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Not All Sellers Are Equal
Hot real estate
markets can mean high home prices and that's great for home sellers. But
all sellers will not benefit equally. Also, extreme markets can be
risky. Here's what to watch out for:
As tempting as
it might be, don't automatically assume that you're going to receive a
huge price for your home. The media tends to report the excesses in the
marketplace. You'll see a listing that sold with 35 offers, or one that
sold for hundreds of thousands of dollars over the asking price. You're
not likely to find reports about the listings that sold with only one
offer. Yet, many homes sell this way.
Even if you do
receive a flurry of fabulous offers, you could end up selling for a much
lower price. The number of failed transactions usually climbs during a
sizzling market.
For example, a
home recently sold in the Oakland Hills in Northern California for
considerably over the list price. The offer that was accepted was
$100,000 higher than the next best offer. Within a day that buyer backed
out. The seller's euphoria waned when $100,000 of profit evaporated
overnight.
In frenzied
markets, buyers feel pressured to push their offer prices higher in
order to be competitive. It's not uncommon for buyers to break through
their financial comfort zone in the peak of a multiple offer contest.
After more sober consideration, a certain number of these buyers realize
they made a mistake and withdraw from the contract.
Sellers in this
situation wonder whether they're entitled to keep the buyers' good faith
deposit money. You'd need to consult an attorney for the answer. If the
purchase contract includes an inspection contingency, the buyers may be
able to back out without penalty, depending on how the contingency is
written.
Before you count
on the proceeds from your sale, make sure that the buyers have removed
their inspection contingency. Buyers, who are particularly generous at
the offer stage, could end up settling the score a bit by asking the
sellers to repair defects found during their inspections.
HOME SELLER
TIP: Beware of offers made without contingencies. This may seem like
a seller's dream. However, no contingency offers can lead to trouble,
especially when the buyers don't understand what they're getting
themselves into at the time they make their offer.
For example, if
the contract doesn't have an appraisal contingency and the property
appraises for less than the purchase price, the lender might not be
willing to give the buyer enough money to close the sale. If the buyer
has enough cash to make up the difference between the purchase price and
the appraised value, and he's willing to do so, the sale can close. But,
if the buyer is short of cash, you may have to reduce the purchase price
to keep the deal together.
Letting a buyer
purchase your home without the benefit of an inspection contingency can
be very risky, particularly if there were no pre-sale inspection reports
for the buyer to review before making an offer. What happens if the
buyer finds significant defects in the property soon after closing?
This is another
legal question that requires an opinion from a knowledgeable real estate
attorney. The seller could have liability, or face and unpleasant legal
hassle after closing. It's best to counter an offer that does not
include an inspection contingency to provide the buyer an opportunity to
inspect.
THE CLOSING:
You can minimize your risk somewhat by providing pre-sale inspection
reports. But, these shouldn't be a substitute for buyers having the
opportunity to perform any inspections they deem necessary.
Dian Hymer is author of "House Hunting, The Take-Along Workbook for Home
Buyers" and "Starting Out, The Complete Home Buyer's Guide," Chronicle
Books.
Copyright Dian Hymer |
