Your buyers have found the home of their dreams, started packing their stuff and have mentally moved in when suddenly a challenge arises that could put a serious wrench in the home buying process. In today’s market, finding the home is only the start of a transaction that can have many stumbling blocks along the way.
1. Fixtures and Personal Property Pitfalls
I can’t tell you how many times I have seen deals falter because of disagreements over silly stuff like who gets the fireplace screen, the wall sconces or the appliances. For some buyers and sellers it can be difficult to distinguish between personal property and fixtures that come with the house. I once had someone try to take a beloved bathtub. Like the buyer wouldn’t notice?How to avoid it- Disputes over fixtures and personal property are common. It is important to educate your client about the difference between attached appliances and personal property but there are times when the lines get blurred. Wall mounted flat screen TVs are frequently an issue. If something is really special to a homeowner, recommend the sellers remove the item before you put the house on the market. Have a beloved chandelier? Replace it before you start showing the home with an acceptable alternative. If this isn’t possible, exclude it in MLS along with frequently confused items like that flat screen and make sure it is excluded at the time the offer is written as well. Buyers should investigate and include any items that are important to them.
2. The dreaded ex-wife/husband
There may be many reasons to dread an ex, but when it comes to selling a property, it can impact the sale of a home. We often see situations where the owners got divorced but he/she didn’t sign off. Finding this out late in the process can be problematic, especially when one of the parties no longer has a financial interest in selling the home. This scenario along with other clouds on the title can take time to clear. Bank owned properties often come with title issues such as unpaid garbage fines that can impact your closing.How to avoid it: Get a preliminary title report as soon as possible and be sure to ask your seller if there are any potential claims on the title.
3. Buyers Buying “Stuff”
Your first time home buyers are moving into their new home. They don’t have a washer and dryer of their own and the local appliance store is offering a smoking deal – get a store credit card, and save 15% on the purchase of your new appliances! Sound like a steal? It might just kill your deal.Time and again we counsel buyers not to make major purchases before close of escrow such as a new car or major appliances, and time and again, some appliance store has a great “deal” that kills the deal. Any major purchase the impacts your credit can also impact your loan being funded too.
How to avoid it: Regularly remind your buyers to wait on appliance purchases, new car purchases, furniture and more until they the loan has been funded. Tell them to put those credit cards away until the paperwork is recorded.
4. Failure To Disclose
“But Ginger, I didn’t know I had to disclose that the hill behind the house next door came down last spring. It didn’t impact my part of the hill.” I have had to fight with sellers to get them to disclose certain facts about their home, but it is almost always better to over share when it comes to disclosure. Inevitably, a neighbor is going to tell the prospective buyer about the sliding hill, the formerly moldy basement or about the meth lab around the corner.How to avoid it: When in doubt, disclose, disclose, disclose. Problems always seem much bigger when they are uncovered by a buyer after they are in contract.
5. Appraisal Nightmares
We went through a period of time when appraisals always magically came in at the offer price. For the most part, those times are gone. Appraisals are common deal breakers, and in many transactions, you don’t just have one. Review appraisals of the first appraisal are commonplace.How to avoid it: Make sure the lender has a qualified appraiser. When possible, accompany the appraiser on the inspection. Prepare your clients in advance that the purchase price may have to be renegotiated or a higher down payment may need to be brought in if the appraisal comes in low.
6. Who Owns What?
Your buyer thinks they are getting a 6000 square foot lot, only to find out that the fence is built on the neighboring property. Or they think they own the driveway, but it is really an easement on property owned by the cranky old neighbor. Lot lines, shared driveways, and fences are common stumbling blocks in a transaction.How to avoid it: Review the preliminary title report carefully. Legal descriptions aren’t always easy to read, but take the time and effort to have your client do so carefully. Have a title officer walk you through the title report to explain anything unusual. You should have your client go to the city/county authorities to review the items on file. If your client is concerned about the lot boundaries, have them perform a survey. While surveys can be costly, not knowing the actual boundaries can be costlier says Diana Rugh, a Realtor with David Lyng Real Estate, in Santa Cruz County, California. If a client is only concerned about one side of the property, she has her clients perform a partial survey for just the side in question.
7. No permits
In many areas, unpermitted additions or remodels have become serious deal killers. Many cities and towns have implemented pre-sale inspections to fill their dwindling coffers.How to avoid it: If city/town inspections are required, get them in advance, correct any required issues, and get your clearance. Some municipalities don’t operate on the swiftest timeline, so start as early as you can.
8. Unexpected inspection findings
I used to work with an inspector that other agents called the deal killer and honestly, he was. But he was also a lawsuit saver. When you have a client paying hundreds of thousands if not multiple millions of dollars for a house, they should know what they are buying. I call inspection periods the second negotiation phase of the deal. Inspections are common deal breakers when agreement cannot be reached over repairs. Sarah Stelmok, a Realtor in Fredericksburg, VA almost lost a deal when the home inspection uncovered numerous dead felines in a crawl space. Amazingly enough, she was able to hold it together, the felines were removed and she closed the deal.How to avoid it: Get inspections before the property is actively on the market. Buyers will probably still get their own, but at least you can resolve serious problems that may send a buyer running in advance. Repairs almost always cost a seller less if the buyer knows about it before they write their offer.
9. The lender changed the rules
This may be hard to imagine, but sometimes you are ready to rock and roll, you got your buyer pre-approved, not just pre-qualified, you are in contract and everything looks great until- poof- the lender changes the rules. Suddenly your buyer can’t meet the lender documentation requirements. This would have been helpful to know in advance.How to avoid it: Unfortunately, there is not much that can be done to avoid it other than working with a reputable mortgage broker or lender with a solid record of closing transactions. If you represent the buyer, you may want to recommend the buyer leave their loan contingency in place until the loan is funded. If market conditions don’t permit this, make sure your buyer is aware of the ramifications if the loan doesn’t fund.
10. The bank doesn’t care
If the property being purchased is a short sale, the bank is pretty much in charge and they simply don’t care about your timeline. I have heard of people celebrating two and three year anniversaries of working on a short sale. When it comes to short sale timelines, anything goes, or better yet- who knows?!How to avoid it: The best way to save a deal when a bank is involved is to make sure your buyers have appropriate expectations about the process. Educate them of the pitfalls of working with a bank. You might want to share the handout found in this article on the 5 Most Common Complaints of Short Sale and REO Buyers.
One of the best ways to avoid killing a deal- educating your clients about the entire home buying/selling process to make sure everyone is properly prepped goes a long way to holding deals together.