Counting Chickens

Jane Douglass April 27, 2017

Counting Chickens

If your house has been on the market for any length of time, or if you need to sell because of an out-of-town job change, you may be tempted to accept a contingency offer on your home, or anticipate the completion of the sale.

You've already picked out the new house, planned the move, chosen paint colors in your head and mentally decorated for the holidays.

This is when that old saying, "Don't count your chicken's before they hatch" holds true.

No one wants to accept an offer on their current home and then be disappointed that the sale falls through. You want it to be a solid deal from the get go.

Before you jump at an offer, take the time to consider and anticipate why a sale may fall apart and take steps to mitigate your exposure. Your real estate professional is prepared for this, so listen to their advice when making decisions on accepting offers.

Here are some areas to watch for, any one of which can become a deal-breaker:

  1. Disappointing appraisals:  Sometimes, the appraisal can come in lower than expected. If it is lower than the list price it can delay the sale. A buyer's lender will only lend up to the property's value, so unless the buyer is willing to make up the difference in cash, or you're willing to lower your price, the deal may fall through. To protect yourself from a low appraisal, have your real estate professional give you a fair market value (FMV) quote that anticipates differences in the local market.If there is considerable difference between your FMV and the buyer's appraisal, you can request that the buyer get a second appraisal. Sometimes appraisers just miss stuff. But, sometime we believe our property is worth more that the market actually will bear.
  2. Lower than expected comparable home sales:  It is possible that your home is an exception. That means that there are no truly comparable homes within a specified distance of your home. In particular, this may be true of homes in rural developments, larger estates or completely remodeled and upgraded homes in older neighborhoods.In this case, ask for comparable home sales to include homes further away or with more similar upgrades and amenities.
  3. Documentation errors:  Misspelled names, transposed address numbers and a host of other potential errors can derail closing documents. Take the time to review each and every document as you see it the first time. Request corrections immediately and then review the new documents.
  4. Title insurance glitches:  If you inherited your home, have suffered a divorce, or bought the home through less than conventional means—a wrap-around loan or lease-option, for example—the title of your home may not correctly reflect your ownership.From the moment you begin considering selling your home, take the time to check on your title and any other paperwork, past loans, former liens, other possible glitches to a clear title. Be proactive so that you aren't surprised on closing day.
  5. Buyer financing problems:  It all comes down to money. As much as a buyer may love your home and want to buy it, if they don't have the financial means, they can't do it.Before agreeing to an offer, make sure the buyer is pre-qualified and pre-approved for the loan in the amount required to buy your home. You don't want to learn at the last minute that they buyer's loan is for $10,000 less than you're asking. If you've already made an offer or bought another home, you'll be tempted to take the lower amount, potentially losing thousands of dollars.
  6. Contingency offers:  When a buyer also has a home to sell, no amount of preparation on your part can save the sale of your home from imploding if the buyer's contingency falls through.If you need to sell your home quickly, DO NOT accept a contingency offer. On the other hand, if you have plenty of time to sell your home, locking in a buyer with a contingency might be the right call (if prices might appear to be falling, for example). Work with your real estate professional to determine if a contingency offer is right for your situation.
  7. Last-minute lender requests:  Sometimes it comes down to paperwork and sometimes it comes down to the lender wanting just one more piece of reassurance that the buyer can handle the mortgage. This may particularly be true of FHA, USDA and other government backed loans. Since the real estate bubble and banking collapse, the rules for certain loans have tightened.Refer back to #6. Make sure your buyer is pre-qualified and pre-approved, has the downpayment in the bank and is prepared to close in a timely manner. Let your agent work with their agent to make certain everything is in place before locking in that offer.

Your real estate advisor can help you navigate the process and inform you of possible pitfalls in accepting an offer with the potential to fall through.

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