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Realtors see more buyers changing minds after signing contracts

The economic recovery is underway, and the real estate market is on the rebound. According to the National Association of Realtors, sales of existing homes have risen 9.3 percent just in the past year. These home sales increased another 7.8 percent from July to August of this year.

However, one obstacle to these home sales is becoming an impediment to the housing recovery. An independent research firm estimates that almost 18 percent of signed residential real estate contracts were canceled during the three-month period ending in July. The National Association of Realtors is reporting that 36 percent of realtors had contract issues in August, which is a prime month for residential real estate sales.

As the residential real estate market rebounds and more people purchase existing houses, more contracts will be canceled or have issues. A primary issue that results in a contract's cancellation is when a red flag is raised during an inspection or appraisal of a home that is under contract. In many cases, an appraiser will determine a lower value than the agreed purchase price between the buyer and seller.

In other instances, lending requirements are so tight that home buyers are having a difficult time qualifying for mortgages on homes on which they have already signed purchase agreements. Buyers should consider getting pre-approved for a mortgage so they know that they are qualified for a loan.

Buyers typically pay a deposit on a home when they sign a contract, and the deposit is held in escrow until the closing or forfeited if the buyers cancel. Buyers should ask real estate agents to include a contingency clause in the real estate contract, so if for some reason they cannot purchase the home, they will not lose the deposit.

Source: MarketWatch, "Canceled contracts dog real-estate recovery," AnnaMaria Andriotis, Sept. 19, 2012

We help buyers who are purchasing property or who have problems with sales contracts like the ones discussed in this post. If you would like to learn more about our Annapolis-based practice, please visit the Comprehensive Real Estate Services page of our website.

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