From the Record:
Deal — or no deal?
Does a signed contract mean the property will actually sell? In a volatile housing market, the answer these days is “not necessarily.”
“You start earning your commission the day you get the contract,” said Kate Conover of Re/Max Properties in Franklin Lakes. “Getting a contract isn’t as hard as keeping it together.”
Home builders are especially plagued by canceled deals. Large builders say their cancellation rates have soared in the past year or two — to 35 percent or higher — often because their would-be buyers can’t unload their own homes. In an effort to head off cancellations, Hovnanian Enterprises of Red Bank, New Jersey’s largest homebuilder, now offers free home inspections, staging advice and other services to help its buyers sell their homes.
Cancellations are not as big a problem with existing home sales, according to North Jersey real estate agents. But they say keeping deals on track — from the offer through the contract to the closing — has become much more complicated.
Sometimes buyers have second thoughts; sometimes lenders balk at the size of the mortgage or the credit record of the buyer. Sometimes the home inspection turns up trouble.
“A lot of buyers are getting cold feet and backing out in attorney review,” said Ann Murad of Re/Max Real Estate Associates in Woodcliff Lake. “It’s usually three days of attorney review. Sometimes they’re dragging it out a week, and then they’re backing out.”
Often, deals go on the rocks because lenders have gotten tightfisted — after several years of being free (in some cases, reckless) with mortgage money. And at banks’ request, appraisers are being more conservative when valuing properties.
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When real estate prices were rising, deals that fell apart were no big deal, McGuirl said. “You’d sell for as much or more, and it was never a matter of litigation,” he said. But now a seller could face real losses, he said.
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“In this business,” he said, “a deal is not done till it’s done.”