Steps Homeowners Can Take To Avoid Contract Failures

When homebuyers agree in principle to purchase a property from an owner, there still exists a possibility that the deal could crumble if certain provisions of the contract are not met by either party.

A December 2011 assessment of pending home sales by the National Association of Realtors (NAR) has found that this figure has fallen slightly - 3.5 percent - from the 19-month high of 100.1 it logged in November. One potential reason for the slight drop-off in pending home sales is the high rate of contracts that fell through after a deal was agreed upon.

A home sale may fall through when a lender denies a borrower financing. For example, some foreign national loans could provide a buyer with a path to U.S. citizenship, so that application process could be quite intricate. For that reason, the likelihood of such an agreement falling through might be higher than if it were a conventional loan.

Despite this high rate of contract failures - one in every three Realtors reported a contract failure last month - many homebuyers and sellers have moved forward with deals after adjusting terms of a contract.

"Housing affordability conditions are too good to pass up," NAR chief economist Lawrence Yun said. "Our hope is lending conditions will gradually improve with sustained increases in closed existing-home sales."

To prevent contract failures from occurring in the first place, contingencies should be written into the sales contract that allow either party to abort the sale before it is fully completed. One way some buyers protect themselves from losing an agreement or having to pay unexpected costs to repair the property is for them to hire a mutually-agreed upon home inspection professional to survey the home for maladies that could affect their occupancy of the home.

Obama Proposes Plan To Make Mortgage Refinances More Accessible

Principal Reduction From FHFA Unlikely For Underwater Borrowers