This Katy, TX Home Has Fallen Out of Contract Three Times. Should You Still Buy It?

You find a home in Katy, TX that checks almost every box. Then you look at the listing history and discover something that makes you hesitate: the home has gone under contract and returned to the market three times.

Would you still consider buying it?

My answer would not automatically be yes or no.

A home falling out of contract multiple times is a reason to investigate. It is not, by itself, proof that something is wrong with the house.

Real estate transactions fail to close for many reasons. Some involve the property. Others have very little to do with the property at all.

What matters to me as a buyer's REALTOR® is figuring out what information is available, identifying questions that deserve answers, and helping my client evaluate the property based on what we can actually establish rather than what we might assume from the listing history.

Does a Home Going Back on the Market Mean Something Is Wrong With It?

No. A home returning to the market means the previous transaction did not close. It does not, by itself, establish that there is a defect with the property.

A buyer may have experienced a financing problem. An inspection may have led to negotiations the parties could not resolve. An appraisal could have created an issue. A buyer's circumstances could have changed. There could have been a title concern, a contingency involving another property, or another contractual reason the transaction ended.

And depending on the circumstances, we may not be entitled to every detail surrounding a previous transaction.

That is why I would not tell a buyer, "Three contracts failed, so there must be something wrong with this house."

I also would not ignore the history.

Repeated failed transactions justify additional questions and careful due diligence.

Why Do Home Purchase Contracts Fall Apart?

There isn't one universal reason.

A residential transaction can fail to close because of issues involving the buyer, seller, property, financing, appraisal, title or terms of the transaction.

Potential reasons can include:

• A buyer being unable to obtain financing
• A change in the buyer's financial circumstances
• Inspection findings
• Repair negotiations that were not resolved
• An appraisal issue
• A title-related issue
• A survey or boundary concern
• HOA-related information or restrictions
• A buyer's other property not selling when required by the transaction
• Changes in a buyer's personal circumstances
• Disagreement over contractual terms or deadlines
• Termination under a contractual right available to one of the parties

The important point is that the fact that a contract terminated does not tell you why it terminated.

That's where the investigation begins.

Start With the Property's Listing History

When I'm evaluating a property with a buyer, I want to understand its actual market history rather than simply look at the current number of days on market.

Depending on the information available, we may look at:

• When the property was originally listed
• Previous list prices
• Price reductions
• When the property went under contract
• When it returned to active status
• Whether it was withdrawn, terminated or relisted
• Whether the listing information or disclosures changed
• Whether repairs or improvements appear to have been made

This can help us develop better questions.

For example, if a property went under contract and returned to the market quickly, that may lead to a different set of questions than a transaction that remained pending for several weeks before failing to close.

But the timeline is still evidence of what happened to the listing status, not necessarily evidence of why the transaction ended.

Ask What Information Is Available About the Previous Contracts

If a home has fallen out of contract multiple times, I want to ask the listing agent what information the seller is able and willing to provide regarding the previous transactions.

That does not mean we are automatically entitled to confidential information about previous buyers or negotiations.

It means we ask appropriate questions and evaluate whatever information is properly available to us.

Depending on the circumstances, useful questions might include:

• Was the termination related to the property?
• Were inspections performed?
• Were any material concerns identified?
• Did the seller make repairs after a previous contract terminated?
• Has the Seller's Disclosure Notice been updated?
• Is there additional documentation the seller is providing?
• Was there an appraisal-related issue?
• Are there known title, survey or HOA matters affecting the property?

We may receive useful answers. We may receive limited information. In some situations, the available information may lead to additional questions.

The goal is not to speculate beyond what we know.

Pay Close Attention to the Seller's Disclosure Notice

For a Texas resale property where a Seller's Disclosure Notice is required, I want my buyer to read it carefully.

That is true on every transaction, but a history of multiple failed contracts can make careful review even more important.

I would look for information concerning matters such as previous flooding or water penetration, structural conditions, roof issues, plumbing, electrical systems, HVAC equipment, previous repairs and other disclosed property conditions.

If information has changed since the home was originally listed, we also want to know whether updated disclosure information is available.

A disclosure is not a substitute for an inspection, and I do not want a buyer treating it as one.

It is one piece of the property's due-diligence picture.

Were Previous Inspections Performed?

If a property has been under contract several times, there's a reasonable possibility that one or more previous buyers had the home inspected.

That does not mean the current buyer automatically has a right to obtain those inspection reports.

Inspection reports are generally prepared for the client who hired the inspector, and their availability to someone else depends on the circumstances.

But we can ask whether the seller has received prior inspection information or whether any documentation is being made available.

More importantly, I would still recommend that my buyer consider obtaining their own independent inspection from an appropriately licensed inspector.

A previous buyer's inspection should not automatically replace the current buyer's own due diligence.

If the Seller Says Repairs Were Made, How Do We Evaluate Them?

Suppose we learn that a previous inspection identified a problem and the seller says it has now been repaired.

That's useful information, but I don't want to stop at, "The seller says it's fixed."

Depending on the issue, we may want to ask:

• Who performed the repair?
• Are invoices or receipts available?
• Was the work performed by a licensed professional when licensing was required?
• Were permits required and, if so, were they obtained?
• Is there a transferable warranty?
• Should the repair be evaluated during the buyer's inspection?
• Does an appropriate specialist need to evaluate the work?

A repaired condition may no longer be a significant concern.

Or the additional information may reveal that further investigation is appropriate.

Again, the answer comes from due diligence rather than assumptions.

Could an Appraisal Have Caused a Previous Transaction to Fail?

Possibly.

Appraisal issues can create problems in financed transactions, particularly when the parties cannot resolve a difference between the contract price and the property's appraised value.

But buyers should be careful about assuming that a previous appraisal establishes what the property is worth today or what another appraiser will conclude.

Market conditions, comparable sales, contract terms, property condition and the appraisal itself can all matter.

If information about a prior appraisal is properly available, it may be something to consider. But I still want to evaluate current comparable sales and the property's current asking price.

What If the Previous Buyer Simply Couldn't Get Financing?

This is an excellent example of why a failed contract does not necessarily indicate a problem with the home.

A buyer's financing can change during a transaction.

Employment, income, debt, credit, available funds, loan qualification or another financial issue can affect the buyer's ability to close.

If a previous transaction ended because that buyer could not obtain financing, that tells us very little by itself about whether the property is appropriate for the next buyer.

This is why I don't want clients drawing conclusions from the words "back on market" alone.

Could There Be a Title or Survey Problem?

Potentially, and this is another category that deserves investigation when appropriate.

Real estate transactions can encounter issues involving ownership, liens, probate, legal descriptions, easements, encroachments, surveys or other title-related matters.

Some issues can be resolved before closing. Others may require additional time or professional assistance.

As a REALTOR®, I am not an attorney and do not provide legal opinions regarding title matters. When a title or legal concern arises, I want the title company and, when appropriate, the parties' attorneys involved.

If a previous transaction encountered a title issue, the important question for the next buyer is whether that issue has been resolved or remains relevant to the proposed purchase.

Look at What Happened to the Price After Each Failed Contract

The property's pricing history can also be informative.

Did the seller put the home back on the market at the same price?

Did the seller reduce it?

Was there a substantial adjustment after one of the previous transactions?

Has the home now accumulated significantly more market exposure than competing properties?

None of those facts automatically tells us what offer a seller will accept.

But they can become part of the negotiation analysis.

A home that has repeatedly returned to the market may be viewed differently by buyers than a property that was listed yesterday. The seller may also have different priorities now than when the home first entered the market.

Multiple Failed Contracts Can Create an Opportunity, Too

This is the other side of the conversation.

Imagine that a home has gone under contract three times.

Many buyers may see the history and immediately move on because they assume there must be a serious problem.

But what if our investigation reveals that one buyer had a financing issue, another transaction ended for circumstances unrelated to a material property defect, and an issue discovered during another transaction was subsequently repaired and properly documented?

Now we may be looking at a property that has become psychologically less attractive to other buyers even though the available facts do not support the assumptions they are making.

That could create an opportunity.

It could also be a property we ultimately decide isn't worth pursuing.

My job isn't to talk you into the house or talk you out of it. My job is to help you gather and evaluate the available information so you can make an informed decision.

Should You Make a Lower Offer Because the Home Fell Out of Contract?

Not automatically.

The fact that a home returned to the market can be relevant to negotiation strategy, but it is only one factor.

I would also want to consider:

• Current comparable sales
• The home's condition
• Current competition
• Total market exposure
• Recent price changes
• The seller's apparent motivation, to the extent appropriately known
• Other available homes
• Any property-specific concerns we've identified
• The buyer's own priorities and risk tolerance

A seller does not have to accept a discounted offer simply because a previous contract terminated.

At the same time, repeated market exposure may affect the negotiating environment.

That's why I prefer a strategy based on the specific property rather than a blanket rule.

Should You Get Your Own Inspection Even If the House Was Already Inspected?

Yes, I would generally want my buyer to consider an independent inspection even if another buyer previously had the property inspected.

Your inspector works for you.

Conditions can change, inspectors can identify different issues, and the scope or quality of a previous inspection may not be known.

If repairs were performed after an earlier inspection, your inspection can also help evaluate the property's current observable condition.

Depending on what is discovered, additional evaluation by specialists may be appropriate.

What Should a Katy, TX Buyer Investigate Before Moving Forward?

If you're considering a Katy-area property that has returned to the market multiple times, I would organize the due diligence around several questions:

• What do we actually know? Separate documented information from assumptions.
• Why did the previous transactions end? Ask for whatever information is appropriately available.
• What does the seller's disclosure tell us? Read it carefully and look for updates.
• Were repairs performed? Ask for available documentation and evaluate the work appropriately.
• What does our own inspection reveal? Do not rely solely on someone else's due diligence.
• Does the current price make sense? Review current comparable sales and competing properties.
• Are there title, survey, HOA or other concerns? Bring in the appropriate professionals when needed.
• Does the home still fit your needs? A potential negotiating opportunity does not make the wrong house the right house.

What If You're Relocating to Katy and Can't Investigate Everything in Person?

This situation can feel even more uncomfortable for someone moving to Katy from another city or state.

You may be looking at listing photos, property history and documents from hundreds or thousands of miles away while trying to decide whether a home deserves a trip, an offer or further investigation.

That's where local representation becomes especially important.

I can help coordinate showings, communicate with the listing agent, review available property information with you within my role as your REALTOR®, coordinate inspections and other professionals, and help you understand how the property compares with other options in the Katy area.

Technology makes remote home shopping much easier, but I don't want a relocation buyer making a major decision based solely on photographs and an online listing history.

So, Would I Let My Buyer Purchase a Home That Fell Out of Contract Three Times?

Possibly.

I would not reject it solely because three previous contracts failed to close.

I also wouldn't shrug off that history.

I would investigate it.

If the available information, inspections, disclosures, pricing analysis and other due diligence give my buyer reasonable confidence in the property, the failed contracts may ultimately be less significant than they first appeared.

If our investigation uncovers concerns that materially change how the buyer views the property, then we factor those concerns into the decision.

That's what buyer representation should look like.

Not:

"Don't worry about it."

And not:

"Three buyers walked away, so run."

Instead:

"Let's find out what we can, evaluate what we know, bring in the right professionals where needed, and then decide whether this home still makes sense for you."

Buying a Home in Katy, TX?

Whether you're already in the Houston area or relocating to Katy, I can help you evaluate more than the photos and asking price.

Listing history, disclosures, inspections, repairs, comparable sales, property taxes, HOA information, MUD considerations and other property-specific factors can all become part of the due-diligence process.

If you've found a Katy-area home and something in its history is making you hesitate, send it to me. We can start by figuring out what information is available and what questions we should be asking.

Call or text me at 281-549-8099 or learn more about working with me at Jonathan.NestAhead.com.

Jonathan McNabb, REALTOR®
Broker/Owner, Nest Ahead
Katy, TX and Greater Houston
281-549-8099
Jonathan.NestAhead.com

This article is provided for general real estate education and is not legal, inspection, engineering, lending, appraisal, tax, title or other professional advice. Every property and transaction is different. Buyers should conduct appropriate due diligence and consult qualified inspectors, lenders, title professionals, attorneys and other professionals when applicable.