Why is that Home Back on the Market?

January 25, 2012 at 10:03 am Leave a comment

By: Maria Hass

In today’s real estate market, it is more common to see buyers backing out of a contract. With short sales and foreclosures taking most of the inventory, there is no guarantee that buyers will get the home they bid on or how long the process will take. The time it takes for the buyer to hear a response from the bank sometimes steers them into another direction.
1. Investor Buyers: The current real estate market is filled with investors waiting to pounce on the “best deal in town.” They make multiple offers on short sales or foreclosed homes, then pick the home that gets accepted by the seller or seller’s lender first. Too bad for the other sellers who thought they had a willing and able buyer but later find out that the buyer has walked away. These sellers are left in the cold scrambling for a new buyer. On a short sale, finding a new buyer right away is required to beat the foreclosure deadline.

2. Inspection Period: Buyers are allotted 10 calendar days from the time the seller’s lender has approved the short sale or from seller acceptance. During this time, the buyer does his or her due diligence to investigate any concerns pertaining to the home, such as condition, square feet, schools, environment, zoning, termites, pests, neighborhood, and crime data, to name a few. A buyer may cancel during the inspection period if any of these concerns cause disapproval. Unless specified differently in the contract, the full earnest money is then released to buyer. However, the buyer cannot recover the cost of inspection and appraisal, if any.

3. HOA Restrictions: A buyer may cancel the contract within the cancellation period if he or she disapproves in writing any HOA rules or covenants. For example, if a buyer disapproves of the HOA rules forbidding basketball hoops in the driveway or pickup trucks to be parked on the street. Unless specified in the contract, the full earnest money is refunded to the buyer when he or she disapproves of any HOA rules.

4. No Sense of Need or Urgency: Many buyers. whether looking to downsize or move up into larger homes, already have an existing home. There is no sense of urgency for them to move out. They can stay in their home for as long as they want. These second-home buyers or investors are fine even if they don’t get the home. When a seller’s lender finally approves the short sale, it is possible for them to change their minds.

5. Financing Contingency: The contract is contingent on the buyer obtaining the loan. If, after a diligent and good faith effort, the buyer is unable to obtain loan approval, the buyer may cancel and all earnest money is released to buyer.

6. Appraisal Contingency: Completion of this sale is contingent upon an appraisal of the premises acceptable to the lender for at least the purchase price. If the home fails to appraise for the purchase price in any appraisal required by the lender, the buyer may cancel the contract and receive a refund of the earnest money — or the buyer may waive the appraisal contingency.
To minimize the risk of putting a listing “back on the market,” it is a good idea to ask as many questions as possible about the buyer prior to accepting the offer. For example, questions pertaining to other offers; their current housing situation; their reason for buying the home, or what the buyers liked about the home, find out if the buyer is well qualified to obtain the loan. It also helps to require a $500 to $1,000 non-refundable earnest money payment for 60-90 days to ensure that the buyer stays on during the short sale process. A primary resident buyer is favorable over an investor buyer. The former cares about the house while the latter only cares about the price. And if the seller’s lender counters with a higher price (which is likely) you are sure to lose your buyer. Back-up offers are great on investor offers. Even with these in mind, there is still a chance your buyer could walk away, but at least you’ve done your best to hold the home for what you thought was the “best buyer” given the day and time.

Entry filed under: Arizona Real Estate, Chandler Real Estate, Foreclosures & Short Sales, Phoenix Real Estate. Tags: , , , , , .

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