Accepting the highest offer without considering the buyer and the other terms of the contract.
It is great to get a high asking price, but you need to know that the person on the other end of the contract can and will complete the purchase.
There are a many ways this can play out, and you must be aware of the problems. For example, if a buyer has a small down payment, or they don’t really have the credit to get the loan, or maybe they don’t quite have the income to afford the mortgage. Even if they are offering more than anyone else, you are not likely to make more money on the deal. In the end you will probably have to drop your price or walk away from the deal altogether.
It is critical to look at every aspect of the offer and the buyer, and take a close look at your own needs. For example, if you are leaving town, and need to get the mortgage paid off so you can buy in another state, then you should be interested in selling for a fair market price to a highly qualified and motivated buyer.
Mishandling multiple offers and situations that involve multiple buyers.
There is a big difference between talking about selling your property and entering into a contract. Many people get confused when they are working with just one buyer. This is, in fact, why you have an agent. The legal ramifications of selling property are beyond the expertise of most people.
Most people only sell and buy a few times in their life. This is the reason the State of California requires real estate agents to have a license.
Improper handling of backup offers.
Backup offers can become binding contracts. Most of the trouble that sellers get into revolves around not understanding what is a contract and what is a not a contract. It is great to have a backup offer. It is also very important to structure that contract in a way which doesn’t harm you.
Entering into an agreement without getting substantial earnest money from the buyer.
When you enter into a purchase agreement with a buyer, you will be legally locked into a contract to sell. You may not be able to get out of the deal. You need to be very careful about getting into any contract where the buyer is not able to put up a sufficient earnest money deposit.
When you enter into a contract to sell, you are agreeing not to take any other offers. The buyer needs to prove they are serious, or you should avoid working with them. In many cases, their earnest money deposit is what keeps them honest and prevents them from manipulating you.
Failure to investigate the buyer’s ability to close before entering into an agreement.
You need to know that a buyer can close before you lock yourself into a contract that can drag on for a month or more, costing you lost money and lost time. This is one of the main reasons for a pre-qualification letter from a lender.
But it is not enough to just have a pre-qualification. It is often a very prudent step to look at the very same information a lender would need to see to create a pre-qualification.
For example, if the potential buyer is self-employed, you might want to verify their income by asking to see their tax returns and bank statements.
Many sellers require proof of funds. Especially if it is going to be a cash transaction, a seller will require bank or brokerage statements showing sufficient funds.
If a buyer is just moving to the area, you might want to ask for a letter showing her job offer and his or her first pay stub.
If you are unsure, a great way to handle the situation is to ask the buyer to prequalify with a lender you know and trust (or one your agent knows and trusts). This means that you will have an expert on your team vetting the buyer for you.
To be clear, you can’t require that a buyer uses your lender for their loan. But there is nothing to stop your lender from making the buyer a better deal than the one they had from their own lender.
In short, it is your job to know who you are doing business with. Any good agent should be sending info on the buyer with the offer, and your agent should be asking if anything important is missing. After you have vetted a buyer, if something just seems wrong, it is probably best to walk away.
Neglecting to disclose known material facts that have an effect on the value or desirability of the property.
If you know about something that “might” happen in the future in your area which could affect the value of the property and you don’t let the buyer know about it, you are asking for a lawsuit. When in doubt, disclose.
Not providing legally required disclosures to the buyer.
In California there are nearly 100 disclosures which are required by law, and a myriad of things which would additionally require disclosure.
Disclosure laws are a serious deal. If you fail to make the right disclosures in the right way at the right time, you could void the sale. Even if more than a year has gone by, you could end up being required to give back the money and take back the property.
Luckily, if you have a great agent, you also have an expert to help you through the process.
Failure to obtain the buyer’s written acknowledgement of disclosures.
Even if you have given every disclosure required by law, and you have done each and every one at exactly the right time and in exactly the right way, you don’t have the legal proof if you don’t have a signed acknowledgement of this.
A good agent will make the acknowledgement of the disclosures a contingency on the contract so that failure to acknowledge them would mean a legal way out of the contract.
Make sure you are protecting yourself and your interests.
Not considering whether to require the buyer to remove contingencies.
A good agent will want to protect you. They will always require that the buyer stipulate they will remove contingencies in a timely manner. If I receive an offer without timely contingency removal I might ask the other agent about it, but frankly I am close to recommending that my seller avoid working with the buyer under all circumstances.
There are enough people out there who are willing to buy property on fair and reasonable term. I don’t want my sellers to ever have to work with someone who may be trying to manipulate them.
Forgetting to exclude items from the sale that the seller wants to keep.
The distinction between personal property and real property is sometimes not as distinct as it might seem. This is often true in historic homes, which I specialize in.
I once saw a very beautiful stained glass orb which a homeowner had brought from a famous designer in England. The homeowner had attached it in a very artistic way to the ceiling of their kitchen. I was told that the stain glass orb was worth over $10,000.
However, due to the manner in which the orb was attached and placed, it would almost certainly become a part of the home and no longer personal property. In a sale the artwork would go “with” the house unless it was “excluded” in the contract.
There are many similar examples of personal property which become real property and therefore are sold as a part of the house.
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