6 Reasons Real Estate Transactions Fail, and How To Avoid Them

There is a reason that real estate agents shouldn't count their commissions until they actually get the check and that's because sometimes real estate transactions fall apart when you least could expect it.  Granted the advice and guidance of an experienced agent can help you avoid most jams and keep deals together, but that plays right into one of the top 6 reasons why real estate transactions fall apart (clients don't always listen).

If your list is different or you think I left anything out please let us know.  We'd love to hear your thoughts and personal experiences!

Now for the list:

  • Man vs. Woman In the current market environment buyers have too many options, which can cause some indecision.  This is just a simple function of human psychology.  Trust me, I know because I am in the market to buy a home with my new fiancee myself.  You would think that as a real estate agent with years of experience I would be able to avoid a simple issue like this. Well let me tell you, having real estate experience does not equal automatically being on the same page as your loved one.   One may think that it is more si-highlight--primary to have an extra bedroom while the other prefers larger room sizes.  One wants a yard, the other wants a condo.  One wants something fully updated, the other wants to do the remodel themselves.  One wants modern, the other wants traditional....and on and on and on it goes.   When you really sit and think of all of the potential differences in opinion it is amazing that men and woman can agree on a location, style, property type, bedroom count, etc. as often as they do.  The problem is that many also do not fully discuss these issues, or one of the two parties do not voice their opinion as loudly as they should until it is too late and they are already in escrow.  This obviously causes escrows to fall apart due to the buyer's lack of comunication with each other.  To avoid this:Make sure you are honest with what elements are si-highlight--primary to you in a purchase.  This one sounds simple but it happens far too often.
  • Sellers do not screen buyers properly.  This one falls squarely on the shoulders of the seller.  There are many forms of screening that the seller may fail to do.  The most si-highlight--primary of the seller's screening responsibilities is to make sure that the buyer's financing is approved.  Without this, the deal is bound to fail.  If it is a cash deal, sellers should be requesting proof of funds.  Another simple, yet crucial, responsibility of the seller is to make sure that the buyer really and deeply wants the property.  This is usually communicated through the agents, but it is extremely si-highlight--primary that the seller know the answer to questions such as; Is it an investment property or will you live in it?  How long have you been looking?  What is it about my property that works for you?  What other homes are you considering?  Questions like these will give a seller  an understanding of just how attached the buyer is to the property and will make real estate transactions more successful.
  • Clients do not always listen to their Realtor and other advisers. This one I really don't get.  You have hired your Realtor, mortgage broker, and other advisers for a reason.  Why ignore them?  If I was getting my brakes changed I wouldn't argue with the mechanic.  This may be the top reason why real estate transactions fall apart, supposing you are working with a good competent agent.  This one can easily be avoided by having a bit of humility and realizing that people that dedicate their lives to closing real estate transactions probably know a thing or two.
  • Buyer or seller lose focus of the goal - also known as EGO!!! Let me paint the typical scenario for you.  A seller is hoping to get $520,000 for their Carmel Valley Townhouse. Their agent does an fantastic job of marketing and negotiating the property and secures an offer for $10,000 over asking price.  The seller is thrilled and escrow is opened.  Everything is going fine until the buyer does a walk through of the property and realizes that paint is a little more scuffed up than they had first realized and they ask for a $500 credit in their repair request.  The seller puts his foot down and says that the buyer can't ask for the $500 because they already had seen the condition of the property and the buyer should have taken that under consideration when the offer was made.  Now, for the record, the seller is right.   However, the seller is losing focus of the fact that even with the $500 credit they will still be doing $9,500 better than what they had originally hoped for.  This is still a hugely successful sale for the seller but focus is being lost.  Rather than seeing it this way, the seller's ego gets in the way and a huge fuss is made of the fact that they will simply not pay for it.  The buyer puts their foot down too and says that they deserve perfect paint given the price they are paying.  Focus is no longer on the sale but on an insignificant $500 item and the deal is lost.  Keep your eye on the ball for the goodness sake so you can close your real estate transactions!
  • Seller does not properly disclose issues that are bound to come up during the inspection period. This one goes hand in hand with the point above.  This is the case of when a seller knows that the plumbing needs work, or the microwave is broken, or the water pressure is low and they hope that nobody will ever find out.  Well this is why property inspections exist and it is near guaranteed that the truth will eventually surface.  The buyer finds out the truth, is turned off, and the deal goes south.  This could have easily been avoided by just disclosing what you know to the buyer.  Aside from the fact that it is the right thing to do, the buyer is bound to find out anyway so why not make sure that they are OK with all the issues before you tie up your property with a buyer that will not close escrow?  It may also be that deceit is not in play but that the seller just really had no idea of the issues.  In order to avoid situations like this you can also try to be familiar with your property as a seller.  After all you are selling an fairly expensive asset.  It stands to reason that you should know what you are selling.  This way their will be no surprises and you can avoid escrow pit falls.
  • Buyer is not honest with their lender.  Listen now because this may be the best piece of real estate advice you will ever get.  Be honest with your lender!!! Sorry, I didn't mean to yell, but I hope that was loud enough for everyone to hear.  This is a terrible idea.  To get a loan in today's lending environment you will have to document everything, show your tax returns, and  run your credit.  The truth will come out, I promise.  Buyers sometimes try to get sneaky with their lenders, and while it may work to get that pre-approval letter from their loan officer, it will not work for the underwriter.  Avoid this common mistake by just being honest and telling your lender the brutal truth.  It will help them give you better service.  I am sure you want that.

So that's my list.  Is yours different?  How so?

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