'Under contract' for months. Why?

Another reason for long "under agreement" periods - the purchase offer on the home is contingent on the sale of buyers current house. Seller extends the time from P&S to closing to allow for this sale and there may even be a contingency on the P&S that the deal is dead if closing is not excuted by a certain date. Penalties may or may not apply. Seller may be willing to do this in a down market since "a bird in the hand..". Buyer likely loses some negotiability on price due to the desire for the contingency in the contract, but lessening the risk of having to bridge two mortgages may be worth it.

I seem to remember reading about this, somewhere else, recently.

I think some of the larger real estate firms (such as Coldwell Banker) require sellers to fill out a form stating what they want to happen, when their homes go under agreement.

A seller can request his/her agent continue to show the property or a seller can request his/her agent stop showing it.

It doesn't seem to make any sense for a seller to stop showing it, for the reasons you mention.

Agents love to stop showing properties because it means less work. Plus, even today, most properties that go all the way to Purchase & Sale Contract will probably close. Anytime before P&S is signed, I'd say you should definitely leave your home listed as "Available".

Don't listen to your agent if he/she suggests otherwise.

John,

Thanks for the note. I read between the lines and found your recent post on the subject. I've updated the post with a link. In the future, feel free to include in your comments links to relevant posts on your blog.

My basic rule is that I'll allow links to topical content on other sites, but not to commercial content.

This is a sign of the times. In Metrowest, I see more than 25% of all homes that were once under agreement go back to being on the market. I assume that financing is to blame - it is a lot harder to get than people think.

Another reason is that banks want 20% down - on the BANK assessed home value. Not the town's assessment. And not 20% on the purchase price.

So, say the home sold for 500k, and is assessed at 400k (ridiculous I know but I am using simple numbers here to make my point). The bank wants to finance no more than 80% of 400k, which is 320k, which means there is a 180k downpayment required. Many buyers think "Oh, I only need 20% down of 500k, which is 100k". Then, buyers realize they cant afford the home after all, and then pull out.

Again, home prices in Mass are much more affordable, but more often than not are still not reflective of the current financing challenges out there. But its not that financing today is unfiar, its that it is going back to being reasonable. Today's housing market "weakness" is really normalization. Unfortunately, people wish to percieve 2005/2006 as "normal" and today as "weak".

And for some cases, it's "lazy" realtors who forget to update the system.
(I was one for 14 years, so experienced this factor firsthand)
Garbage in, garbage out. Thankfully most brokers tend to updating MLS properly

Why is it that it is always the real estate agents fault? I work for a company with
some of the hardest working and most caring realtors and none of them would
take a shortcut and sell their seller or their buyers short. The reason the homes
may not be shown after the home goes under contract is because MLS requires
a listing agent to "red flag" the property. If the property has a red flag it means
the seller would like to continue to show the home until Purchase and Sale.
Unfortunately the red flag alerts other realtors and their buyers the the home
has an accepted offer and very often the buyer will not want to look at it. In a
market where there is an abundance of inventory to look at who can blame the
buyers. It is NOT the fault of any lazy realtors. When are people going to begin to
understand that real estate agents are just trying to make a living just like every
one else. The difference is that realtors can work for a long period of time and
not realize a single penny. Give us a break!

Binyamin,

It's difficult to answer a question such as this without a more specific analysis of the properties in question. As a 25+ year veteran of the downtown Boston market, I can tell you the situation your reader describes is the exception to the norm whether in Boston or Newton. It's far too easy to generalize and even sensationalize these issues as a matter of an indifferent agent or a contract contingent on the sale of another property. I'd be curious what percentage of the total Newton under agreement market has been that way "for months." I would imagine it's a very small percentage.

In the current lending environment, the most likely reason for houses remaining under agreement for months is that even WITH a purchase and sale agreement, there is no guarantee a house will close depending not only on the buyer's particular credit history and overall financial picture but also issues the buyer has no control over like approaching a lender that deems the area they are buying in a "decling market." It's an arbitrary guideline that differs from one lender to another.

So, the reality is that many of these long standing under agreement contracts that haven't closed may in fact just reflect the extended time to process loans in the current environment and that a buyer left one lender to go to another and the seller calculated it was better to give them the extra time.

It do feel the frustration of seeing properties "under contract", but I have not followed it closely enough to determine how long they remain under contract. If it is happening, it is clear there can be many different causes, from securing financing, negotiating credits, etc. Buyers need to keep pursuing the properties of interest; sellers need make sure to keep showing the property until the deal is closed. As for sellers agents, failure to show during this period is their loss, and would seemingly hurt their sales.

Being a potential buyer in the Boston Metro area, do buyers often include a contingency that the seller not show the property during the period that the parties have to close? And more importantly, do sellers accept such contingencies? I am sure it depends on the market (buyer or seller), so at this point, I expect some sellers are willing to accept such a contingency.

I can't don't understand why a sales agent would even think about changing the listing status until the property went under contract. This is a good example of why having an experienced agent is crucial to any deal.

Regarding the " red flag" comment, I can understand that there are rules that govern MLS listings which influence how realtors perceive a property. However, I have always been amazed by realtors in our area who immediately place stickers or additonal signage on the For Sale signs posted on the lawns in front of properties announcing that a house is "under contract" before it has sold. They announce the potential sale by the realtor long before it happens (? advertising for the realtor), and accomplish nothing for the seller because they effectively take the house off the public radar. These extra signs then need to come down when the sale falls through.

Eric, I've never had a buyer request a property is not shown once it's under agreement. . In fact I think the average reasonable buyer guided by an experienced professional would completely understand a property remaining on the market until a Purchase and Sale Agreement is signed.

However, that said, if a seller wanted to be absolutely sure they have a solid transaction (relative to showing or not showing the property), they would actually wait until a buyer has obtained a financing commitment, adding a few more weeks to the property still being shown.

While well-intentioned and ostensibly helping the seller, the problem with a scenario of keeping a property on the market for weeks that is under an existing agreement is that in my experience, both the average buyer and perhaps even more so, the average agent, isn't particularly motivated to look at a property they believe (rightly or wrongly) is ultimately unattainable. In an ideal world, transparency would be the rule so that buyers could determine whether they should pass up other properties while waiting to see if the one under agreement becomes available again. But the reality is the contingencies in an existing contract are confidential so a prospective buyer has no way of gauging whether it's financial or personal issues of either the buyer or seller in the existing transaction.