Cancelled contracts for home purchases on the rise
On behalf of Steven Waldinger
For Westchester residents, selling a home is an exciting event, but it can also be very complex. There is a lot of preparation for both the buyer and the seller in making the decision to enter into a contract for sale. The real estate market changes quite a bit in the state of New York and many factors determine whether a sale will reach completion.
Increase in cancelled contracts on purchased homes
Capital Economics, an independent research firm, reports that 18 percent of contracts for the purchase of homes did not complete earlier this year. This is the highest reported number since 2010. The National Association of Realtors has also reported that 36 percent of realtors are having problems closing deals because of contract problems or delays. The NAR has also reported that homes sales have increased 7.8 percent in August of this year.
At the same time, however,
home sale contract cancellations are increasing instead of decreasing. Because there are few houses for sale to choose from, buyers make offers on the homes but do not consider whether they really want the home or can afford it until they see the actual contract. Appraisals of homes are also interrupting contract sales because many times the appraisal number will be lower than the purchase price of the home, causing buyers to back out of the contracted price.
Lending requirements have also contributed to the increase in cancelled contracts. Many buyers are having a hard time qualifying for mortgages. It is not a requirement for a buyer to get pre approval for a mortgage, so many of them sign contracts without getting approval first.
Even though there are many contracts that go through cancellation, this does not mean that sales do not reach completion. Buyers and sellers may renegotiate after a failed attempt at completing the first contract. Buyers may also be looking at other homes and making other offers.
A seller’s options if a buyer defaults on a contract
Many sales contracts have a liquidated damages clause. This will specify what compensation the seller will get if the buyer backs out. If there is no liquidated damages clause, another option is to keep the earnest money deposit. This is the amount paid by the buyers to indicate they are serious about the purchase. If either of these options is not satisfactory, the seller can take the buyer to court. However, court costs can be expensive and time-consuming.
There are many documents that are involved in the sale of a home, and attorneys can be helpful in the preparation, execution and understanding of those documents. Homeowners who have questions about their legal options concerning a real estate sale can contact a real estate attorney for assistance.