fact is that close to 30% of all homes that go under contract will end up back on the market before reaching the closing table. Most people believe that transactions fall apart because of financing, inspections, and appraisals. Sometimes those issues will be the legitimate reason for a contract to become null and void. However, there are skilled and creative Realtors that are freely prepared to roll up their sleeves to restructure the transaction in a manner that satisfies both party’s needs. A good Realtor associated with a reputable company will educate you on the market, represent your interests well, and will take the time to listen to you. By following these steps first and foremost, you greatly improve the odds of getting to the closing table.
Over the past few decades, the real estate industry has become more challenging and sophisticated which is reflected in two major areas. First, in technology, which completely influences how we communicate, locate properties, market properties, research properties, conduct inspections, and write and submit offers. Business can be executed in the car, at Starbucks, from our home, or in an office. The other dominant influence indicative of the industry becoming both more challenging and sophisticated is (protective) consumerism. In a span of almost 40 years, the Colorado real estate contract has grown from 1 page to 16 pages, not including several mandated addendums.
We are well past the days when a listing agent would list a property, place a sign in the yard, attach a lock box to the door, put it in the MLS, and possibly run a newspaper advertisement. The job of a listing agent should, theoretically, be a simple concept; manage the marketing and sale of a home while working towards achieving the best price possible in the most reasonable period of time. An essential part of the Realtor’s job is to provide and manage appropriate expectations during the transaction process, communicate regularly, and have the experience and expertise to guide the process to the closing table. It doesn’t matter how much technology is available, real estate is still, and always will be, a people business that should include establishing valued relationships with clients that may likely be buying or selling their largest asset.
Most seasoned brokers recognize that most of the work in real estate begins after receiving an offer and the property goes under contract. The current market in Colorado, dependent upon price range, still leans toward a seller’s market and becomes more balanced as the price range increases. Regardless of the price, the contract itself is primarily written to protect the buyer’s interests with a variety of contingencies related to inspections, appraisals, financing, title, etc.
Buyers and sellers both make plans based on dates in the contract regarding movers, new furniture, school, etc. and have high hopes of consummating their transactions accordingly. A valid concern (or risk) of a contract failing for the seller is the loss of marketing momentum gained from being a new listing. Once a property goes under contract and is off the market for 1-3 weeks, it is very difficult to get the same level of showing activity, with the potential for multiple offers, as a new listing that enters the market.
So what are some of the reasons why transactions might fall through? The most obvious reasons have to do with contingencies built into the contract:
Financing – the buyers must qualify for the loan and be satisfied with the terms.
Appraisal – an independent appraisal is ordered by the lender to make sure the value is (at least) equal to the contract price, protecting the lender’s loan-to-value ratio.
Inspection – buyer retains the right to inspect any and all elements of the home primarily to determine that systems and other areas of the home are properly functional and/or safe.
When it comes to real estate, it’s never the problem that poses the greatest challenge, it is how the problem is handled. Carefully selecting the right broker to represent you, your financial interests and peace of mind is the most influential factor impacting your journey to the closing table.