An article on Trulia inspired me to create my own list of things that can go wrong in a real estate transactions, even if both parties have an Agreement of Sale and are very serious about completing the deal. So here goes -
The top 5 Deal Breakers - and how to avoid them -
1. Personal Property
I am one of those agents who urges the clients to keep personal property out of the negotiation - and out of the Agreement of Sale. If sellers are emotionally tied to certain items, replace them before putting the house on the market. Everything attached to the house sells with the house. If it has not been removed, put it in as an exclusion in the MLS. Points of contention are always TVs mounted to the wall, kitchen appliances, wall mounted speakers, chandeliers or window treatments. Putting things in perspective, the appliances are almost always a tiny fraction of the value of the property - are we being penny wise and pound foolish? On the buyers side, how can one determine the value of a used appliance? especially since it is sold as-is? When emotions are tied into the personal property - strong negotiation may result in - No Deal! Focus on bidding for the property and closer to settlement - you may request and separately negotiate a fair price for the personal items.
2. Failure to Disclose
Announcing to the world that you have had a multitude of roof leakages or pest control problems or a radon correction unit in the basement may seem like baring your soul, but the Sellers Disclosure is a very important part of the home sale process. I urge my sellers to take their time and be absolutely honest and truthful in filling out the form. What the buyers are looking for, is that all the issues were fixed by a certified professional who acquired the necessary permits. This applies for newly finished basements and decks or patios as well. You may have a contractor who tells you - if you get the permit, your taxes will go higher! However, you need that permit before your township will issue the 'Use and Occupancy' certificate at the time of sale. Better to state it all upfront rather than risk the buyer finding out later. Because later, even if the buyer finds something minor, they may start thinking about "what else" is wrong... that has not been disclosed, leading to - No Deal.
3. Appraisal
When mortgage lenders send in an appraiser, they know the Agreement of Sale price for that property. However, gone are the days when the appraisal magically came back at the sale price. It is all a function of the most recent sales in the neighborhood - so good luck if you have one of those highly upgraded property for sale in a market like the current one. Your sun room, exclusive Waterloo Gardens designed patio or fancy kitchen upgrades are not going to sway the appraisal even if the buyer is willing to pay the price. If the appraisal comes back lower than the sale price, the buyers cannot get a mortgage and would naturally negotiate - and if the seller is unwilling, the property is back on the market - No Deal. One option could be to get the property appraised before putting it on the market - however an appraisal is one individual's opinion of value, which may differ from one appraiser to the next. Also with Days on Market being so high these days - new comps may change the entire picture.
4. Inspections
Negotiations on inspection repairs and correction can get contentious. The buyers must understand that the point of the inspection is not to ask the seller to fix everything on that report - it is just a guideline for them to judge and know what they are purchasing. Request the repairs on items that seem like deal breakers and know that the rest will have to be fixed in the near future after moving in. Even new construction is not perfect - and often focuses on the disagreement while 99% of the property has been given the thumbs up. The negotiation on the house was already done - this is just a contingency for protection against any major problems. Sellers know that they risk the offer on the table if they refuse to fix any structural, safety and mechanical issues. If the buyer and seller cannot agree - No deal. Sellers with older homes may want to pre-inspect the properties, and show the report as a part of their marketing, to entice buyers. They may also offer home warranties that offer peace of mind. Sellers may also accept a low offer "as-is" - implying that the prospective buyer is welcome to do the inspections - but the seller has already hit rock bottom on their price and will not negotiate any further. No agreement on Inspection repairs - No Deal.
5. Mortgages
A preapproval is not a guarantee that the buyers will get a mortgage. When it comes time to commit, the mortgage may be denied for a plethora of reasons. Maybe the buyer failed to lock in a good interest rate, maybe some recent appliance purchases pushed their credit limit over the top, maybe the car they recently bought pushed their debt/income ratio beyond the acceptable range, sudden deposits of large sums to a bank account may be questioned....No mortgage - No Deal. To avoid this situation stay in close contact with your mortgage advisor, ask them a lot of questions, consult before making major purchases, make sure what documentation will be needed and whether you will be able to provide them - are your tax records clear?
Well - this is my list - what are your thoughts? Agents, would you please share your experiences? Buyers or Sellers missed a great deal and have comments on any of the above? Please share.
More articles like these in Real Estate Tips
Technorati tags - Downingtown Real Estate
The top 5 Deal Breakers - and how to avoid them -
1. Personal Property
I am one of those agents who urges the clients to keep personal property out of the negotiation - and out of the Agreement of Sale. If sellers are emotionally tied to certain items, replace them before putting the house on the market. Everything attached to the house sells with the house. If it has not been removed, put it in as an exclusion in the MLS. Points of contention are always TVs mounted to the wall, kitchen appliances, wall mounted speakers, chandeliers or window treatments. Putting things in perspective, the appliances are almost always a tiny fraction of the value of the property - are we being penny wise and pound foolish? On the buyers side, how can one determine the value of a used appliance? especially since it is sold as-is? When emotions are tied into the personal property - strong negotiation may result in - No Deal! Focus on bidding for the property and closer to settlement - you may request and separately negotiate a fair price for the personal items.
2. Failure to Disclose
Announcing to the world that you have had a multitude of roof leakages or pest control problems or a radon correction unit in the basement may seem like baring your soul, but the Sellers Disclosure is a very important part of the home sale process. I urge my sellers to take their time and be absolutely honest and truthful in filling out the form. What the buyers are looking for, is that all the issues were fixed by a certified professional who acquired the necessary permits. This applies for newly finished basements and decks or patios as well. You may have a contractor who tells you - if you get the permit, your taxes will go higher! However, you need that permit before your township will issue the 'Use and Occupancy' certificate at the time of sale. Better to state it all upfront rather than risk the buyer finding out later. Because later, even if the buyer finds something minor, they may start thinking about "what else" is wrong... that has not been disclosed, leading to - No Deal.
3. Appraisal
When mortgage lenders send in an appraiser, they know the Agreement of Sale price for that property. However, gone are the days when the appraisal magically came back at the sale price. It is all a function of the most recent sales in the neighborhood - so good luck if you have one of those highly upgraded property for sale in a market like the current one. Your sun room, exclusive Waterloo Gardens designed patio or fancy kitchen upgrades are not going to sway the appraisal even if the buyer is willing to pay the price. If the appraisal comes back lower than the sale price, the buyers cannot get a mortgage and would naturally negotiate - and if the seller is unwilling, the property is back on the market - No Deal. One option could be to get the property appraised before putting it on the market - however an appraisal is one individual's opinion of value, which may differ from one appraiser to the next. Also with Days on Market being so high these days - new comps may change the entire picture.
4. Inspections
Negotiations on inspection repairs and correction can get contentious. The buyers must understand that the point of the inspection is not to ask the seller to fix everything on that report - it is just a guideline for them to judge and know what they are purchasing. Request the repairs on items that seem like deal breakers and know that the rest will have to be fixed in the near future after moving in. Even new construction is not perfect - and often focuses on the disagreement while 99% of the property has been given the thumbs up. The negotiation on the house was already done - this is just a contingency for protection against any major problems. Sellers know that they risk the offer on the table if they refuse to fix any structural, safety and mechanical issues. If the buyer and seller cannot agree - No deal. Sellers with older homes may want to pre-inspect the properties, and show the report as a part of their marketing, to entice buyers. They may also offer home warranties that offer peace of mind. Sellers may also accept a low offer "as-is" - implying that the prospective buyer is welcome to do the inspections - but the seller has already hit rock bottom on their price and will not negotiate any further. No agreement on Inspection repairs - No Deal.
5. Mortgages
A preapproval is not a guarantee that the buyers will get a mortgage. When it comes time to commit, the mortgage may be denied for a plethora of reasons. Maybe the buyer failed to lock in a good interest rate, maybe some recent appliance purchases pushed their credit limit over the top, maybe the car they recently bought pushed their debt/income ratio beyond the acceptable range, sudden deposits of large sums to a bank account may be questioned....No mortgage - No Deal. To avoid this situation stay in close contact with your mortgage advisor, ask them a lot of questions, consult before making major purchases, make sure what documentation will be needed and whether you will be able to provide them - are your tax records clear?
Well - this is my list - what are your thoughts? Agents, would you please share your experiences? Buyers or Sellers missed a great deal and have comments on any of the above? Please share.
More articles like these in Real Estate Tips
Technorati tags - Downingtown Real Estate
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