by M. Anthony Carr www.realtynews.com It’s every homebuyer’s nightmare — write the contract, get it ratified, go through the excruciating mortgage application process, get approved, and then at the last minute a hang-up turns your American Dream into a nightmare. What’s most frustrating is when it’s your own fault.
Just this week I’ve talked with agents where a buyer has made some not so wise choices in their home-buying process. The first story was about a buyer who just got cold feet, plain and simple. The second one sabotaged himself financially by taking a vacation with the money that was supposed to be used for closing. For many cases in this area, the buyers market has people getting nervous and some taking unnecessary risks. In the Washington DC market about 5 percent of properties in the MLS mention either “short sale” or “third-party approval” in the remarks. This is the language of pre-foreclosure. With that said, it can be frustrating in the negotiations to be talking with an agent who doesn’t understand the short-sale transaction, a seller who wants to sell but who really doesn’t have the final word and a bank employee who’s just trying to clear his desk of old cases, preparing for the new ones coming in the door.
When everything comes together, as in the case of this one short-sale buyer, it’s even more frustrating when that buyer gets cold feet at the last minute. The buying agent had lined up everyone. The seller had priced it right, the short-sale executive had agreed to the terms of the contract, including a home inspection and closing costs. The buyer had gotten a full commitment from the bank and then it happened — she dropped her feet into an icy vat of buyers’ remorse. She just couldn’t do it. Instead, when the final initial was needed to seal the deal — she sealed, alright, with her landlord.
Media reports of sub-prime mortgages, dropping sales prices and rising inventories put the fear of failure in her mind that this wasn’t a good decision, so she bailed. But if one were to take a look at the regional numbers, a different story arises: inventory is dropping, days on market have tumbled compared to a year ago and in her market area sales prices are up 3 percent compared to the same time in 2006. The stars were aligned, but her feel-goodometer, wasn’t engaged. The second buyer catastrophe was a matter of over exuberance and celebrating too early. The house was situated just across the street from this renter. The family was so excited to stay in the same neighborhood, get a foreclosure property that barely needed any repairs and get the house for thousands under the going rate. The mortgage was in place and settlement date was approaching — so why not celebrate?
One vacation and final verification later, and the deal was hosed when the buyer spent the reserve money necessary for the house to go to settlement. Buyers can get great deals in today’s market, but they must not be overcome with unnecessary fear, or make financial decisions that could harm their financial standing.
I once had a buyer who was going to purchase his first home. He and his wife had borne three sons while living in the same apartment over 23 years. He could have used his Veterans Affairs status to purchase a property for no money out of his pocket whatsoever, but he didn’t understand how it worked. So once he did, he went after the house with a vengeance. Then he did it. One week before settlement he bought a truck — for the move, you understand. It nearly wrecked his buying power and the deal almost fell through.
When the contract is signed, the money is approved and settlement’s on the way — buyers should stand in place until the fat lady sings. Worrying about your decision and celebrating too early, can both ruin your dream.