Why Are So Many Real Estate Deals Falling Apart?

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It's been hard enough just to find a buyer for your house. Now the challenge is to drag them across the finish line. Only two-thirds of opened escrows close on time and 16 percent of the deals fall apart without closing.

Of agents polled in June by the National Association of Realtors, one in six reported having a deal fall apart the previous month before it closed escrow. Previously, the number was one in 25.

Why the uptick? Buyers' remorse is cited among the top reasons, often disguised as displeasure with items that turn up in the inspections. Things that buyers would have overlooked in years or months past are now deal-busters, agents say. Bad economic news at the beginning of the month may have caused some buyer jitters, said the agents polled.

There are also issues on the financial side that raise agents' blood pressure: Lenders who won't approve mortgage loans, appraisals that come in lower than the agreed upon sales price, short sales that drag on so long that buyers fear the home's value has dropped further and get cold feet. A full 32 percent of buyers either cancelled their contracts or had to delay closing or renegotiate to a lower price because the appraisal came in lower than anticipated.

What was the conclusion of NAR's Realtors Confidence Index? The rental market has increased significantly and some sellers may chose to become landlords instead of dealing with the hassle of selling.

Also see:
Mortgage Interest Deduction: Housing Boon or Boondoggle?

Case-Shiller Index: 3 Reasons to Blow It Off
Bank of America Donating Foreclosed Homes

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