Several news outlets have reported that homebuyers are canceling real estate contracts at an elevated rate. We have previously posted about real estate transactions that do not proceed to closing. Certainly, in this bitterly cold winter that New Yorkers are enduring, some parties are getting cold feet.
Our attorneys have observed a higher rate of cancellations by contractor purchasers. Such entities do not intend to reside in the house and are objective and impersonal about the property. They look at the property from a mere financial perspective. Contractors want to purchase the property at a low cost, renovate it and then sell it to a person who will appreciate the improvements and eventually live in the house. Perhaps these contractor buyers are looking at the numbers more carefully once they have signed a contract. They visit the property multiple times and price the materials and tradesman costs necessary to complete the renovation. Tariffs imposed by the current Presidential administration have made some of the building materials substantially more costly and may make a contractor’s renovation plans financially impractical.
In general, purchasers in New York cannot readily cancel a contract in the same fashion as may be possible in other states. For instance, inspections typically take place before a contract is signed in New York. In other states, inspections occur after the contract is signed and allow for a buyer to cancel if conditions are unacceptable. As we have previously indicated, some of the reasons buyers cancel contracts in New York involve title issues that cannot be cleared, declination for a mortgage, or rejection by a cooperative board. A purchaser’s refusal to waive the mortgage contingency , contrary to a previous trend, may also cause the rate of contract cancellations to elevate should a purchaser be declined for a mortgage.
