The wide disparity between closed and pending sales is another reflection of just how dramatically the local real-estate market has changed. Before the bubble burst a couple of years ago, rapidly appreciating home values meant short sales were rare. And buyers who insisted on a home inspection often risked losing the house to another bidder.
A buyer makes an offer on a house. The seller accepts it.
That means there’s a sale, right?
Not necessarily. Not anymore.
That’s what Jeremy Eide of Keller Williams Realty’s Renton office learned last year after he listed a four-bedroom house in Maple Valley for sale. It was a “short sale,” certain to fetch less than the owners owed on the home.
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The first offer they accepted fell through. So did the second. The third contract was the charm, finally making it to closing.
A report released Tuesday suggests that a record share of King County home-sale agreements fell through last year.
Pending sales of single-family homes — offers accepted by owners — totaled more than 23,000 in 2009, the Northwest Multiple Listing Service said in its year-end summary.
But just 16,000 sales — about 70 percent — actually closed. The ratio was similar for condos, and for single-family homes in Snohomish County.
The gap has been much narrower historically. In 2008 the number of closed house sales in King County was about 85 percent of pending sales. In previous years it was above 90 percent.
“I have been shocked by the [recent] discrepancy,” said Mike Skahen, broker at Lake & Co. Real Estate in North Seattle.
He and other agents and brokers say fewer deals are closing because more of them are complex, time-consuming short sales. They fall through because the sellers’ lenders reject them, hoping to recoup more, or because buyers simply get tired of waiting for an answer.
Also, real-estate professionals say, sellers are accepting more offers contingent on a home inspection — only to have the buyers back out once they see the inspector’s report.
A change in the listing service’s definition of pending sales also has contributed to the growing gap.
The wide disparity between closed and pending sales is another reflection of just how dramatically the local real-estate market has changed.
Before the bubble burst a couple of years ago, rapidly appreciating home values meant short sales were rare. And buyers who insisted on a home inspection often risked losing the house to another bidder.
Eide, a short-sale specialist, listed the Maple Valley house last March. His clients, who had bought during the heady days of 2006, owed two lenders $363,000 on the property, far more than its current value.
What transpired over the next nine months is a case study in what can — and agents say often does — go wrong with short sales.
Eide said the home’s owners, a young couple, accepted an offer for $259,000 12 days after the house was listed. But, since that wouldn’t pay off their loans, their lenders would have had to agree.
The company holding the second mortgage did just that, accepting pennies on the dollar. It stood to get nothing if the house went to foreclosure.
But, after several months of silence, the primary lender rejected the offer in early summer, asking for $272,000. The buyers, out of patience, walked away.
So Eide listed the house again, advertising that the bank had signaled it would accept $272,000. The owners accepted an offer for that amount from a second buyer in early August — but at the last minute that buyer couldn’t qualify for financing, Eide said.
So the house went back on the market again. Buyer No. 3’s offer was accepted in late October, and the house finally closed, for $272,000, on Dec. 14, beating the clock; the house was scheduled to be sold this month at a foreclosure auction.
The Northwest Multiple Listing Service didn’t break out short sales in its report. But Skahen of Lake & Co. said about half never close. And in some outlying areas short sales make up half the market, he estimates.
“It’s going to be a delayed closing at best,” Skahen said, “and no sale at worst.”
Ron Sparks, managing vice president of Coldwell Banker Bain in Bellevue, said short sales make up about 10 percent of actively marketed homes on the Eastside, with bank-repossessed properties accounting for another 5 percent.
But they constitute a much higher percentage of pending sales, he said, attracting buyers hunting for bargains.
And while a standard sale takes about 45 days to close, Sparks said, short sales can take much longer: “Mostly we see people [buyers] walking away.”
Many backed out of short sales and started looking elsewhere last year because of the Nov. 30 closing deadline — later extended — for first-time buyers to claim an $8,000 federal tax credit, Sparks added.
Contingencies are back
There are other reasons for the growing gap between pending and closed sales. Skahen points to a fixer-upper home his office has listed near Green Lake.
The owners have accepted six offers on it over the past eight months, he said — all “subject to inspection.” Each time the deal has been recorded as a pending sale — and each time the buyer has pulled out once the inspection was done.
About one in five pending sales contingent on inspection falls through now, Skahen said. Not long ago, he said, the ratio was more like 1 in 20.
Buyers are pickier, said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University — and so are lenders. Tighter loan-underwriting standards also are undermining some sales, he said.
“Now they’re actually asking borrowers to prove that they have income,” Crellin said. “In 2006 and 2007, all they were asking for was proof that they were alive.”
Seattle prices up
Seattle-area home prices rose on a seasonally adjusted basis in November for the second straight month after 2 ½ years of declines, according to a closely watched index.
The Standard & Poor’s/Case-Shiller home-price index for Seattle rose 0.28 percent in November from October after a 0.44 percent bump the previous month. Before then, the index had dropped every month since peaking in May 2007.
The Case-Shiller index tracks home prices in 20 cities. The Seattle market, which includes King, Snohomish and Pierce counties, was one of 14 in which seasonally adjusted prices rose in November.
Eric Pryne: 206-464-2231 or firstname.lastname@example.org