Real Estate Cancelled House Contracts due to Nation’s Unstable Economy

Its becoming more and more common to see home buyers reconsidering the contracts they have signed. Last month, a great deal of signed real estate contracts fell through before reaching settlement. In fact studies showed that 1 in 6 real estate agents claimed to have signed contracts canceled before closing. Ordinarily, this occurs once for every 25 contracts and maximizes at about 8% to 10%.

The question that arises is: What’s the cause?

Although there is no solid evidence, experts suggest it is underestimated appraisals, as well as difficult mortgage underwriting rules which frighten home buyers from proceeding with contracts due to the mortgage contingency clauses.

Unfortunately, home buyers have lost faith in the country’s economy in the past few weeks as a result of the chaos in Congress over increasing the national debt ceiling and stinging the deficit. Buyers are less likely to make a major purchase. It also means they are becoming more demanding and fussy about smaller issues when choosing homes. Most are uncertain about the country’s economic fate, causing them to be more reluctant.

It is relatively normal for minor issues to be discovered during inspections, but lately buyers are on the search for a flawless house. If not, they are asking for compensation, a reduced price on the house, or a replacement or repair before closing at the seller’s expense. Where some sellers are prepared to discuss options, others feel they cannot afford to lower the price. When the two parties cannot come to an agreement, the contract is rejected.

Another cause of cancelled contracts are the increasing number of pending short sales in the local markets. When buyers negotiate with banks, it usually takes months to hear back about their offers, causing continual extensions of the contracts. Sooner than later, buyers lose interest and patience, leading them to walk away.
Lastly, real estate transactions all over the nation are affected by appraisal dilemmas. At times, under-qualified appraisers charging minimal fees compared distressed property sales to non-distressed property listings. Recently, an appraiser in South Carolina signed a contract on a property which he valued at a much lower price than the agreed-upon sales price. Eventually the lender convinced the buyers to get out of the contract and refuse to pay the price they had agreed to after the appraisal report was reviewed, showing many errors.

The uncertainty surrounding the national debt crisis will soon be resolved and though it may still take six months to a year, we will be on the way back to strong and stable economic foundation. The Washington D.C. real estate market is not recession proof but it clearly has been doing extremely well compared to the rest of America. Prices are stable and volume is steady. Having the government in our backyard def has its advantages!

Original Article: http://www.washingtonpost.com/realestate/economic-uncertainty-leads-to-cancelled-home-contracts/2011/07/25/gIQAtU3EhI_story.html

7 years ago by in Home News | You can follow any responses to this entry through the RSS feed. You can leave a response, or trackback from your own site.
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