The last 4 words you do not want to hear from your Realtor is “The Contract Fell Through”.  Especially if it is a day or two just before the closing at the title company.  What are the causes of this situation and what can your Realtor do to prevent this?

Here is one of the worst stories that I have heard about a deal falling through.  Picture this.  You have agreed on all the terms and conditions, successfully completed the option period but due to some extensive time  requiring repairs, the buyer insisted upon an amendment to extend the closing date for an additional 2 weeks.  You agree and two weeks elapse.  But the dreaded phone call comes one day before closing because the lender upon a final credit check for the buyer discovers the buyer had  purchased $40,000 worth of furniture(on his Master Card) resulting in a last minute  denial of his loan!

This is a  horrible situation for both the buyer and seller.  No transaction takes place; the buyer is stuck with $40,000 worth of furniture and you the seller wasted a precious 6 weeks with your home off the market.   Needless to say, this could have been prevented if the buyers Realtor had told his clients not to make any significant purchases until after the closing.  Ben Franklin said “common sense ain’t so common.”

Upon scrutiny of this contract, we note that there were also several warning signs that your agent should have identified, discussed with you and negotiated.  The sales price for this home was $300,000 but the amount of earnest money put up by the buyer was too low to qualify the contract as a “solid” offer.  In this case, it was only $750 which is way below the more acceptable amount of 1% or $3,000. Moreover,  the option check was a paltry $100.  Understand that the only money the buyer risks is the option money.  That is all he loses if the deal dies.  He almost always will  get his earnest money back.  Would  you take your home off the market for 6 weeks knowing the buyer only has $100 to lose?

We also notice on page 1 of the contract that the buyer is only putting down 2% of the purchase price or $6000. And, financing 98%!  This is another red flag.   We also note that the buyer successfully negotiated an additional $3000 from the seller for closing costs.  This means that the buyer only really needs to bring a check for $3000 to the closing.  Bottom line is the buyer is trying to purchase a $300,000 home with way too small an amount of money.  This is the kind of smoke and mirrors that has contributed to our present economic mess…that is the proliferation of foreclosures.

We can see from this story that the  purchase price is not the only thing that counts in a contract.  Yeah, the “devil is almost always in the details.”In this story, both Realtors failed to do their job according to the National Association of Realtors Code of Ethics Article 1 which states Realtors pledge themselves to protect and promote the interests of their client.  Fortunately,  most Realtors are well qualified to handle contracts better than this.

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