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Question: Where do the most problems occur during the home sale process?
I get this question from almost every first time home buyer and seller I work with. They want to know where problems turn up and how to avoid them. The two areas I see causing the biggest issues or delays are the home inspection and financing. Here’s some advice to buyers and sellers on each.
The purpose of a home inspection is to make sure there aren’t any major problems with the “bones” of the house (foundation, pipes, roof, etc) and ensure the major systems and appliances are operational. In most cases, homes are purchased contingent on a home inspection, meaning the buyer is permitted to make requests of the seller after the inspection and if the buyer and seller cannot come to an agreement, the buyer has the right to walk away from the deal without losing the Earnest Money Deposit.
Buyers: Remember that you are buying a used home (usually). Things will be near or beyond their expected useful life. If the water heater is from 1996, but it’s working well, you can’t expect the seller to buy you a new one. New construction is more expensive for a reason.
Sellers: If something doesn’t work or is broken, you should fix it or offer the buyer a comparable credit. Most homeowners know what problems exist and it’s a good idea to pro-actively solicit bids so you can move quickly if needed. It’s likely that issues in one inspection will show up in another inspection report, so it’s in your best interest to work hard to compromise with a current buyer instead of letting a deal go and risk facing the same problem(s) with a second buyer.
A lot has to go right in order for buyers to secure a loan in time to settle. Since 2011, banks have significantly increased the paperwork requirements and scrutiny on borrowers and recent changes by the Consumer Finance Protection Bureau (CFPB) have changed the protocols between lenders and settlement agents, causing difficulties for both parties. Without financing, there’s no deal and if there’s no deal, a buyer’s Earnest Money Deposit may be at risk.
Buyers: Ask your agent for a local lender and a loan officer who is responsive, with a good reputation. Your pre-approval should be based on a detailed review of your financial accounts and include a credit check. Please avoid services that offer “immediate” approvals and don’t require documentation like tax returns or account balances. Finally, do your homework while you’re searching for properties so that you’re ready to select your lender within a day or two of going under contract. When you find a property you love, ask your lender to prepare a few estimate sheets so you’re comfortable with the numbers and the type of loan that works best.
Sellers: Have your agent call the loan officer listed on the pre-approval (submitted by buyer with offer) and ask questions about what they reviewed. This will also give you a sense of how responsive they are. An unresponsive lender makes life tough on the buyer and is a bad sign for you. Ask your agent to check-in with the loan officer occasionally during the financing period to make sure the buyer is cooperating and acting in an appropriate time frame.