Top Reasons Why Your Contract May Not Close

Getting a signed contract is only half the home buying battle. See what agents say are the top reasons why contracts fall through & how to avoid any issues

Shortcomings of Short-Sales and Foreclosures

"Foreclosures - even though there are many - 1) some lenders are so restrictive they do not encourage people to buy their properties, they discourage them; 2) offers can take up to two weeks to process to get an acceptance or counter; 3) lenders are listing with any agent that completes forms, to the coop/selling agent, many are uncommunicative, work out of the trunk of their car or home, some even have part time or "real" jobs outside of real estate (of course the lender/seller doesn't know this)."

Jim Fite
CENTURY 21 Judge Fite Company


"At this time, the primary reason is that buyers become frustrated by the special issues involved in closing
the purchase of a short sale or a foreclosure. Those distressed properties now represent a significant segment of the housing market. 

In the case of short sales, getting approval of the sale from the lender can take months, and if buyers aren't properly educated about the process, they quickly become frustrated and want to walk away.

With foreclosures, a different but related problem arises because so many would-be buyers want to use FHA financing, which requires that the property meet certain condition guidelines before the loan can be issued. Getting the bank to fix these problems or even allowing the buyer to get the work done before the closing can be a slow process, and again frustration often sets in.

The best way to keep the contract on track is to educate buyers before they even make an offer about the need for patience in the buying process. The other thing I do is make a point of keeping in regular contact with the selling agent and the bank, which lets me give my buyers frequent updates, weekly if possible, so
they feel they are in the loop and someone is working to get the transaction."

Glenn Sharp
RE/MAX Professionals South, Plainfield, Ill


"Short-sales are ultimately decided by the short-sale lender.  The lender has final approval on all terms, price as well as all others.  The reality is that in a short-sale transaction, the bank is the seller, not the home owner.  A buyer can be in contract having that contract duly executed by the seller, (home owner), only to have the banks weeks later, counter unacceptably, or flat out refuse the transaction.

Interest rates are so very volatile presently that a buyer who may have been quoted a rate at the point the contract is submitted, may not be able to have that rate locked at the time the short-sale approval is finally obtained; or the rate lock once obtained, expires." 

Dameon V. Russell
Dir., Business Systems
MAE Capital Mortgage


Qualifying for the Actual Loan

"Buyers are often improperly or inappropriately pre-qualified by a zealous Loan Officer.  Although the pre-qualification or pre-approval was enough to get them into contract, once the file actually progresses to Underwriting they are frankly not qualified to obtain the loan."

Dameon V. Russell
Dir., Business Systems
MAE Capital Mortgage


"They [buyers may] bite off more than they can chew. Later on, the buyers are not able to secure closing and other costs. Know what customary fees are, such as appraisals, inspections, document preparations, mortgage loan fees, commissions, etc."

Chantay Bridges
Senior Real Estate Specialist
Clear Choice Realty & Associates

"One of the most common reasons why a contract falls through is because the buyer is not actually qualified. And, this is almost always avoidable by getting the proper lender approval before beginning to shop for a home.

All buyers know - or will know once they talk to a professional real estate agent - that they need to have a letter from a lender unless they have proof of funds showing that they can pay cash for a property. What most buyers don't know is that there is a difference between a pre-approval letter and a pre-qualification letter.  Spending the time up front to properly qualify a buyer will save everyone's time in the end and also save multiple family's frustration when a contract falls through just days or even hours before an anticipated closing."

Nicole Tucker
Licensed Texas Real Estate Consultant
Keller Williams Realty, Dallas


"Financing issues are one of the top reasons contracts fall through in the current market. The new stringent lending standards resulting from the recent financial crisis make it harder not only for buyers but also for properties to qualify for financing.

It's not only important for buyers to be pre-approved so they can be sure they qualify for a specific loan amount, but buyers should also seek to pre-qualify the type of home/property they are seeking. 
In today’s market it is also important for a buyer to work with a lender who is experienced in dealing with the particular type of home they are seeking.

To avoid losing contracts to financing issues, we ask our buyer clients to confirm with their lender the loan amounts and the specific property types the financial institution can finance."

R. Wayne Lopez 
Broker and Principal
RESIS real estate consulting firm    


Changes in the Buyer's Finances

"Employment status alters. The individuals no longer have a steady source of income, which in turn looks like they may not to have the ability to pay the mortgage on a regular basis.

While in escrow something is purchased, un-covered or un-disclosed comes to surface that changes their [buyer's] qualification status and they are no longer qualified."

Chantay Bridges
Senior Real Estate Specialist
Clear Choice Realty & Associates


Not Completing the Contract on Time

"Not being familiar with the contract, real estate jargon or the process and when all the contingencies are not removed or important deadlines are missed" contracts fall through.

Chantay Bridges
Senior Real Estate Specialist
Clear Choice Realty & Associates


Inspection Issues

"Inspection issues and their resolution are a reason -- I like to see sellers have a home inspection before listing but few do. Environmental issues, especially underground tanks are another problem -- they should be certified and insured."

Dan Desmond
Broker, Owner
Help-U-Sell Bay Beach Realty


Lack of Communication

"I think that the main reason a transaction can fall out is lack of communication between all the people involved in the closing of a transaction.  There are many people and documents involved, so many moving parts that something, somewhere can stop the whole transaction either temporarily or permanently."

Sandy Segovia 
Keller Williams Realty                                                                      


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