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6 Real Estate Contract Killers You Need to Know About

Posted by Lisa Kohl on Monday, March 21st, 2016 at 10:27am

Real Estate Contract Killers You Need to Know About

Even after a real estate contract is signed, sealed and delivered the deal is far from over.

When buying a home or selling a home- there’s no such thing as a done deal until the transaction is funded and recorded with the county. As real estate agents, we’d love nothing more than to see clients dance their way to the closing table. The reality is that many real estate transactions hit the fan before close. Many times for reasons you might not have thought about.

Idaho is a single contract state. Unlike in some areas, the initial Purchase and Sale Agreement is the only contract that spells out the entire agreement. As a buyer, you are committing yourself before the seller has even seen your offer. As a seller, you can agree to the purchase price and terms or counter with your own price or terms. But once it’s signed by both parties, that’s it.

Get Out of Jail Free Card?

Home inspections are by far the most common reason any contract can crumble. Once an offer has been accepted, the next step is a home inspection. When most buyers tour a home and fall in love- they tend to be thinking about whether or not their dining room table will fit or the future placement of their furniture.

While these are all good things to consider when looking to purchase a home. Sometimes there can be underlying issues that are not apparent to the untrained eye. Things we don’t see before deciding to make an offer. For instance, mold in the attic or issues with a foundation usually aren’t caught until a home inspection. It may be defects with a potential property that a buyer simply can’t stomach or the unwillingness of the seller to make any repairs. If a compromise isn’t made, either with agreed upon repairs or a monetary credit- this will usually be the end of the road on a deal.

In Idaho, a buyer typically has five business days to complete their inspection and request any repairs. In turn the seller has three business days to respond. The way the Idaho real estate contract is written, failure to respond by either party is considered acceptance.

The inspection contingency is essentially a get out of jail free card for the buyer. You will never see a property inspection report that doesn’t have at least a few repair items. When the inevitable does happen, the buyer is under no obligation to complete the transaction. They can get out of the contract without any further explanation. Alternatively, they can move forward without requesting any repair, which almost never happens. Most likely the buyer will ask the seller to make the repairs or request a credit from the seller.

As a seller, you can save yourself a lot of grief by having the home pre-inspected. Many inspectors offer a pre-sale inspection for as little as $150-$250. At the very least take a look around the property for the most common home inspection items.

The Financing Contingency

There’s a great deal of work that happens before even shopping around for properties. This includes one of the most important, how is the buyer planning on paying for the home. In the ever-changing mortgage market- new rules and legislation is a thing of the norm. The approval process for a home loan can be nothing short of a marathon. Starting with credit scores and everything else from pay stubs to tax returns and bank statements.

Has the financing process already been initiated before making the offer? Has the buyer been pre-qualified or pre-approved? There is a big difference. Most times the beginning of the process will merely be stated information from the buyer. There is never any guarantee that a lender will loan.

The finance contingency is spelled out in the Purchase and Sale Agreement. As a seller, there are many red flags an experienced agent will help you watch out for. Idaho real estate contracts spell out the buyer's loan type, loan term, interest rate, down payment amount and an estimate of what the buyer will need to bring to closing. Plenty to consider.

Low Appraisals

If the buyer is receiving a loan it will always be contingent on the appraised value of the property being less than or equal to the agreed upon purchase price. The appraisal protects the lender in the event a borrower defaults on the loan.

In hot markets, we tend to see a very low supply of homes. In turn, this can provide some very aggressive pricing. Even if both the buyer and the seller agree to a sale price- the appraiser will work to fact check that number to ensure the value is indeed there.

When it comes to appraisals killing deals, condition can be a less common but very real factor. A good example of this would be when a buyer is using an FHA loan (common with first time home buyers). These loans require that the home is in relatively good condition. No soiled carpets, peeling paint or bad roofs. If a buyer uses a conventional loan which requires more money down, the lender will be slightly more forgiving on repairs.

If the appraisal comes in below the agreed purchase price, the buyer can break the contract. Typically what happens is, the seller will have to come down on the price or the buyer will have to make up the difference out of pocket. If the buyer and seller are unable to come to an agreement, then the contract simply dies. With bidding wars becoming commonplace, low appraisals are to be expected.

According to the National Association of Realtors, more than one out of five contracts get delayed before closing because of disagreements or problems connected with the appraisal. – seattletimes.com

Title Issues or Liens

There are so many wheels in motion when you buy or sell a home. From the real estate agents, inspectors, lenders and appraisers. There’s a group of folks that you may not typically think about, working behind the scenes on your home purchase. The title company and/or closing attorney.

In Idaho, attorneys are not involved in the transaction. The closing only consists of the title company and agents. In addition to facilitating the closing, the title company issues title insurance to the new owner of the home. It’s like any other insurance policy, but it pertains strictly to the title of your home. This means that when the property is transferred to the buyer at close the title to the home is free and clear of any liens or “clouds.”

Let’s say the previous owner had work done to the home, but didn’t pay the contractor for the services. The contractor would then be able to apply a lien on the property for the amount owed. Typically, a lien like this can get paid off at closing, but sometimes other title issues arise that require more legwork. For instance, unpaid debts, tax liens or judgments can be way more complicated to remove.

If the title company is not able to grant a free and clear title, they’re not able to issue title insurance. Which in turn will torpedo any contract.

The presence of a lien does not allow either party to get out of a real estate contract. The seller is required to pay off or otherwise remove the liens and provide clear title to the buyer of the property.

Buyer’s Remorse

Emotions run very high for home buyers, especially when they first get started. It’s not only an emotional experience, but is also one of the most expensive, which adds to the stress. This can be amplified when we are experiencing an unbalanced market where buyers outnumber available homes for sale.

In instances like this, a buyer may not have a whole lot of time to think about a property and extending an offer. In a fast moving market, a buyer may not have the weekend to think it over or a night to sleep on it. I would like to call this the “Buyers Rush.” It’s like a sense of euphoria, excitement and adrenaline all packaged into one.

From looking at the home, to drawing up the offer to anxiously waiting to hear back from the selling party on whether or not they accepted your offer- it’s all a lot to take in. Guess what? The seller has accepted your offer and now it’s really go time. The reality sets in, you are going to buy this house. Then your mind wanders, maybe it’s too far from work? Maybe I made a decision too quickly? Maybe I’m settling?

An experienced agent will help you go into the deal with a clear mindset. A lot is going to happen and there are only so many instances where if you decide the home isn’t for you- that you’d be able to keep your earnest money. Simply put, extending an offer to purchase a home is a big deal. It is a legally binding contract. It’s not like buying a pair of shoes that don’t quite fit right.

Seller’s Remorse

Seller’s remorse is rare, but it happens. Important life issues can occur during the sale of a home. A job loss or possibly a medical emergency. On the other hand, the seller rethinks the offer and wished they had held out for more. Or even received a higher offer on the home after they already accepted an offer.

It is very important to understand that real estate contracts are legally binding. The court system in most states, including Idaho takes these contracts very seriously and tend to favor the buyer. If found in violation, the judge will order the sale to take place at the originally agreed upon price and terms. This also includes attorneys’ fees and other costs the other party may have incurred.

How To Get Out Of A Real Estate Contract

I’m not a real estate attorney. If you find yourself having to break a real estate contract you should seek the legal advice of a licensed attorney. The key is to avoid getting to that point in the first place. At the end of the day, most real estate deals usually go through without a hitch. If you find yourself in a situation of needing to break a contract inform your Realtor immediately. An experienced agent can keep a situation like this from snowballing into a disaster.

I represented a seller in a particular situation where the buyer wanted to get out of the contract. The home had already been off the market for three weeks and we were only a week from closing. Working with the other agent we put together a solution that was a win-win. I negotiated keeping the buyer’s earnest money, rightfully so, and releasing the buyer from the contract. Before the deal was even resolved, I had found a new buyer that agreed to a higher purchase price than the original. The buyer was out of the contract and the seller was in a better financial position than before.

Put yourself in the other parties shoes. It may mean paying their costs up to this point in the transaction, but it sure beats the alternative.


Having an experienced real estate agent in your corner, you can avoid many of these real estate contract killers in the first place. You’re not just hiring the agent themselves, but you are hiring their whole network of tried and true experts. This is your team and your support system, helping pave the way for a smooth purchase or sale.

Boise Real Estate Agent Lisa Kohl

Lisa Kohl

Lisa Kohl is a full-time real estate professional in Boise, Idaho. Lisa’s experience as a Realtor helps her clients successfully complete real estate transactions without a hitch. Questions about this post, send us and message. We love receiving questions from our readers. They allow us to focus our content on issues that are important and relevant to sellers and buyers in Idaho.

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