Several months ago, we were excited at Coldwell Banker when, after reviewing home sales data, we discovered that pending sales were up--way up. Wow, perhaps we're recovering from the housing slump. (Pending sales are transactions in which there is mutual acceptance by buyer and seller of the terms of the sale of a home, but generally the transaction is contingent on a home inspection and financing. (There may be other contingincies). Until all contingencies are satisfied, the sale is pending. The sale is closed when it is officially recorded in the jurisdiction where the home physically exists.)

 

However, after doing additional analysis of home sales data over the past months, it became apparent that although pending sales are way up, actual sale closings of home, although they have improved, are not nearly as good as pending sales indicate. What's up?

 

Many pending sales of homes do not close if the inspection uncovers problems with the home. Sometimes, the buyer will want repairs to be made, or want the sale price to be reduced. The buyer may decide not to buy the home based on the results of the inspection, or the seller may not be willing to reduce the sales price or pay for repairs.

 

Many pending sales do not close because of problems in obtaining a mortgage. In the wake of so many failed mortgages, lenders are very cautious when approving a mortgage. a. Part of the financing process involves an appraisal. Some appraisals indicate that the home isn't worth what the buyer paid, and the loan is not approved. Part of tb. he financing process involves determining if the buyer has sufficient funds for the down payment, and if the buyer has sufficient income to make payments .

 

The financing process is managed by a loan officer who collects and processes all of the information, arranges the appraisal, and verifies funds and income. The loan oficer makes the detemination to go forward with the mortgage, or not.

 

However, there is a final review process, sort of a quality control step. Typically referred to as "underwriting". The underwriter does a "final" review of the mortgage load application. The underwriter verifies that the loan meets criteria for final approval. It is at this point where many mortgages are denied, and where pending sales do not close. And this often occurs within days of closing. When this happens, buyers must face the fact that they will not be buying the home. Sellers discover that they will not be selling their home. Sellers may have emptied the home of their belongings. Buyers may have moved out of the home they are selling. It can get ugly and very inconvenient. But the fact is that many pending sales are not closing, they end in a failed ("flipped") transaction.