Monday, January 9, 2012


In something as complicated as a real estate transaction, let’s face it:  experience matters.

In 18 years as a broker, I have seen dozens of deals go sideways for a host of different reasons.  Sometimes they are legitimate.  Sometimes they are based on emotion overriding logic.  And sometimes they are totally avoidable with a few slight adjustments or corrections in the way certain challenges are addressed.

The fact of the matter is that, above all else, you should hire a real estate broker for his or her experience.  Contrary to the old adage that “experience is the best teacher”, in reality, the far better alternative is to learn from other people’s experience.  It’s more efficient, less costly and it doesn’t hurt nearly as much!

My goal as your broker is to help you negotiate the best possible terms, sidestep the pitfalls and use my 18 years of hands-on experience to close your transaction smoothly.

Having said that, it still must be acknowledged that we are living in a world of new and ever-changing lending regulations, underwriting requirements and a fundamental shift in attitudes about housing.  This means that closing a real estate transaction is more difficult today than at any time in recent memory, and it means there can be no room for complacency or assumptions during the contract period.

A good broker must be vigilant, diligent and always thinking one step ahead.

Here are 100 of the most common reasons real estate transactions fail to close:

The Buyer / Borrower…
1.    Fails to disclose information which disqualifies the buyer from financing
2.    Provides inaccurate information on the loan application
3.    Has late payments after applying for credit
4.    Takes on new debt after applying for credit
5.    Loses job after going under contract
6.    Underwriter refuses to accept sourcing of buyer’s income
7.    Overtime hours used for qualifying are rejected by underwriter
8.    Buyer becomes sick or incapacitated while under contract
9.    Buyers separate or divorce while under contract
10.  Anticipated gift funds fail to materialize
11.  Tax returns obtain from IRS differ from what buyer disclosed
12.  Cannot obtain certified copies of tax returns from IRS in a timely manner
13.  Buyer’s personal circumstance changes and purchasing the home no longer makes sense
14.  Bank statements do not substantiate assets buyer claimed to have
15.  Landlord refuses to verify rental history or provides negative information about buyer
16.  Rates increase before borrower locks rate in, causing buyer to no longer qualify
17.  Loan program is discontinued prior to closing
18.  Child support increases, decreases or stops altogether after buyer is under contract
19.  Buyer cannot provide or obtain divorce decree from courts
20.  Judgments are uncovered which disqualify buyer from financing
21.  IRS liens are placed against buyer’s income
22.  Borrower declares bankruptcy
23.  Underwriter declines file based on “payment shock” compared to previous rent
24.  Borrower changes jobs while under contract 
25.  Borrower has less than two years of work history in a commissioned sales position
26.  Employer refuses to verify likelihood of continued employment
27.  Too much emphasis given to commissions or bonuses in calculating qualifying income
28.  Friends or family members talk buyer out of purchasing once under contract
29.  A more attractive, competing home comes on the market
30.  Inspections cause buyer to ask for unreasonable or unrealistic repairs
31.  Veteran using VA financing cannot obtain DD-214
32.  Buyer has concerns about future planned development in the neighborhood and cancels
33.  “Megan’s Law” – registered sex offender is discovered in the neighborhood and buyer cancels
34.  Buyer gambles away funds required to close
35.  Buyer’s lender closes shop and disappears
      The Seller…
      36.  Lacks motivation to sell and refuses to cooperate (not uncommon during short sale transactions)
      37.   Cannot find adequate replacement property
      38.  Rents the home to uncooperative tenants or family members
      39.   Removes inclusions previously agreed to in the contract
      40.   Cannot clear liens against the property
      41.   Fails or refuses to complete inspection repairs to buyer’s satisfaction
      42.   Does not own 100% interest in the property
      43.   Divorcing spouse, or spouse’s attorney, kills the deal
      44.   Has insufficient equity to sell
      45.   Attempts to change closing date, possession date or inclusions after agreement is reached
      46.   Is in foreclosure and sale date arrives before contract closes
      47.   If a short sale, terms from bank are deemed unacceptable by seller
      48.   Problems with seller’s replacement home transaction derail the deal
      49.   Builder for seller’s replacement home is delayed in construction
      50.   Builder of seller’s replacement home declares bankruptcy
      51.   Seller of seller’s replacement home declares bankruptcy
      52.   Representatives of estate cannot agree on price or terms
      53.   Seller loses job and cannot complete transaction
      54.   Seller becomes sick or incapacitated and cannot close the transaction
      55.   Seller is sued and cannot complete transaction due to litigation
      56.   Seller’s HOA is sued and buyer cannot finance into community with pending litigation
      57.   Seller dies while under contract

      The Property…
      58.   Has problems discovered during inspections which cannot be cured
      59.   Has condition issues the lender requires remedy for which the seller cannot provide
      60.   Property suffers freeze damage and floods
      61.   Property has electrical issues and there is a fire
      62.   Hailstorm damages or destroys all or part of property
      63.   Lightning strike damages the home or inclusions
      64.   Is not FHA approved or loses FHA approval during contract period
      65.   Has real or perceived structural concerns that concern the buyer or buyer’s inspector
      66.  Is subject to environmental issues which cause the buyer to cancel
      67.  Square footage does match what was marketed
      68.  Property is vandalized during contract period
      69.  Property is subject to zoning change which affects desirability
      70.  Property tax increases are passed which make the home too expensive
      71.  Draws water from a source which is deemed unreliable for future needs
      72.  Existing well on the property is not permitted
      73.  Septic system fails inspection
      74.  Survey reveals faults with boundary lines, encroachments or easements
      75.  Excessive claims history makes it uninsurable
      76.  Neighboring home is damaged or destroyed, affecting neighborhood’s desirability 
      77.  Is not zoned for intended use
      78.  Has a special assessment levied against it
      79.  HOA declares bankruptcy

      The Agent(s)…
      80.   Has not properly vetted client’s ability or motivation to sell or buy
      81.   Has not educated clients thoroughly enough and they waver at buyer or selling
      82.   Loses the confidence of buyer or seller through gross incompetence
      83.   Disappears during the transaction
      84.   Is fired by the buyer or seller after contract terms have been agreed to
      85.   Lacks experience to close a complicated transaction
      86.   Does not accurately portray true contents of short sale approval until day of closing
      87.   Sues the seller for breach of contract, derailing the transaction
      88.   Sues the buyer for having multiple agency agreements
      89.   In a short sale, has misrepresented communications with the seller’s bank
      90.   Recommends incompetent or negligent inspectors

      The Appraiser…
      91.   Lowballs the value of the property
      92.   Comes from out of the area and does not know the neighborhood
      93.   Fails to adequately value certain improvements
      94.   Cannot find suitable comparables
      95.   Loses license or has lender approval revoked after the appraisal is complete
      96.   Is accused of favoring buyer at the expense of seller
      97.   Is accused of favoring seller at expense of buyer

      98.   War, natural disaster or Act of God that affects the economy during the contract period
      99.   Title company shuts down, freezing assets held in trust       
      100. Government shuts down, freezing accessibility to financing through FHA, VA and GSE’s
        My clients know that I write “tight” contracts and I don’t skip over anything when it comes to reviewing the 15 page Colorado Real Estate Commission purchase contract, the eight page listing contract or the six page buyer agency agreement.

        I often explain my meticulous approach to going over contracts by saying that “I live in the world of the one percent,” which means I am always thinking about things that have a one percent chance of happening… but when you have been licensed for nearly 20 years, you have seen what can happen to agents who haven't given thought to every contingency.  

        The point of this article is simply to let you know that the decision to hire a broker is an important one, and it should not be entered into lightly.  If your agent isn’t talking to you about the “world of the one percent”, chances are he or she hasn’t been there, or worse yet, doesn’t even know it exists.