Mistake #1: Ignore Contingencies
Sales Contracts can have any number of contingencies, all with time frames. Common contingencies include financing contingencies, home inspection contingencies and appraisal contingencies, and more. All of the “must-do” items for these contingencies have deadlines. It’s so important for buyer and seller, both, to take those timelines seriously.
If your contract requires you to do something before the sale, make sure you do it. If you’ve negotiated certain contingencies to be completed before settlement, take those time-frames seriously…the first words on the Maryland contract read: “time is of the essence”, which means time frames must be met, or the contract is voidable.
If repairs are in order after a home inspection, don’t do cheap patch-jobs and expect the buyers not to notice the fixes aren’t done properly. If repairs are not done to the specifications that buyer and seller have negotiated, there may not be time for a “re-do” before the deadlines, and the home purchase may be put in jeopardy. Make sure that the work is ordered in time to get completed before the contingency date.
Mistake #2: Use non-licensed professionals when the home inspection negotiation calls for a licensed professional.
Yes, I’ve seen it happen. On major systems of the home, as well as other items negotiated after the home inspection, a licensed repairman is essential. While the buyer has obvious interest in a quality repair, the seller should also be concerned for reasons of future liability. It seldom pays to go cheap on major fixes.
Mistake #3: Don’t bother to fix things that break
The last thing any seller needs is for the buyers to notice on the pre-closing walk-through that the home isn’t in the same condition as it was when they made their offer. When things fall apart in a home about to be purchased, sellers must make the repairs. If the furnace fails, get a professional to fix it, and inform the buyers that the work was done. When you fail to maintain the home, the buyers may lose confidence in your integrity and the condition of the home and have the right to back out of the sale. [See more linked below: What NOT to do on Your Way to Settlement]
Mistake #3: Get lax about deadlines
Treat response deadlines as sacrosanct. If you have 20 days to secure financing, don’t drag your feet in the paperwork process. If you have three days to accept or reject the home inspection addenda, make your decision within three days. By stalling and not responding within the time frames of the contract, you risk making the contract “voidable”. This term means that the other party has every right to void the contract.
You also can be at risk for NOT getting the terms and agreements you wanted to get. Those last initials that you need to seal the agreement of any particular items are important. Without them, you have no “meeting of the minds” and nothing that is enforceable.
If you’re selling, you must vacate the home, with all of your belongings, by the time of the walk-through, unless you’ve negotiated a rent-back with the buyer. When you turn over the keys at closing, you are finished.
Mistake #4: Underestimate Closing Costs
Your real estate agent should provide you with some form of Estimated Seller Net Sheet. You should have an estimate of closing costs from your lender as well. The exact closing costs will come later, with a Good Faith Estimate, but early on in the process, a seller should know what the estimated costs will be. Insist on it from your real estate agent…finding out the financial facts at the beginning of the process can save you from false expectations. [See the informative post linked below: How to Avoid Sticker Shock at the Closing Table]
Mistake #5: Refuse to negotiate any further
Once you’ve negotiated a price, it’s natural to calculate how much you’ll have when you walk away from the closing table. However, there can easily be more issues and expenses. Any problems uncovered during the home inspection will have to be fixed. The appraisal may come in at a price below what the buyers offered to pay. Be prepared to negotiate with the buyers over these issues and stay flexible about your “bottom line”.
Mistake #6: Hide liens from buyers
Did you neglect to mention that Uncle Sam has placed a tax lien on your home or you owe six months of homeowners association dues? The title search is going to turn up any liens filed on your house. To sell your house, you have to pay off the lien (or get the borrower to agree to pay it off). If you can do that with the sales proceeds, great. If not, the sale isn’t going to close.
Did you forget about that collection from last year? More times than we’d like to mention, we’ve seen an old collection sneak up and appear on the credit report, sending credit scores plummeting and rendering the buyer unable to qualify for the loan program they’ve applied for. [see the informative video below: Your Credit Score from Contract to Close]
It’s never a good idea to hide things. It will always come to the surface.
More Ghoulish Stories
For more about What NOT to Do on the Way to Settlement…consider these excellent articles from some fellow real estate bloggers:
- Bob Gordon, Boulder Colorado Real Estate Agent, and prolific blogger, writes some great advice in: What NOT To Do When Selling Your Home. Bob makes a great point: The Failure to Disclose can be a big mistake.
- Andrew Fortune, in his blog: Great Colorado Homes, has an extensive explanation of all the possible costs that a seller (or buyer) may encounter at closing. How to Avoid Sticker Shock at the Closing Table When Buying a House.
- First Rule of Negotiations: Don’t Let Emotions Rule
- Great tips from Credit Counselor Blair Warner: Your Credit Score Between Contract to Close:
Armed with knowledge of the process, sellers should not run into any of these issues during the time between contract to close. It helps to go into the home buying and home selling process with an understanding of the basic home buying process… a mind to play nicely with others.
The Highland Group – 301-401-5119