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You Need to Know the Top 4 Reasons Contracts are Falling Apart

Photo Copyright : Kittisak Jirasittichai /

Whether you have worked for weeks to prepare your home for sale or you’re a prospective buyer in need of a new place before the holidays, there’s a lot riding on this contract. There are many things that can cause a real estate contract between a buyer and a seller to fall apart. However, a few problems cause contract delays and contract terminations more often than others.

The REALTORS® Confidence Index (RCI) survey gathers on-the-ground information from REALTORS® around the country based on their real estate transactions in a given month. Today, well take a quick look at the survey results for September 2020, the most recent month for which data is available.

Know which issues could spell trouble for your closing. Here are the top four reasons real estate contracts are falling apart.


REALTORS® Confidence Index (RCI) survey, Issues Affecting Buyers and Sellers


1. Home Financing

Home prices have been trending, according to NAR. Locally, home values have followed suit, reaching a regional median sale price of $314,950. However, interest rates have dropped to record lows, making 2020 still a good time to buy for many. Unfortunately, home financing remains the top reason why contracts are delayed (29%) or terminated (13%).

What this Means for Home Buyers

It’s more important than ever to understand how much home you can buy before you begin your home search. To make the most of the current situation, work closely with your loan officer. Supply all your income and asset documentation so you are prepared to act when you are ready to make a confident decision. There’s no substitute for being well prepared in tumultuous times.

What this Means for Home Sellers

Before you accept an offer, be sure your home buyer has received a full approval minus an appraisal. Not all lenders offer this service, but it can be invaluable for creating peace of mind for you.


2. Appraisals

In a home sale, the appraisal is used to determine whether the contract price is appropriate given the home’s location, permanent physical features and amenities, and current condition. However, homes are currently appreciating more quickly than the historical norm. And we’re seeing increased competition for homes under $600,000. That combination means appraisals are falling behind real-time home values and have become a major concern for contract delays (21%) and terminations (12%).

What this Means for Home Buyers

If a home appraises at less than your contracted offer, you will likely be responsible for paying the difference. (Often, your home loan will not cover more than the appraised value of the property.) Before you make your offer, make sure you have some wiggle room in your savings. Do you have enough to cover the down payment, closing costs and fees, and a few thousand more if the appraisal comes up short? If not, you may see your contract fall through.

What this Means for Home Sellers