The Cost of a Failed House Deal
While I’m confident that this won’t be an issue for us, I just ran across an interesting article on the costs associated with a failed real estate deal. Depending on when the sale falls through, it can turn out to be quite costly for the buyer in particular, as the buyer is the one that incurs the most third-party fees. Setting aside the issue of earnest money for the moment, here’s a quick rundown of the fees that you won’t get back if you fail to seal the deal. Note that these costs may be incurred even if the deals falls through due to a failed contingency, such as problems with the inspection, or a failure to procure financing.
– Inspection fee
– Title search
– Survey
– Attorney fees
– Appraisal fee
– Financing costs (buying an extension on your rate lock)
– Document preparation fees
The bottom line is that a failed real estate deal can easily cost the buyer several thousand dollars. Of course, a failed deal could turn out to be quite costly for the seller, as well, as their house will have to go back on the market, and they could be stuck carrying two mortgages.
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[Source: CNN/Money]
Published on May 23rd, 2006 - 7 Comments
Filed under: Mortgages, Real Estate
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Yeah, things can get really ugly when a deal falls through but it shouldn’t be because of a failure to find financing…
Comment by jim — May 23rd 2006 @ 12:35 pmYou are telling me!
I spent not quite a year and a half trying to find a house. We went under contract once last September, but that fell through after inspections. The septic tank was basically non-existant, on top of a lot of smaller issues, and the seller wasn’t willing to work with us to get it fixed. We got our earnest money back, but we lost a bit over $800 on various fees and such.
Thankfully, last March we managed to find a house that was actually in good shape, so I bought it at the end of that month.
Comment by Blaine Moore — May 23rd 2006 @ 1:02 pmIt’s better to have it fall through and lose a few thousand than be stuck with a $200,000 nightmare.
Comment by FMF — May 23rd 2006 @ 1:03 pmOh, without a doubt, without a doubt. I am much happier where I am than where I would have been. Plus, now I don’t have a pool to worry about. It should be much easier to take care of the brook in my back yard!
Comment by Blaine Moore — May 24th 2006 @ 7:08 amYeah, I hear pools can be a real pain. We have a neighbor with a pool a couple doors down — which is GREAT.
Comment by FMF — May 24th 2006 @ 12:19 pmFailed deals can hurt, however if you have a real estate business (and this is open to how your interpet it), you can deduct those expenses. Granted, money is money and you still lose money but just something to keep in mind to at least have a positive from a negative.,
Comment by quote — Jun 18th 2006 @ 10:31 amIt’s always worth the extra time involved to make sure all costs are incurred on an “as needed” basis - i.e. not ordering appraisal until the house has passed inspections, and the borrower has full approval (with financing conditions on the property only), and not ordering a survey until an appraisal has been done. As stated these fees can add up so not incurring all at once before contingencies are met could save you money.
Comment by J Maish — Mar 13th 2007 @ 8:10 am