What Exactly Happens After Your Home is Listed For Sale?

what-exactly-happens-after-your-home-is-listed-for-sale-featured

Once you’ve made the decision to sell your home, it’s time to find a real estate professional to list it on the market. Listing your home requires a few key tasks: signing a listing agreement contract with your chosen realtor, coming up with an appropriate listing price according to the current market, and prepping your home for showings.

Your home will likely be placed on the local Multiple Listing Service (MLS), which essentially lets all other agents in your area know that your home is available for sale. This is a very important place to have your home listed as it will allow your agent to distribute information about your home with prospective buyers, making it a powerful marketing tool.

But once your home is officially up on the market what happens next?

Lockbox Placed

If you want to maximize the number of buyers who visit your home while it’s on the market, you should absolutely have a lockbox. These tools are essential for allowing buyer agents to show your property to their buyer clients when you are not home. Instead of relying on your presence to let buyers in, they can visit your home with their agents at any time without you being there.

This may seem distressing at first, considering the fact that complete strangers will have access to your home, but it’s recommended that sellers vacate the premises when buyers have an appointment to view a listed property. This will allow prospective buyers to freely view the home without feeling self-conscious about the seller watching or listening to them as they scope the place out. Buyers will feel more at ease and free to open all doors and make comments without being worried about how the seller might react.

Keep in mind that only buyers who are accompanied by licensed agents will have access to your home. These agents will be making appointments to your agent’s office, at which point the lockbox code will be given. This helps to control who goes in and out of your home. You can always change the code every so often in order to minimize the odds of the code getting into the wrong hands.

Lockboxes provide the flexibility for buyers to access the property with their agents without sellers always having to be available to provide the key. It’s a win-win for all parties.

For Sale Sign Planted

what-exactly-happens-after-your-home-is-listed-for-sale-sign

One of the more obvious steps when listing a home on the market is placing a For Sale sign in the front yard. This is a classic way to advertise a property for sale and helps get the attention of people who pass by. Any interested buyers will be able to take down the contact information detailed on the sign and use that information to inquire about the home if they so choose.

Open House Held

While not mandatory, it is customary to hold an open house shortly after a home hits the market. It’s during the first few days of a listing going live that interest is very high. This period of peak interest should be taken advantage of, and an open house can provide the perfect opportunity for people who may or may not have an agent to visit your home.

Open houses usually take place on a weekend, either on a Saturday or Sunday, or both days. But before this public open house takes place, your agent may want to hold a broker’s open house first, usually during business hours at some point throughout the week. This event will allow listing agents in the area to come and check out the home to see if it would be of interest to their seller clients.

Just as with scheduled showings, it’s not advisable for sellers to be present during an open house, so make some plans to be out of the house for a few hours while your agent hosts it for you. If necessary, more than one public open house may be scheduled to maximize the attention your listing gets.

Cleanliness and Tidiness Maintained

what-exactly-happens-after-your-home-is-listed-for-sale-clean

As the seller, you’ll want to make sure that your home is in pristine condition. While you may have already prepped or even staged your home for the market before listing it, it’s still important to be diligent about tidying up and cleaning.

Throughout the selling process, it’s important that your home remains clean and free of your personal belongings. You just never know when a buyer will schedule a showing, and it may be when you’re out of the house and unable to do any last-minute cleaning or tidying up before buyers arrive. This is especially important if you’ve got young children or pets.

Your Agent’s Job Behind the Scenes

While it may seem challenging to have to constantly keep your home clean and frequently vacate your home to make way for buyer showings, your agent’s got a lot to do as well. There is plenty that goes on behind the scenes while a home is on the market.

Your agent will be tasked with continuously marketing your property, scheduling and coordinating buyer showings, following up on buyer feedback, communicating with buyer agents, and making any necessary adjustments if any issues pop up.

Traffic May Slow Down After Awhile

After the first week or two, interest in a listing tends to die down. Many sellers often become distressed about this and may wonder why no offers have come in after the initial rush. If this happens, it’s important to stay patient. A slowdown in traffic is normal and shouldn’t be anything to fret about, unless the slowdown lasts for weeks with no bites.

This brings us to our next point.

If No Offers Come in …

If the initial interest and excitement of a listing have died down and no offers are coming in after weeks on the market, it’s time to take action. If you’re in a hot market, your agent might take steps even earlier.

At this point, it’s important to meet with your agent and talk about what the potential problems may be and make any necessary adjustments to your listing strategy. The market tends to change very quickly, so even after a couple of weeks, it might be time to make some changes.

The first thing that should be looked at is the listing price. Perhaps it might be time to tweak it to ensure it falls in line with what the current market dictates. You might also want to consider whether any improvements should be made to the home that would boost buyer interest.

Your agent may also want to re-evaluate the target market and focus on a different group of buyers when marketing your home. Different marketing channels may also be looked into to boost the number of eyes on your property.

The Bottom Line

The ultimate goal after listing your home is to get a handsome offer, negotiate a deal, complete escrow, and close on time. But knowing what to expect after your home has been listed on the market can help you keep your nerves at bay and take the proper steps to maximize the odds of an effective sales process. If you’re adequately prepared, you can be an active participant in the successful sale of your home.

How to Prepare Your Home for an Inspection

how-to-prepare-your-home-for-an-inspection-featured

Before the deal on your home sale is sealed, a few contingencies will likely have to be fulfilled first, and that includes a home inspection.

Buyers typically include a home inspection contingency in their real estate contracts in order to provide them with the opportunity to scope out the home in greater detail. If there are any major issues with the place that the buyers didn’t notice before, they’ll likely find them at the inspection. Without this contingency, buyers could put themselves at risk of winding up with a money pit on their hands.

Home inspections are often a source of stress for sellers and their agents because anything can turn up that might send everyone back to the negotiating table. But there are some things that you can do as a seller to make sure the buyer’s home inspection is a success.

Ensure Free and Clear Access

The home inspector is going to want to check out all sorts of things, like the attic, crawl space, hot water heater, HVAC unit, electrical panel, and other areas in order to complete the inspection.

Instead of having to hop over objects and sift through debris, it would make the inspector’s job a lot easier if clear access was provided. If the inspector has trouble gaining access, certain items may not be included in the report.

Replace Burned-Out Light Bulbs

how-to-prepare-your-home-for-an-inspection-light-bulbs

The buyer will want you to replace all burned-out bulbs in the home that are noticed, so you might as well change them before the first prospective buyer even shows up.

Replace the Filters

Air filters on HVAC systems should ideally be checked, cleaned, or replaced every 3 to 6 months in order to ensure that they work properly. Filters that are filthy won’t be able to function properly and can overwork the system. Be sure to change the filters and leave service tags behind so the inspector can see when the system or unit was last serviced.

Check Your Grading

how-to-prepare-your-home-for-an-inspection-grading

If you notice that the soil around the perimeter of your home is sloping toward the exterior walls, this can create water issues. Tackle this problem right away to ensure the ground slopes away from the home to avoid any water contact with the foundation walls. You can be sure that this is something that the inspector will be looking for.

Clean Your Closets

The inspector is going to go through as much as possible, including the closets. Make it easier for the inspector to check out these little spaces by cleaning them out.

Fix Small Cracks

how-to-prepare-your-home-for-an-inspection-cracks

If there are any cracks in the foundation walls, window glass, or screens, try to have them fixed before the inspector’s visit.

Keep the Power On

If you’ve already vacated your home and moved into your new place, don’t cancel your utilities just yet. The inspector is going to want to turn on all the lights, power up the oven, test out the furnace and A/C, and so on. Without power, the inspector won’t be able to test some of the major items in your home which could inevitably cause unnecessary delay.

Deal With the Bugs

how-to-prepare-your-home-for-an-inspection-pests

Have you noticed any damage from termites, carpenter bees, ants, or any other unwanted pests in or around your home? If so, you better deal with this issue before your inspector starts snooping around, as these issues will undoubtedly be included in your report.

Clear the Clogs

If your sinks are slow to drain, have them fixed. If the issue is minor, you may be able to clear them with a drain clearing solution. More stubborn or serious clogs may warrant a visit from your plumber. The buyer isn’t going to want to take possession of a home with drains that are clogged.

Clear Your Yard

how-to-prepare-your-home-for-an-inspection-yard

Trim the bushes, cut down obtrusive tree branches, rake the leaves, move garbage cans out of the way, and clear out any other items from your property that could obstruct access and get in the way of a thorough exterior inspection of your home.

Get Your Repair Documents Out

If you’ve had any previous repairs done to your home, have the repair documents handy to show the inspector.

Provide Disclosures

how-to-prepare-your-home-for-an-inspection-disclosure

For any issues that you are unable to repair yourself, you’ll want to be sure to disclose them to the buyer. Things such as mold, asbestos, water damage, foundation problems, or any other issues with the home need to be communicated to the buyer. Otherwise, these issues will likely be discovered during the inspection and delay closing. Even worse, failure to disclose any known issues with your home could land you in hot water in the near future.

Make Plans To Be Out of the House For a Few Hours

Sellers should never be present when an inspection is taking place, if possible. Since inspections can take anywhere a few hours to complete, make some plans that will keep you out of the house during this time frame. In addition, keep your pet(s) at bay.

The Bottom Line

A home inspection can make or break your sale, so anything you can do to ensure a successful one should be done. Take the advice of your real estate professional in terms of what steps you can take to reduce the odds of a renegotiation – or worse, a dead deal.

California Governor Signs New Affordable Housing Legislation

california-governor-signs-new-affordable-housing-legislation-featured

The lack of affordable housing in California is an issue that continues to plague residents of the Golden State. The statewide median home price currently sits at $565,330 and is expected to rise well into 2018. That’s more than twice the national average of $253,500.

In fact, it’s anticipated that the run of increasing housing prices in California will last as long as five more years, with median prices on pace to surpass the record highs that were seen throughout the housing bubble a decade ago.

According to the California Association of Realtors (CAR), home prices are expected to increase another 4.2% in 2018 to $561,020. That number exceeds the record high of $560,270 from 2007. The number of single-family home sales also are expected to jump in 2018 – albeit at a slower pace – to 426,200, an increase of 1% from 2017.

Housing Construction and Sheltering the Homeless Among Issues Targeted

In response to this affordability crisis, Governor Jerry Brown recently signed housing legislation. Lawmakers approved 15 bills that would tackle the problem in various ways. One of the biggest issues being addressed by the new laws are the obstacles that homebuilders face when dealing with city councils.

Lack of fiscal incentives to approve housing from local governments, environmental policies, and the high cost to build in California have made it difficult for homebuilders to erect new homes to meet the growing demand for housing in the state. These factors have all contributed to the inability for housing starts to match housing demand for years, creating a dire housing affordability situation in California that has prompted the attention of lawmakers to do something about it.

california-governor-signs-new-affordable-housing-legislation-laws

More prominent of all the 15 bills signed is Bill SB 35, which addresses this issue of lack of home construction and development. The bill will allow housing developments to circumvent city councils where state-mandated housing objectives fail to be met.

In March 2015, the state Legislative Analyst’s Office put out a report which stated that California needs to increase homebuilding by 100,000 units per year in order to ensure housing costs would be at par with national growth rates, as well as to tackle community opposition and environmental laws that hinder homebuilding. The signing of Bill SB 35 is designed to address these concerns.

The new legislation is also addressing the need to provide shelter for the homeless across the state. Among all states in the U.S., California has the largest share of unsheltered homeless at 66.4%.

Wage and Employment Increases Don’t Seem to Impact the Affordability Crisis

The big question when it comes to California’s housing market is why the rate of price growth and sales isn’t higher, considering the fact that jobs and wages have been on the rise. The answer is rather simple: there is a major shortage of inventory and too few buyers who have the robust incomes to afford homes that are listed at sky-high prices. It’s a problem that has been ravaging the state’s housing market for the past four years.

Even sellers can suffer as a result of such a price-inflated environment. Despite experiencing huge price gains, they can be slapped with capital gains tax if they make a profit of more than $250,000 ($500,000 for married couples).

While the signing of this new legislation to address the housing affordability crisis in California, it’s just the start of a long road ahead until the issue is minimized. State Senator Scott Wiener promises that there will be more bills to come to continue tackling this growing problem that has made it extremely difficult for the average California resident to become a homeowner.

5 Things That Might Not Be Included When Buying a Home

5-things-that-might-not-be-included-when-buying-a-home-featured

You’ve fallen in love with a home and are ready to put in an offer. But before you do, are you entirely certain that all the items that you believe come with the home purchase will be left behind when you get the keys to the home?

One of the most frustrating and unpleasantly surprising things that buyers sometimes face is the realization that a particular item that was assumed to be part of the deal is actually not. Before you put all of your emotions into the home, make sure you ask all the necessary questions to identify exactly what comes with the home, and what doesn’t. You may be surprised about what might not necessarily be included in your home purchase.

1. Window Treatments

Even though window drapes can be easily removed, many buyers may assume that they come with the home. In fact, it’s quite common to expect that window treatments will stay with the buyer. 

Many homeowners have their window drapes custom-fitted for the width and length of their windows, so they might not necessarily fit the windows in another home. However, if these items are not specifically addressed in a real estate contract, the seller may still take them with them. It’s safer to assume that the seller will take the drapes with them to their new home once they vacate, unless the contract stipulates that they will be left behind.

The case for blinds might be a little different, as they are typically bolted down at the top and bottom of windows in place. Just to be sure whether or not they will stay, ask the seller or include them in the contract as part of the items to be left behind. Even if the seller rejects your request to have the blinds left behind, at least you’ll be made aware of it and even use them as a negotiating tool.

2. TV Mounts

5-things-that-might-not-be-included-when-buying-a-home-mount

The case of TV mounts can be a tricky one. Many homeowners have TV mounts bolted to their walls to accommodate for their flat-screen televisions. Many hang them above fireplaces to free up wall space in other parts of the room. Sellers typically take their TVs with them, but taking the mounts that hang them is another story.

If TV mounts are removed from the wall, they will leave behind a large hole that will need to be fixed. If the seller insists on taking the TV mount, this fact should be stipulated in the contract and the necessary steps should be taken to repair the hole before you get the keys to your new home.

This is often a source of dispute because TVs are considered personal property and therefore tend to go with the seller once they leave. But many times the mounts and brackets that hang them are thought to be part of the television package and are therefore also personal property, according to sellers, while many buyers may assume the opposite.

Regardless, buyers should never make assumptions, even if they may technically be right.

3. Appliances

It might be customary for sellers to leave their fridge or oven behind, it’s not necessarily required. These pieces might be huge and heavy, and therefore tough to lug around, but they’re not exactly considered fixtures because they’re not permanently attached to the property. They can simply be unplugged and transferred from one location to another.

The dishwasher and washing machine, on the other hand, can cause some confusion since they are attached to the plumbing. As such, many buyers might assume that they are fixtures that should remain with the property. An argument can be made either way in this scenario.

In most markets, it’s customary for appliances to be left behind with a sale, though sometimes sellers may want to discuss them at the negotiating table. As a buyer, you should make sure to clearly list all appliances in the home, along with their serial numbers, to ensure that they will indeed be left behind.

4. Hot Tub

5-things-that-might-not-be-included-when-buying-a-home-hot-tub

People can argue either way about the status of a hot tub. Some may say that because it is a free-standing, above-ground feature that can be disconnected from its heat source, it is personal property. As such, it should go with the seller unless they choose to do otherwise. Others may argue that because a hot tub is attached to a plumbing source and is located outside of the home, it’s considered a fixture and should be left behind.

As with other items of potential confusion, a hot tub should be listed in the items to be left behind on the contract.

5. Lights

Believe it or not, some sellers choose to take their chandeliers, pendant lights, and wall sconces with them when they move. The case of whether or not light fixtures should stay or can be taken by the seller is up for debate, but it’s customary for these items to stay with a home after it’s been sold.

That said, some homeowners actually want to take some light fixtures with them, and they sometimes neglect to stipulate this in their contracts. Others replace the light fixture and take the original with them, sometimes informing the buyer and other times doing so without disclosure. Either way, any seller who chooses to take certain items that may be considered fixtures should clearly identify their intentions in the contract.

What Constitutes a ‘Fixture’?

Typically, a home purchase should include anything that is considered a ‘fixture’, which is an item that is attached to the home. Fixtures are deemed to be part of the property, and as such, they are left behind when the seller vacates and the buyer takes possession.

Unfortunately, fixtures are often the source of disputes among buyers and sellers. Some fixtures are obvious, while others may not be. That said, a fixture is considered something that, if detached, would cause damage to the property. Things that are bolted down or part of the construction of the property are considered fixtures that should stick with the property after title changes hands, as they cannot be easily removed.

Despite this definition, fixtures are still a major source of confusion and dispute among buyers and sellers.

The Bottom Line

Sellers should absolutely be as detailed as possible regarding the items they intend to take with them and which items will remain with the property. At the same time, buyers should also take it upon themselves to ask questions and make their own inclusions in their real estate contacts to ensure specific items will be left behind. Being as specific as possible about the items to be included is the best way to avoid confusion and disappointment.

What’s the Difference Between an APR and Mortgage Interest Rate?

whats-the-difference-between-an-apr-and-mortgage-interest-rate-featured

When you take out a mortgage, you’ll be paying an interest portion on each monthly payment in addition to contributing to the principal. The mortgage rate that you’re quoted makes a big difference in the overall cost of your mortgage.

But what about the annual percentage rate (APR)? How does this rate differ from the mortgage rate, and more importantly, how will it affect the costs associated with your mortgage?

Understanding the difference between these two crucial rates could save you a ton of money on your home loan.

What is a Mortgage Interest Rate?

The mortgage interest rate is a percentage of your loan amount that you are charged for borrowing the funds needed to make a home purchase. This is an essential component that you should use to compare different mortgages from different lenders.

It’s also an important factor to look at to get a basic understanding of how much your monthly mortgage payments will be. Essentially, the interest rate is the base rate before any additional fees and charges are tacked on.

What is the Annual Percentage Rate (APR)?

Mortgages can often be confusing. With so many different quotes involving so many different numbers, it can be tough to decipher which home loan is better or more affordable than the other. Some quotes you obtain could include specific costs that you’ll likely pay, while some may not.

Most of the time lenders are very upfront and detailed with the quotes they offer to borrowers. However, it can still be hard to tell which one is the most cost-effective since interest rates and fees will differ.

The APR can help you compare apples to apples by taking all costs related to borrowing into consideration. It includes the interest rate as described above, but also various other fees that borrowers are charged when they take out a mortgage. This includes buy-down points, loan origination fees, mortgage insurance, and the majority of closing costs.

The APR is therefore usually (but not necessarily always) higher than the mortgage interest rate because of all these extra fees added on. As such, the APR provides a more in-depth idea of how expensive a home loan will be, as it is an all-encompassing rate that factors in all associated mortgage fees.

Both the interest rate and APR are clearly outlined in loan documents as per the Truth in Lending Act to allow borrowers to make an informed decision before settling on a mortgage. The primary difference between the interest rate and APR is that the interest rate calculates the monthly payment, while the APR calculates the entire cost of the mortgage.

Generally speaking, a lower APR means the total cost of the loan is lower.

whats-the-difference-between-an-apr-and-mortgage-interest-rate-apr

APR is Not Without its Weaknesses

The APR certainly provides borrowers with a solid starting point to compare mortgages, but it’s not free of drawbacks. The biggest flaw with the APR arises when different lenders apply different fee structures in their APR calculations for their loan programs. That’s why it’s important to inquire with the lender regarding what is and is not included in the APR.

In addition, APRs might be tricky when comparing adjustable-rate mortgage (ARM) loans. For these types of mortgages, the APR doesn’t reflect the maximum interest rate of the home loan. The interest rate for an ARM may fluctuate at any time, which makes it a lot more challenging to compare the APRs of ARMs to fixed-rate mortgages.

Lastly, if you ever plan to pay down your home loan early, refinance at some point, or move in the near future, an ARM comparison might not be as useful as comparing the interest rate. That’s because the APR is a representation of the entire cost of the borrowing over the life of the mortgage.

The APR spreads out the fees that are paid upfront over the life of the mortgage, so the comparison of APR is only useful if you’re planning to keep the home loan for its full length.

Since the majority of borrowers don’t hold onto their mortgage for the full amortization period, the APR can make it tough to decipher which mortgage is better than the other. If you plan to stay put for 30 years, it might make sense to choose a mortgage with the lowest APR because you’ll pay the lowest amount for your home.

But if you’re planning to move or refinance within a few short years, it might make more sense to get a higher interest rate and pay fewer upfront fees with a higher APR because the overall costs over the first little while will be less.

The Bottom Line

Comparing different mortgages with different interest rates and APRs can be rather confusing for the average borrower. Instead of tackling this job on your own, you might be better off working with a mortgage specialist who will be able to shop around for you and find the mortgage package that is most affordable for your particular circumstances.

What Can Go Wrong if the Buyer Takes Early Possession?

what-can-go-wrong-if-the-buyer-takes-early-possession-featured

Before buyers move into their new homes, escrow needs to close. That means all conditions and contingencies in the contract need to be met within a certain time frame, and all necessary documents must be signed by the closing date specified in the purchase agreement. At that point, buyers will get the keys to their new abode and are free to move in.

But while this is the case in just about every real estate deal, there is the odd time when a buyer may request to take possession before closing arrives. Whether it’s because the home they just sold hasn’t closed yet or their rental lease expires a few days before your closing date, some buyers may ask to move into your home before the deal is sealed for good.

So what’s the harm in letting the buyer claim a stake in your home before escrow closes?

Plenty. If you allow a buyer to take early possession of your home before all contingencies have cleared and title has yet to be transferred, you could be vulnerable to significant issues.

Here are just some of the problems you can run into if the buyer moves in before your contract’s closing date arrives.

Your Insurance Policy May Not Cover Issues

Until escrow actually closes and the title has been transferred over to the buyer, the home is still yours, which means your insurance policy should still be in effect. If everything goes smoothly, there will be no need to file a claim. But what happens when there’s been some damage done to the property as result of the buyer? What if the buyer or someone that they’ve invited gets hurt in your home? Whose responsibility will it be?

Liability will fall on you, since the buyer will not have any property insurance on the home until their name is on title. In the meantime, your policy is still in effect. But complications can arise when filing a claim because someone else is living there even though the insurance coverage is still under your name.

Changes to the Property Could Cause Problems

If the buyer moves in early and starts making changes to the place and fixing things up, problems can certainly arise as a result. If the buyer starts dabbling in some construction to remodel the bathroom, change the layout of the basement, or even install some light fixtures, you could be liable if they sustain an injury in the process.

Not only that, if any changes are made without a permit, you could be in the dog’s house with your local building department since the home is still titled to you.

what-can-go-wrong-if-the-buyer-takes-early-possession-delay

Closing Could Drag On

Ideally, your deal will close on the date specified and agreed upon in your contract. However, there may be certain obstacles that can stand in the way of a timely closing. Maybe there’s an issue with the title that needs to be ironed out, or perhaps there was a problem with the appraisal. Maybe the proceeds of the sale are stuck in escrow or maybe there’s a disparity in closing numbers.

Whatever the case may be, a delay in closing means the buyers get to live in your home for a longer period before you see any proceeds from the sale. You may even be left wondering if the deal will ever close at all, which brings us to our next point.

The Sale Falls Through

What happens if the deal doesn’t go through at all? What if the issues met during escrow are never resolved? Should this happen, you’ll be put in the position to evict the buyers from your home. Meanwhile, they could have already made changes to the property (that you may or may not like) or may have done some damage after realizing the sale fell through.

At this point, you’ll have to cover the costs of having your home brought back to pristine condition, after having had to deal with kicking the buyers out. You’ll then have to spend more time and money to market your home all over again and cover all the carrying costs (such as mortgage payments, property taxes, homeowners insurance, etc) until you’re able to find a new willing buyer. It’s possible that the price you’re offered the second time around is lower than what you were offered from the first buyer.

Any way you look at it, having the deal fall through after you’ve allowed the buyer to move into your home is messy all around.

The Bottom Line

Until the title has been transferred and you get the full proceeds of the sale, that house is still yours. That means any issues related to it – even if they are caused by the buyer – are your responsibility. Rarely is it wise to allow a buyer to move in before the closing date arrives. If you must, make sure that you speak with a real estate lawyer and draft up a solid contract that will give you an easy way out if anything goes awry.

What Can Sellers Do if the Buyer Backs Out of the Deal?

what-can-sellers-do-if-the-buyer-backs-out-of-the-deal-featured

The selling process can definitely be intense and even overwhelming at times. After all, we’re talking about a massive investment. There are plenty of efforts made to find the right buyer who is qualified and interested in buying your home, but even after you think you’ve found the right buyer that will see the deal through, there’s still a chance that they may back out.

Now what?

If your buyer backs out at the last minute, it could throw a wrench in your plans, especially if you’ve already bought another house and worked out both closing dates to coincide with one another. Luckily, there are steps you can take to minimize the repercussions, but you’ve got to move quickly to lessen the blow.

Go Over Your Contract First

If the buyer decides to back out of the deal, the first thing you need to do is pull out your contract and go over it in great detail. Check to see if there are any contingencies included that address what you can do if the buyer decides not to go through with the deal as planned.

It may be that the buyer is in breach of the contract if they choose not to go through with it. In that case, you may want to talk to a real estate lawyer to see what type of recourse you’re eligible for or what avenues you can take to be compensated for your inconveniences.

what-can-sellers-do-if-the-buyer-backs-out-of-the-deal-featured-contract

Find Out What Happens With the Deposit Money

The majority of real estate contracts require that buyers provide an earnest deposit to the seller which goes towards the purchase price of the home. This is meant to be a sign of good faith on the part of the buyer showing that they’re serious about buying the home. This money is held in escrow until the deal closes.

If the buyer backs out of the deal with no contingency in the contract that allows them to do so without penalty, you may be able to keep that deposit. However, some circumstances may allow the buyer to take the deposit back, so you will definitely have to check your purchase agreement.

Consider Taking the Buyer to Court

While not an ideal situation, you may be able to sue the buyer and receive some sort of financial compensation for your troubles. Keep in mind that if your purchase agreement stipulates that keeping the deposit is considered the same as liquidated damages, going to court is probably not an option. However, if the contract doesn’t specify any limits on your ability to take the buyer to court if they breach the contract, you may file a lawsuit.

This will help you to recover any damages associated with having to put your home back on the market and possibly sell for less money that what your original buyer agreed to pay. You may also choose to ask a judge to force the buyer to follow through with the deal. In the case of the latter, you’ll have to show that not only is the contract is reasonable, it needs to be enforceable too.

The main type of monetary recovery that you may recoup if your buyer is in breach of the contract is the difference in price less the market value of the property at the time of breach. The judge will typically look at what the home ends up selling for – in a reasonable amount of time – after the buyer breaches the contract.

For instance, if the buyer originally agreed to pay $700,000 for the home and you end up selling for $600,000, you may be entitled to $100,000. You might also be eligible to recover expenses associated with having to re-market the property to find a new buyer, as well as the costs associated with maintaining the property if you’ve already moved into a new home.

The Bottom Line

It’s incredibly frustrating when a buyer backs out of a real estate deal, especially considering all the time spent marketing the property to find the right buyer, negotiating the offer, and waiting to go through escrow. Having to start right back at square one can certainly be a highly annoying position to be put in. At this point, you’ve got some options. Just be sure that whatever option you choose is done with the sound advice of a real estate professional.

What Are Reasonable Requests to Make After a Home Inspection?

what-are-reasonable-requests-to-make-after-a-home-inspection-featured

The odds of problems being uncovered during a home inspection are pretty high, no matter how minor. Just about every house has some issues, even new ones.

It’s pretty common for buyers to make repair requests with the seller, especially if certain problems are more significant than others. But while some requests may be reasonable, others are not.

Here are a few issues that are serious enough to be negotiated with the seller and may warrant a reduction in price.

Leaky Roof

A roof doesn’t last forever. In fact, roofs typically only last a decade or two, depending on the quality of the material being used. Lack of maintenance and inclement weather can effectively reduce the lifespan of a roof, which can compromise its integrity and negatively impact its ability to keep water and moisture out of the home.

If the property you are buying has a faulty roof, that’s reason enough to ask for some repairs. Replacing a roof is a big endeavor, and it’s expensive too. If the seller is aware that the roof requires replacement, it should be factored into the listing price. If not, that warrants a trip back to the negotiating table.

Failing HVAC System

what-are-reasonable-requests-to-make-after-a-home-inspection-hvac

It’s certainly reasonable to ask for assurance that the home’s HVAC system is working properly. The home inspection report will typically involve checking out the condition of this system. If it is discovered that the A/C unit is failing, the ductwork is blocked, or the thermostat isn’t working, for instance, the seller should have no problem with your request to either have it fixed or offer a credit to cover the costs associated with you dealing with the issue after closing. 

Water Damage

Not only is water damage unsightly, it can also be dangerous. If you notice any water damage on walls, ceilings, or in the attic or crawl space, there could be a serious underlying issue that should be fixed. Depending on the extent of the water damage, you may want to walk away from the home altogether. The process to fix the issue can be extensive and costly, and you may even be left with dangerous mold.

If you do decide to continue with the transaction, the seller should be open to either fixing the problem before you move in or renegotiating a lower price.

Plumbing Leaks

what-are-reasonable-requests-to-make-after-a-home-inspection-plumbing

If the water damage in the home is caused by leakage in the plumbing pipes, this is an issue that will need to be dealt with right away. Whether the problem is faulty valves or older pipes, the problem cannot be ignored. Ideally, you should be able to move into your home without having to deal with fixing leaky pipes.

Sellers should already be aware of this problem before they even list their homes and should ideally rectify it before they even list. If not, it’s definitely reasonable for you to ask for this issue to be resolved before you take the keys at closing.

Foundation Issues

If your home inspector noticed that the cracks in the foundation, sloping floors and “sticky” windows and doors are the result of a faulty structure, you certainly have reason to ask for some sort of compensation. Structural problems with a home can translate into major effort and significant costs to repair.

If you’re even willing to continue with the deal, you should seriously consider renegotiating the price of the home or ask for some sort of credit to pay for the cost of repair after you’ve been given an estimate from a foundation specialist. Otherwise, you could very end up with a money pit on your hands.

Ill-Functioning Appliances

what-are-reasonable-requests-to-make-after-a-home-inspection-appliances

Unless the listing specifically stipulates that the appliances in the home are not working and the listing price reflects this, it’s not unreasonable to ask the seller to ensure that the appliances in the home are in working condition before you take possession. If not, you may consider asking for a cash credit to help cover the cost of having to replace the appliances yourself.

Dangerous Electrical’s

Many older homes still have the same electrical system they had when they were first built. Unfortunately, these older electrical systems can be dangerous. For instance, any ungrounded wiring can cause an electrical fire they can cause sparks and an electrical charge that can fuel fire along walls, flooring, or on nearby furniture.

Electrical panels are another issue in older homes. Households from a few decades ago didn’t use nearly as much electricity as we do today, which is why it was common for homes to have 60 Amp electrical systems installed. These days, however, it’s more standard to have a 200 Amp system installed in the average home in order to accommodate all the appliances that today’s average home uses.

If the Amps are insufficient, the home could be vulnerable to an electrical fire. Besides, the majority of insurance companies won’t even insure a property with less than 100 Amp service.

The Bottom Line

Your home inspection report will unveil any issues with a home that you’ll certainly want to know about. While you don’t want to nitpick, you also don’t want to miss out on the opportunity to request that certain repairs are made before you take possession. When in doubt, follow the advice of your real estate professional.