Higher Rate of Buyer ‘Walk Aways’ Reported in June

An article in yesterday’s Los Angeles Times claims that a very high rate of real estate deals fell apart in June. Factors such as economic concerns, financing requirements and lower than expected appraisal values are leading suspects for the increase in failed housing contracts.

I personally haven’t had many transactions fall apart because of low appraisal values, and often sellers will adjust their selling price downward if a second appraisal supports that lower value.

Another factor is the increase in pending short sales, just the type of transaction that is problematic and often takes months to close. Does the increase in short sale homes under contract have a role to play in this statistic? Perhaps, but more likely it’s a combination of all of the above reasons, and perhaps others.

I had a recent transaction that encountered some lender issues, but nothing that couldn’t be solved. It was a purchase agreement on a foreclosure home owned by Fannie Mae. Of course it needed work and the first-time home buyer had to go with an FHA 203K streamline (rehab) loan. While waiting for two weeks for FNMA to agree to concessions for serious issues found only at inspection, our process became delayed. During that time the appraisal was completed and no value issues found.

We asked for a reasonable extension but FNMA wouldn’t agree. It had to be closed by the end of July, which was quite impossible for the lender. A two week extension would have had us closing in mid-August, but the house went back on the market as a ‘failed’ deal.

Why the stubborn tactics by the seller? My guess is that the asset manager gets dinged on her productivity bonus points for cloings that get extended, but not for failed deals. Of course, that’s just my guess, but other agents that have had similar occurrences feel the same way. How many of those go into the monthly totals under the failed deal category? (We have re-submitted the purchase agreement and are trying to get an acceptance at this time.)

For all of the noise about stabilizing neighborhoods and getting owner occupants into these foreclosed homes, sometimes it may just boil down to the personal motives of an asset manager. If our hunch is true, shame on the institutional sellers that impose these restrictions on the people handling the properties. Of course the asset manager is going to do what’s best for them, especially when they never meet a buyer, lender, selling or listing agent or anybody else at the front end of the transaction. Hey bank reformers – here’s a new niche market for you to examine.