8 Common Real Estate Deal Breakers By Jay MacDonald . www.Bankrate.com A disappearing ficus tree, tenants who won't budge, secrets under the dining room rug, a buyer-seller brawl, and a particularly contrary house cat are just a few of the last-minute deal breakers that have quashed or threatened real estate transactions across the country. Real estate professionals are trained in the art of shepherding a property sale from contract to closing. They counsel their buyers through every step of the lending process, mediate between buyer and seller while inspections and repairs are completed, and reassure nervous sellers that the buyers' financing will be sewn up tight by closing. And in 2004, realty agents were particularly busy. According to the National Association of Realtors, an estimated 6.75 million single-family homes were sold, up 10.66 percent from the 2003 record of 6.1 million. Not surprisingly, homeownership was at an all-time high of 69.2 percent as of the second quarter of 2004. But the best laid plans of buyers and sellers can and do go awry from time to time, especially amid the stress and fatigue of a pressure-cooker deal between highly motivated buyers and sellers. We surveyed five real estate agents from coast to coast to get their perspectives on the unforeseen last-minute surprises that can turn a good deal south. While deal breakers by their very nature are not typical, they do tend to arise from several common concerns. 1. Shaky financing The single most common deal breaker? The buyer's financing falls through. This is understandable, considering that a typical home sale actually involves two contracts: one between the buyer and seller, the other between the buyer and lender. Where big money is at stake and the ticking clock is exerting additional pressure, there is no such thing as a sure thing. Kristal Kraft, a relocation specialist with The Berkshire Group Realtors in Denver, Colo., had a deal fall through when the buyers failed to maintain the financial status upon which their loan was based. "The buyers spent way too much money before closing and when it came down to a few weeks before closing, they couldn't qualify for their loan anymore," she says. "That's typical of what can happen when people go under contract and then go out and buy a big new car and it changes their financial status. I always tell them, don't buy anything until after closing." Dick Pelosi, broker-agent with Century 21 Advance Realty in suburban Boston, says the old industry phrase "Buyers are liars" sometimes applies to their loan documents. "Getting prequalified or preapproved, that's easy to do," he says. "When it comes down to it, can they get the loan commitment? That's where it's always shaky. People lie on the application or they can't produce their pay stubs." 2. Lame lenders Increasingly problematic in these days of low mortgage rates are lenders who just don't get it together for closing. "You have a lot of people who got into the mortgage business during the refi boom who are not seasoned people and they're not paying attention, especially the nonconforming lenders," says Hugh James of Hugh James Realty in Chicago. "I've had them asking for changes to title and additional documentation at the closing table that they never asked for to begin with. "We had one the other day at the closing table that was asking for changes in the way the title commitment was written, even though they had had a title commitment for a week." Several real estate agents also shared tales of buyers who obtained financing only to be shocked at the final numbers at the closing table. 3. Fussy inspectors Every real estate agent's nightmare is a renegade inspector. Because most inspectors' livelihoods are based on referrals, their reports tend to be fair but not overly picky. Once in a while, however, they can be flat-out wrong, as Brook Ashley, a broker in Santa Barbara, Calif., found out the hard way. "I had an escrow fall out when an inspector said a beam was way too long and not structurally correct. After a lost escrow and $10,000 later, a structural engineer came in and said actually it's not one beam, but two beams, and they are joined twice as well as they need to be. But we lost the sale. "And I never used that inspector again. There doesn't seem to be any liability on his part. If we had done that, we would have lost our license." James had a sale fall through when the inspector turned up a sinking front porch that would have cost $5,000 to repair. It wasn't the inspector's fault; the homeowners didn't know about it either. "They're typically not deal killers unless there is something really ugly. In most cases, it's usually very small stuff, $200 here, $200 there, and can be easily negotiated." 4. Property condition We all want to know that the house we put a contract on is the same one we're purchasing at closing. That's why that final walk-through can be positively nerve-wracking. Case in point: Palm Beach, Fla., where the sale of even a glorious high-end property can hang on a walk-through, according to Paulette Koch, broker with The Corcoran Group Palm Beach. "I had a listing where the seller had redone a house magnificently, but underneath this gorgeous area rug under the dining room table, he hadn't put hardwood floor in. I was in shock, everyone was in shock, and if he had just told everyone it wouldn't have been the end of the world," she says. "I always tell my sellers, please tell me everything. When people have the knowledge upfront, they're usually fine with it. People just don't like surprises." Another common problem: Renters who somehow missed the memo. "I have a deal now that was supposed to close a week ago but the tenants still aren't out," says Pelosi. 5. Human factors Sometimes relationships become strained to the breaking point between contract and closing. James has had couples that had to close in separate rooms because they were no longer speaking to one another. Occasionally the friction between buyer and seller can set off fireworks, as in a bizarre culture clash he once witnessed. "This Chinese couple was buying new construction from a Scottish builder with a heavy brogue," says James. "The wife wanted the house and the husband didn't really want it, so he kept trying to find ways to kill it. "On the final walk-through that morning, he kept looking for anything he could nitpick over and finally he and the builder literally got into a physical fight. They really went to it and the police were called. They declined to press charges on each other. We closed the seller at 10 in the morning and the buyer at 2 in the afternoon so they wouldn't even pass in the hallway." Brook Ashley's quick thinking one morning saved a $4.5 million sale. "The buyer walked in and said that the seller had taken a potted ficus tree and they were going to cancel this morning's closing. I found a ficus, it couldn't have been more than a $70 ficus, but I found it at 8 o'clock in the morning. It could have just been a bluff, but it didn't feel like it to me." 6. Lien discharges Although liens on a property are usually discovered during the title search, on occasion they can slip through the cracks, oftentimes due to clerical errors. "The biggest problem is with lien discharges that haven't been recorded, payoffs on properties that get down to the wire and it's missed by an attorney," says Pelosi. "That sometimes happens the day before closing and you have to get an extension. The house still has liens against it because it was misrecorded by the attorney that handled the payoff in the very beginning. That happens a lot. The closing attorney for the lender usually finds it." 7. Homeowner associations Some homeowner associations, especially the powerful ones that rule urban co-ops and condominium buildings, can squirrel a sale at the last minute when the prospective buyer discovers unacceptable restrictions, such as no pets. "Our real estate contract now requires the seller to deliver the last six months' minutes of the homeowner association [meetings]," says Kraft. "Deals can fall through when the buyers find out there is something that the HOA has voted on that nobody told them about." 8. The X factor Award for strangest deal breaker goes to Brook Ashley. "I had a condo sale where we were in escrow with a little old lady whose only companion was a large, vicious, horrible Himalayan cat named Miss Kitty. She called to cancel escrow because she said she had talked to Miss Kitty and Miss Kitty said it wasn't the right thing to do. "We cancelled it on Miss Kitty's hiss. That was fun, telling the selling agent." Jay MacDonal is a contributing editor based in Mississippi

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