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8 common real estate deal breakers

A disappearing ficus tree, tenants who won't budge, secrets under the dining room rug, a buyer-seller brawl, and a particularly contrary house cat are just a few of the last-minute deal breakers that have quashed or threatened real estate transactions across the country.

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Real estate professionals are trained in the art of shepherding a property sale from contract to closing. They counsel their buyers through every step of the lending process, mediate between buyer and seller while inspections and repairs are completed, and reassure nervous sellers that the buyers' financing will be sewn up tight by closing.

And in 2004, realty agents were particularly busy. According to the National Association of Realtors, an estimated 6.75 million single-family homes were sold, up 10.66 percent from the 2003 record of 6.1 million. Not surprisingly, homeownership was at an all-time high of 69.2 percent as of the second quarter of 2004.

But the best laid plans of buyers and sellers can and do go awry from time to time, especially amid the stress and fatigue of a pressure-cooker deal between highly motivated buyers and sellers.

We surveyed five real estate agents from coast to coast to get their perspectives on the unforeseen last-minute surprises that can turn a good deal south. While deal breakers by their very nature are not typical, they do tend to arise from several common concerns.

1. Shaky financing
The single most common deal breaker? The buyer's financing falls through.

This is understandable, considering that a typical home sale actually involves two contracts: one between the buyer and seller, the other between the buyer and lender. Where big money is at stake and the ticking clock is exerting additional pressure, there is no such thing as a sure thing.

Kristal Kraft, a relocation specialist with The Berkshire Group Realtors in Denver, Colo., had a deal fall through when the buyers failed to maintain the financial status upon which their loan was based.

"The buyers spent way too much money before closing and when it came down to a few weeks before closing, they couldn't qualify for their loan anymore," she says. "That's typical of what can happen when people go under contract and then go out and buy a big new car and it changes their financial status. I always tell them, don't buy anything until after closing."

Dick Pelosi, broker-agent with Century 21 Advance Realty in suburban Boston, says the old industry phrase "Buyers are liars" sometimes applies to their loan documents.

"Getting prequalified or preapproved, that's easy to do," he says. "When it comes down to it, can they get the loan commitment? That's where it's always shaky. People lie on the application or they can't produce their pay stubs."

2. Lame lenders
Increasingly problematic in these days of low mortgage rates are lenders who just don't get it together for closing.

"You have a lot of people who got into the mortgage business during the refi boom who are not seasoned people and they're not paying attention, especially the nonconforming lenders," says Hugh James of Hugh James Realty in Chicago. "I've had them asking for changes to title and additional documentation at the closing table that they never asked for to begin with.

"We had one the other day at the closing table that was asking for changes in the way the title commitment was written, even though they had had a title commitment for a week."

Several real estate agents also shared tales of buyers who obtained financing only to be shocked at the final numbers at the closing table.

3. Fussy inspectors
Every real estate agent's nightmare is a renegade inspector. Because most inspectors' livelihoods are based on referrals, their reports tend to be fair but not overly picky.

Once in a while, however, they can be flat-out wrong, as Brook Ashley, a broker in Santa Barbara, Calif., found out the hard way.

"I had an escrow fall out when an inspector said a beam was way too long and not structurally correct. After a lost escrow and $10,000 later, a structural engineer came in and said actually it's not one beam, but two beams, and they are joined twice as well as they need to be. But we lost the sale.

"And I never used that inspector again. There doesn't seem to be any liability on his part. If we had done that, we would have lost our license."

James had a sale fall through when the inspector turned up a sinking front porch that would have cost $5,000 to repair. It wasn't the inspector's fault; the homeowners didn't know about it either.

"They're typically not deal killers unless there is something really ugly. In most cases, it's usually very small stuff, $200 here, $200 there, and can be easily negotiated."

 

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-- Posted: Dec. 30, 2004
     

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