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More Real Estate Contracts Are Crumbling Before Settlement

By
Industry Observer with Retired

More Real Estate Contracts Are Crumbling Before Settlement

The Sunday Real Estate section of The Washington Post included an interesting report by Kenneth R. Harney in his column The Nation's Housing.

A higher percentage of real estate agents are reporting that contracts are being canceled before reaching settlement.  The survey provided three primary reasons for contract cancellations:

- Appraisals below the contract amount.

- Ultraconservative underwriting and documentation requirements by the lender.

- Poor service by the staff of the lender.

What is your personal experience during the first quarter of 2012?  Are you seeing more contract cancellations or is this more finger pointing by agents that do not have the needed experience?

More realty agents report that their home sales are being canceled or postponed 

Spring flowers are blooming.  Be sure to have your camera in hand to capture the special moments that you will want to share.

Cherry Blossoms, Kentlands Spring Flowers IMG_6059

 

Photograph by Roy Kelley using a Canon PowerShot G11 camera.

 

Roy and Dolores Kelley Photographs

 

Posted by

Roy Kelley, Retired, Former Associate Broker, RE/MAX Realty Group

Gaithersburg, Maryland  

Comments (26)

Keith Gilkey
Re/Max Chesapeake - Elkton, MD
410-920-7214, Re/Max Chesapeake

Roy, Ultraconservative underwriting is our largest problem along with approval time.

Apr 02, 2012 12:39 AM
Than Maynard
Coldwell Banker Heart of Oklahoma - Purcell, OK
Broker - Licensed to List & Sell - 405-990-8862

Staff that seems to be looking for reasons to deny. Maybe that qualifies as Ultraconservative underwriting too.

Apr 02, 2012 12:42 AM
Roy Kelley
Retired - Gaithersburg, MD

Thanks so much for your comments.  I just sent out a mass email to my database asking about cancellations in our market area during the first quarter.

Enjoy the spring flowers.

Camellia, Kentlands Spring Flowers IMG_7468

Photograph by Roy Kelley using a Canon PowerShot G11 camera.

Roy and Dolores Kelley Photographs

Apr 02, 2012 01:09 AM
Robin Dampier REALTOR®
Coldwell Banker King - Hendersonville, NC
Hendersonville & Western NC Real Estate Source

Hi Roy -- These days and the last few years it is a rare bird that smoothly flows from date of Contract and makes it to the Closing table unscathed and gets recorded to the new owners!  Mainly due to the 3 items you mentioned as well as home inspection issues that can't get resolved in some cases.

Great picture of the cherry blossoms and flag.

Sue of Robin and Sue

Apr 02, 2012 01:13 AM
Mark Loewenberg
KW of the Palm Beaches - Palm Beach Gardens, FL
KW 561-214-0370

about a third was an average number I had heard that were crashing, so now we need great buyers and great sellers and a lot of staying the course!

Apr 02, 2012 01:27 AM
Juli Vosmik
Dominion Fine Properties - Scottsdale, AZ
Scottsdale/Cave Creek, AZ real estate 480-710-0739

Roy, I just wish I could get a home TO contract.  I've written 17 contracts in the last 3 weeks, only to be over bid by cash investors who price the home over what it could possibly appraise for.  Oh, and then there's the one that did go to contract, but the listing agent hadn't checked the public records thoroughly and the seller didn't actually own the property- it had been sold at tax sale years ago.   SIGH.  

Apr 02, 2012 01:44 AM
Karen Hawkins, MBA - Langley & Surrey, BC
Royal Pro Real Estate Network - Langley, BC

Interesting, Roy, we do see that lenders are tight on appraisal value (but that's not new). In some of our higher-value markets (particularly sea-view properties that attract off-shore investors), where the homes are possibly expected to be rebuilt, it is important that the buyer (and seller) understand the lender has to appraise for the existing property, rather than for land-value potential - which means the buyer may need to come up with more downpayment to bridge any gap btwn appraised value and selling price.

 

Apr 02, 2012 02:43 AM
Eric Kodner
Wayzata Lakes Realty: Eric Kodner Sells Twin Cities Homes - Minnetonka, MN
Wayzata Lakes Realty: Twin Cities, Madeline Island

In addition to the element of ultraconservative underwriting, let me add the problem of incompetent appraisals.

Apr 02, 2012 02:51 AM
Roy Kelley
Retired - Gaithersburg, MD

Thanks so much for your feedback.  Many of us question the national surveys when we know that our local market areas have local issues that can vary greatly.

Camellia, Kentlands Spring Flowers IMG_7470

Photographs by Roy Kelley using a Canon PowerShot G11 camera.

Roy and Dolores Kelley Photographs

Apr 02, 2012 02:55 AM
Robert Bob Gilbert
Berkshire Hathaway HomeServices Anderson Properties - Katy, TX
Your Katy TX ( West of Houston) Real Estate Expert

Roy,

Probably the only item I see in this area is poor service by the lenders staff. i really can't blame the individuals as it is always the short sightness of bad management hich creates these situtaions where a small group of folks serviing a large number of oans can not keep up. Good blog..

Apr 02, 2012 03:04 AM
Anita Clark
Coldwell Banker Access Realty ~ 478.960.8055 - Warner Robins, GA
Realtor - Homes for Sale in Warner Robins GA

Roy: I have seen all 3 of these this year but there's also been quite an increase in buyers making it through closing too.

Apr 02, 2012 03:57 AM
Curtis Van Carter
Better Homes & Gardens Wine Country Group - Yountville, CA
Your Napa Valley Broker Extraordinaire

Roy

I have been fortunate to have all mine close. I do hear of the occasional story from other agents of this happening especially for SS with slow lenders. cheers cvc

Apr 02, 2012 05:35 AM
Roy Kelley
Retired - Gaithersburg, MD

Thanks so much for your comments.  All of us need to be alert to resolve issues before they become delaying factors.

Dandelion, Kentlands Spring Blooms IMG_6301

 

Photograph by Roy Kelley using a Canon PowerShot G11 camera.

 

Roy and Dolores Kelley Photographs

Apr 02, 2012 05:37 AM
William Johnson
Retired - La Jolla, CA
Retired
Hi Roy, I love Kenneth's column and always read it faithfully. He always seems to be first out with the information but the rest of the writiers also seem to depend on him for subject content.
Apr 02, 2012 01:23 PM
Kwee Huset
Kwee Huset Realty - Venice, FL
Venice Florida Homes For Sale

Roy, most of my customers pay cash for their purchase, I am working on one with loan hopefully it will appraise.

Apr 03, 2012 11:04 AM
Kay Van Kampen
RE/MAX Broker, RE/MAX - Springfield, MO
Realtor®, Springfield Mo Real Estate

We just had two contract fall thru today.  One because the seller won't make the necessary repairs and the other because of financing after being prequalified.  You're right!  More paperwork, stricter lending guidelines, low appraisals.......all these would not have been a problem a few years ago.  Now it's a nightmare.  I need Kwee's clients.

Apr 03, 2012 11:36 AM
Roy Kelley
Retired - Gaithersburg, MD

Thanks so much for your comments.  It is always good to hear from you.

Crocuses, Kentlands Spring Flowers IMG_4791

Photographs by Roy Kelley using a Canon PowerShot G11 camera.

Roy and Dolores Kelley Photographs

Apr 18, 2012 11:46 PM
Roy Kelley
Retired - Gaithersburg, MD

We have a beautiful morning in Kentlands and an ideal time for outdoor activities.

Have a great Saturday and a wonderful weekend.

Jun 17, 2016 09:42 PM
Roy Kelley
Retired - Gaithersburg, MD

We have a very windy morning in Maryland. I hope you are having an outstanding week.

Mar 02, 2017 06:28 AM
Roy Kelley
Retired - Gaithersburg, MD

Make it a habit to post a daily reblog. It is an easy way to pay it forward.

Mar 15, 2020 05:12 PM