One of the most common misconceptions among new home buyers and sellers is that getting a contract on a home is the hard part, and then it’s just paperwork and waiting to close. I wish that were the case, but there are so many factors that can kill a whole contract. Here are some of the worst case scenarios buyers and sellers encounter. Thankfully, a good realtor can guide you through this obstacle course!
Failing to Appraise
Not all home appraisals are created equal. Many appraisers are traveling all over the state and don’t really know your neighborhood. They try to gather all the info they need online, but a lack of local knowledge paired with a home that’s difficult to find recent comparable sales for can be a real disaster for buyer and seller.
If a home fails to appraise, that means your buyer can’t get full funding from the lenders unless someone proves the home is worth every penny they first offered. That’s where your realtor comes in. By providing the information the appraiser needs to understand local market trends and pricing, an expert can turn this deal killer around.
In-Ground Oil Tanks
I can’t even tell you how many times a week I talk to tank removal companies. Sometimes old tanks that sellers are unaware of come up in a metal sweep. Sometimes they know the tanks are there and assume that having had them officially decommissioned and filled many years ago is enough. Unfortunately, either way we have some work to do.
Today’s real estate climate (in NJ at least) is completely intolerant of underground tanks. The potential for an expensive soil remediation is more than buyers (and most mortgage companies) are willing to chance. It’s just a matter of whether you decide to have the tank removed now or after the buyer’s attorney demands it in a contract.
This wild card really isn’t under anyone’s control. I once had a very solid deal go from full speed ahead to totally cancelled in one tear-filled afternoon. The buyer wanted to surprise his wife with a new home and, instead, she surprised him by not even wanting to stay in America! Fortunately, there are some solid laws to protect sellers. Buyers have a few chances to get out of their contract before it becomes legally binding, but beyond that they need to mean it when they sign on the dotted line.
The first hurdle to pass is attorney review. This process of both sides agreeing on the contract can last for as little as three days or as long as it takes for everyone to agree. In those three days, if the buyer or seller becomes uncomfortable with negotiations, they are free to say “no deal” and walk away from the contract without any penalty. There is one catch, though. Say both attorneys agree on the final contract by the end of the second day. You might think that leaves one more day to cancel the deal, but that’s no longer the case. After a precedent setting lawsuit, it was decided that once the contract is finalized and agreed upon, the free period for cancelling the deal is officially over, no matter how few days have elapsed.
The remaining contingencies to be accounted for are home inspection issues, securing financing and, in some cases, the buyers selling their own home in order to afford the new one.
The home inspection contingency only applies to major issues when it comes down to cancelling the whole deal. If buyers think the paint could use a fresh coat, they can request a freshening to sweeten the deal, but they’re still legally on the hook for buying your home. However, if the main structure of the home has been eaten by termites, they are within their rights to request repairs, credits or walk away.
The mortgage contingency is just about securing financing. A good agent will make sure that your offers are all coming from well qualified buyers, but things still go wrong at the last minute for unforeseeable reasons.
The home sale contingency is a little sticky. If a buyer has listed their home, but doesn’t yet have a sale in place, we will usually go forward with negotiations but leave the seller with the right to continue receiving offers. The first buyer still has the first right of refusal if a new offer comes in before their home sells. It’s not ideal, but more often than not it works out just fine.
Failure to Disclose
Yes, it’s easier to sell a home that’s never had flooding or termites, but that doesn’t mean you shouldn’t disclose past problems when you’re selling. Your home’s history is the buyer’s business and so long as your repairs are on-the-level and your permits are closed out, you’ll be fine. Even if you’re not worried about the ethical implications of covering up past problems, you should be worried about the consequences if you get caught. Legally, you are on the hook even after you sell if it’s determined that you deliberately defrauded your home buyer. The deal could be reversed or you could be penalized financially.