When real estate deals go bad

FILE PHOTO August Home Sales Jump 9.4%
Buying a home is a delicate transaction that can go horribly wrong and turn a seemingly easy and painless sale into the stuff of nightmares, says Forbes.com's Betsy Schiffmann.Tim Boyle / Getty Images file
/ Source: Forbes

Never have there been more home owners in the United States than there are right now.

The home ownership rate, which stood at 69.2 percent in the second quarter of 2004, is the highest it has ever been since the U.S. Census Bureau started tracking it in 1960. With interest rates on mortgages still hovering near 40-year lows — just below 6 percent, according to Washington D.C.-based trade group Mortgage Bankers Association of America — it could go higher still.

It may seem as if buying a house is a viable option for just about any American with a pulse, decent credit and stable income, but buying one's dream home isn't just about getting a good mortgage rate or finding a property that fits one's budget. Buying a home is a delicate transaction that can be ruined by an off-the-cuff remark about landscaping or renovations — any number of things can go horribly wrong which could turn a seemingly easy and painless sale into the stuff of nightmares.

Every real estate market is unique, and a deal may go badly in New York for a completely different reason than a deal would sour in Austin, Texas.

In Manhattan, for example, where much of the inventory for sale is controlled by finicky co-op boards, even if a buyer is financially qualified to buy an apartment, he or she may find out only after the contract is signed that the co-op board was nervous about the applicants age, lack of assets, or a yippy dog, and rejected the application.

Sometimes however, as Scottsdale, Ariz. broker Bob Hassett of Russ Lyon Realty points out, an aborted sale can benefit the sellers.

"You sometimes see these last-minute disasters benefit the seller — the same house that might have sold for $1.5 million 90 days ago, could sell for $1.6 million today," Hassett says.

Even if it is a benefit to the seller, a broken deal can be exhausting and time consuming. Sometimes, however, it can be anticipated and avoided altogether. In addition to Hassett, we also consulted real estate experts Neil Binder, co-founder of Manhattan real estate firm Bellmarc Realty, and Elizabeth Sample, a broker and director at Brown Harris Stevens, which has offices in Manhattan, the Hamptons and Palm Beach, to find the most common reasons for a sale to go bad.