Avoid these 4 deal-killers to bulletproof your transactions

These days, it’s hard enough to get a transaction at all. If you are looking for a way to blow it up, then failure to do any of these critical elements could be your ticket to disaster.

There are some critical things you can do to alleviate the possibility of your deal going sideways. Here are my top five potential fails:

1. Failure to confirm title status first

Confirm who is on the title, preferably before you get the listing docs filled out, to ensure that the name(s) on the title match the names on your docs.

Over the years, we have encountered situations where the person living in the property did not have the authority to sell. To prevent any missteps, we run a copy of the title prior to a listing appointment so we know who has the authority to sign. Best case, the seller’s legal name(s) will be all you need.

Increasingly, sellers are setting up trusts which include their properties. If so, the listing docs should reflect the name of the trust and then be signed by the trustee(s) granted legal authority to sell. If the trustees are still alive, this is usually very straightforward but may require a few additional listing documents.

If the sellers listed on the title are deceased, this adds another layer of complexity to the sale. If there is no trust, then the property may need to go through probate, even if there is a will. Because Realtors are not allowed to give legal advice, we gather all the necessary documents (trust, will, death certificates, etc.) and send them over to our title company (in some states these would go to an attorney).

Once the docs have been reviewed by the appropriate legal entities, they then give us instructions as to how to proceed. They also let us know how the seller’s names need to appear on all documents.

2. Failure to fully disclose per local laws

Disclose to the maximum as required in your area. Failure to do so could result in a canceled transaction or even legal action for both you and your client if additional facts are discovered after the close.

3. Failure to properly educate the seller

Once a home goes under contract, specific contractual activities need to take place for the escrow to proceed to a satisfactory conclusion. We have learned that time spent at the beginning of the listing explaining the necessary steps goes a long way to ‘greasing the rails’ during the sale.

While the majority of sellers we have dealt with over the years have been gracious and willing to cooperate, there have been a few that I would describe as “cooperation-challenged.”

These typically had their own idea of how things were going to happen regardless of any semblance to reality. Time spent with these folks reinforcing the required benchmarks and related activities can be critical.

Sellers need to be aware of the following:

• They will need to provide access during the transaction. Some sellers assume that the only times they need to allow entry is during the showing period. In most cases, however, the buyers have the right to order inspections (and accompany the inspectors), appraisers have the right of entry, buyers may wish to bring service providers and contractors through to measure for quotes and so on. If a seller does not understand or approve the right for access, things can get difficult in a hurry. Entry can be even more difficult if the property is occupied by tenants who, in some cases, may make access difficult even if provided the mandatory notices.
• Buyers have a right to inspect the property. In most cases, this is true even if the sale is deemed “AS-IS” or the inspection contingency has been removed. Not only can they order inspections, they may also, depending on the contract, have the right to request repairs. Sellers need to be informed of this at the beginning of the transaction so that any inspections and subsequent repair requests do not come as a surprise.
• There may be appraisal issues. In an overheated market with multiple offers and prices spiraling upward, appraisers frequently have difficulty bringing an appraisal in at the contract price. If the appraisal comes in low, depending on the contract, the buyer may have the right to renegotiate the price and terms or even cancel. It is critical the seller be aware of this possibility and subsequent options up front so as to avoid any nasty surprises.

4. Failure to thoroughly investigate the buyer’s financial ability

Some agents, so glad to finally have an offer, get their sellers to sign the contract and fire it into escrow. While understandable on one level, it is important to verify the buyer’s financial capabilities BEFORE the deal is signed and delivered. Make sure you thoroughly investigate the following:

• Call their lender about their pre-approval. We will not begin showing property to a buyer until they are actually preapproved and we have a copy of their preapproval in our files. If we have the listing, all offers must be accompanied by a copy of the preapproval. We always call the lender to verify the information and to ask if the buyer is capable of going higher than the preapproval states. This lets us know that there is some headroom in the event of a low appraisal or multiple offer situation.
• Verify the funds required for the downpayment and closing costs. If we have the listing, we insist that any offer be accompanied by proof of funds on deposit to cover the projected costs of their stated down payment and estimated closing costs. This usually involves copies of bank or investment statements with their account numbers redacted. If the funds are in investments such as a 401K, we ask that they contact their portfolio manager to find out how long it will take to get the funds out of the investment. Failure to do so can result in lengthy delays.

This article was written by Carl Medford from Inman News and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to [email protected].