The Curse of the Cancelled Deal

abandoned staircase_2

Having a deal fall apart is kind of like the real estate version of the Scarlet letter. It’s a black mark that is most often perceived by other potential buyers {and agents} as a warning sign of something being wrong with the building or space that came up during the inspection.

Back. Away. Slowly.

But does a cancelled deal always mean that something is wrong with the building?

In today’s market low inventory and high demand, it’s not always fair {or accurate} to assume that a cancelled deal means a big red flag. Yes, it very well might, but there are a few other things that might have happened as well.

Buyer Freak Out {cold feet}

There is still very low inventory for buyers, which equates to heightened stress, pressure to put in an offer immediately on any property that seems like a great deal or value, and potentially paying over asking price {sometimes by a lot}.  Multiply these things by 100 when there are multiple offers. People can get a little crazy, especially if they don’t have an agent who knows how to keep things calm and set expectations.

People will sometimes put in a high offer to make sure they win, and then have second thoughts and back out once everything gets ‘real’. Buyer’s remorse anyone?

Or they put in a high offer and don’t expect to win… but they do win, and then have second thoughts, about the space or the price.. or both… ohmygod I didn’t think this was actually going to happen!  

Financing Issues

Sometimes people will submit an offer saying they are pre-approved, but they end up having issues with their financing and can’t move forward. This could be because they didn’t provide the correct information up front, or they made a big life change ~ quit their job or bought a new car, etc. ~ after they’ve gone under contract. No big spending and no big life changes {without checking with your agent and your lender}!! They can affect your ability to get a mortgage, and could kill the deal.

Holding negotiations hostage {unreasonable requests}

100% ~ everyone has a different perception of reasonable, and this is why you negotiate…

A deal can fall apart because either side is unreasonable, even if no major issues are found at the inspection.

Contracts specifically outline what is able to be negotiated from the inspection. Things that can be repaired by a handyman, are more cosmetic in nature, or are typical of a given age building are not something you can always successfully ask for {a brand new building is different than a ten year old building is different than a hundred year old building, and they should not be looked at the same way. For example, you can’t reasonably ask for a furnace to be replaced that is nearing the end of it’s life but is fully functional because you don’t want to have to buy a new one yourself in five years}. Sometimes a buyer doesn’t care about that, and wants an excessively large credit post-inspection, or they want every item on the inspection report fixed, even if there are no material defects {this would be wanting outlet covers changed, cosmetic dent on the fridge repaired, etc. not major items like the furnace isn’t working or there is an active leak} or they will ask for a credit that isn’t supported by the actual cost of what the repairs will be, and will threaten to cancel the deal if they don’t get what they want.

Conversely, sometimes sellers are unreasonable and refuse to fix anything or give any credit to get things repaired that are legitimately not working. They feel as if they are justified because there are so few options for buyers and ‘dare’ the buyer to cancel. They might have had multiple offers and feel that if this deal falls through, they can just move onto the next ~ which isn’t totally untrue, but isn’t a smart way to approach things.

Karma is real people, don’t be a dick during negotiations.

Actual Inspection Issues

Sometimes a deal falls apart because there are legitimate issues that are revealed in the inspection. It could be a situation where the property needs work and it’s being sold as a fixer upper, but the extent of work needed is more than the buyer is prepared to do or wants to do. It could also be a situation where there are other unexpected issues that would add an unexpected burden of cost to fix for the buyer, and once they learn of the issues, they ultimately decide the place isn’t for them. In condo buildings sometimes there aren’t any issues in the condo itself, but there are issues with the building, and as a buyer, you have to think about the potential costs of the work needed, as well as having to deal with other owners in coordinating the work.

If you are in the process of looking for a new house, and run across a listing that has either been ‘re-activated’, or you discover that it was previously under contract, before you write it off and run, ask yourself a few questions.

How much do you like the space had you not known it was previously under contract? If you are working with an agent, ask them if they are familiar with the building, often we have a little ‘inside knowledge’ based on previous experiences. You can always ask the list agent why the last deal fell apart. Really there’s no reason to lie, as no one wants another deal to fall through {not the goal!}. But most importantly, tune into and trust your intuition… what didn’t work out for someone else might have just been a detour in you and your new house finding one another… you never know!

 

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