Having been through a few sale fails over the last few months, I started to wonder what was going on, and how problems like this could potentially be avoided. By “sale fail”, I am referring to a situation where a property has gone under contract, a price agreed to by both Seller and Buyer, but then is terminated by one of the parties. What things commonly cause sale fails in the Missoula market, and how might we increase the chances of a smooth real estate transaction?
Sale Fails Due to Inspection Items:
Many of these types of situations are a direct result of information obtained concerning the condition of the home by way of a home inspection. If something is learned at an inspection, the next step is for the Buyer to provide the Seller with a Inspection Notice, which states (1) what the problems are; and (2) what remedies the Buyer wants in order to proceed with the purchase, or that the Buyer wants to terminate the transaction.
If the Buyer has a resolution to the problem on the Inspection Notice, then it is up to the Seller to either agree to the remedy, or the Seller can counter back with another solution, or simply decide to do nothing. Ultimately, as long as the Buyer is within the dates set out in the Buy-Sell Agreement, the Buyer has the right to terminate the real estate transaction for inspection issues.
So, as a Seller, how can you avoid surprises on an inspection?
Many Sellers are choosing to do a pre-listing home inspection in order to bring issues they may not be aware of to light prior to entering into a contract with a Buyer. In this scenario, a Seller can fix items they are able to. And, if they are not able to fix an item, they can disclose it on the property disclosure and see if the Buyer will either assume the problem, or see if there is a way that a fix can be achieved through the sale/purchase (an example would be paying for a new roof out of the closing proceeds). It seems that Buyers feel much more secure dealing with problems if they know about them upfront, and feel that the Seller is being forthright and honest with them.
Sale Fails Due to Financing Problems:
In this era, there have been more problems due to financing than we have been used to in the recent past. Part of this is due to the changes in the financing industry, and the regulations that have been placed on lenders. Every Buyer should be in to speak with their lender and get a pre-approval letter to provide with their offer to a Seller. As a Seller, if a Buyer is not able to produce this letter, you should use extreme caution in contracting with that Buyer.
What if it is a cash buyer?
Buyers who are paying cash for a property are wonderful, there is no denying it. If the cash exists, and is able to be used for a real estate purchase for the Buyer, this is a great situation. Again, however, it is imperative that, as a Seller, you are sure that the cash truly exists, and that it is in an account that allows it to be used for the purchase. We have handled this situation in the past by requiring that the Buyer provide us with a bank statement showing the balance, or letter from the institution where the money is held. We had a situation in the past where a Buyer came in to write an offer, and had verification of the existence of funds. However, it was in a trust fund that did not allow her to use it for the purchase of real estate without the agreement of others involved in the trust.
Selling and Buying a home can feel overwhelming at times. Our best suggestion is to avoid surprises as much as possible. Most problems are able to be fixed, and every home will have problems of varying degrees. The availability of information upfront can help avoid situations that might make a Buyer feel “spooked” about the property and want to terminate the transaction. Not all situations are fixable, and some issues are more important to some people than others. But, all in all, these are a few tips that might set the transaction off on the best foot forward.