Property under contract multiple times - red flag?

Question

I'm thinking of making an offer on a property but noticed its been under contract at least 3 times, and the contracts fell through. Is this a red flag that there's something seriously wrong with the property?

Syed H. · Answer

It happens.

I had 3 contracts fall through on the same property on a hot property in a very hot area. 1st person decided to go lease a new car 2 weeks before closing and that ruined their DTI. 2nd person wanted an unreasonable repair that I couldn't realistically facilitate (needed access to the neighbors property) and wouldn't take a credit. 3rd person had their home sale fall through, so they backed out and lost a part of their deposit. But it worked out for me bc I sold it for $30k over what I originally had it under contract to guy #1. So don't assume you have "leverage" just because of this.

There was nothing wrong with the property, just an unlucky number of contracts. However, this is rare. I've only had this happen once in 9 years. Usually you only deal with a maximum of 1 contract falling through.

David M. · Answer

@Victor Oben

Depends... 3x is a little extreme, but sometimes people just can’t get their financing (especially these days).  Otherwise, sometimes things some up in inspections and the buyers change their mind.

Probably best to walk away.  But first, call to find out if they have anything additional to disclose.  If it’s on the market with a Realtor, they have to disclose patent defects.  So, you gain the benefit of whatever other inspections have been done for free

Good luck

Steve Morris · Answer

Well, could be an issue or it could be 3 buyers that didn't qual.  Had one deal that fell out 4 times (2 were other 1031 chosen and 2 were non-serious buyers) and it closed OK.  In addition, in the past 100 days, banks are getting a lot tougher on investment property lending.

You could call the listing agent and ask, but you'd probably get more out of eyeballing it with a drive-by and comparing it to comps.

In sum, I guess I'd be aware, but I wouldn't let it cloud me from looking at it as an investment for returns - AND I'd get a full list of disclosures signed by seller and go thru it.

Jon Kelly · Answer

@Victor Oben Certainly a red flag and worth understanding why they fell through each time, but doesn't necessarily mean you should walk away from it. You may be able to purchase the property at a nice discount if the sellers are desperate to find a buyer

Moises R Cosme · Answer

Victor,

Evaluate the property, ignore what others have or have not done.  Make sure you have an inspection contingency, bad inspection results are the number one reason why properties go out of contract.  I love buying properties that fall out of contract - its a gift!!!  Buyers often overreact & Sellers often take low offers because they are emotionally tapped.

Joe S. · Answer

A property That falls out of contract could be a good deal for you. It could mean the seller is more motivated now to take a lower price as well. I have bought houses before where a previous potential buyer help lower the expectation of the seller. There is no reason to blackball the property just because it had three previous tire kickers. Get a great deal make sure you inspect it.

Loren Clive · Answer

The first home I bought was in and out of escrow several times. It was a short sale, and people couldn't get financing, got cold feet, etc. No material defects.

I got it for a great price and still own it. OP just go check it out!

Will Gaston · Answer

@Victor Oben yes, it's a red flag. But just adjust your offer accordingly.

(Almost) any property is worth buying at the right price.

Jon McCarron · Answer

@Victor Oben I would definitely find out why they went back on market. Then assess that reason , and see if that is a red flag for you.

Could be any number of reasons. Also, maybe use that info for your offer.

Good luck , hopefully it works out!

Property under contract multiple times - red flag?

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