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Monday, March 8, 2010

"Sale Fell Through! Back on Market!"

Cleaning Up After a Broken Deal

If you're seriously shopping for a home, you've undoubtedly seen one of these properties online.

And if you've been selling real estate long enough, you've almost certainly had it happen to you:

What exactly? A not-quite "done deal" . . . that came undone.


First, a little background:

Listing agents typically switch a "for sale" property from "Active" to "Pending" status once the Buyer's Inspection Contingency has been removed (a home goes from "Pending" to "Closed" or "Sold" once the Buyer actually takes title and the Seller gets their money).

So, a deal that comes undone as a result of an inspection issue -- or multiple issues -- usually never goes "Pending" in the first place.

Rather, in today's housing market and economy, when a home that was formerly "Pending" becomes "Active" again, the reason is invariably financing-related.

Financing Issues

"Financing-related" as in, the Buyer couldn't get it.

Just because a bank has issued a pre-approval letter doesn't mean that the Buyer is home-free (sorry, bad pun).

The bank must still vet the Buyer's income and assets, verify the source of their down payment (if it's coming from a third party), and, perhaps most importantly, appraise the home to make sure the bank has sufficient collateral.

Even when all those hurdles are surmounted, if the Buyer loses their job or their credit suddenly deteriorates, the loan can (and does) go "poof!"

Possible Responses

If that happens, it's certainly possible to simply switch the property's status from "Pending" back to "Active."

And many Realtors do.

But the more common response is to explicitly acknowledge that there was a busted deal, in conjunction with a renewed marketing push.

There are two reasons for that.

One. The Realtor needs to find another Buyer!

Just like a price reduction, new staging, or some other change in the home's status, a busted deal ultimately serves as a pretext to re-contact anyone who's previously shown interest in the home (as well as attract the attention of people who've just started looking).

Two. Buyers are going to find out, anyways.

Depending on which online sites Buyers are looking at, or what type of MLS report their Realtor is sending them, the archived "history" of each listing is at most 3 clicks away.

In fact, that's one of the first things I like to look at, to find out whether a listing is fresh or stale, how long it's been since the last price cut (and whether another one is due), etc.

Coming clean about the busted deal helps defuse it, and lowers the odds that the next Buyer will get cold feet if they discover the busted deal later on.

I'm just not sure that I'd put it in boldface and italics -- with lots of exclamation marks (!!!) to boot.

P.S.: Although I (interchangeably) use the terms "busted deal," "broken deal," etc., the more accurate description for most of the foregoing scenarios is that the Buyer's financing contingency failed.

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