Friday, November 08, 2019 / by Dennis Isip
You’ve just accepted an offer on your house, and for that matter, at a price much higher than your list price. Are you ready to celebrate and move on with the next chapter of your life? Not so fast. In reality, you’ve just entered the most challenging and emotionally draining phase of the home selling process.
Since we are in a seller’s market, we can be a little bit more discriminating before accepting an offer, so as to avoid the pitfalls in the following areas:
Cash is king, because it eliminates a lot of paperwork and red tape throughout the escrow process. Without cash however, the types of loans you should consider are: conventional, FHA, FHA (with a WA state bond loan), then VA, in that order. This sequential order usually (but not always) indicates the buyer’s financial ability to obtain a loan. If a bank disapproves the buyer, the sale is stopped.
The buyer has the right to determine the condition of the house before he/she actually takes ownership. They want to know any potential issues, and whether or not they’re acceptable based on their resources to address those issues - financially, or otherwise. If the buyer decides that the condition is unacceptable, the sale is stopped. Having a pre-inspection done before listing is a good way to mitigate this.
The bank hires an appraiser to make sure that the value of the home is no less than the amount of the loan. If the appraised amount is lower than the sale price, the sale can be stopped. Overpricing is one of the worst mistakes a seller can do.
Title means ownership of the property, granting the seller the legal right to sell. The complication usually arises if there are liens against the property. For example, if the owner fails to pay taxes, the county can obtain a tax lien, which will prevent the sale of the property, until the lien amount is satisfied. Title restrictions may or may not stop the sale of a property. A good listing agent will obtain a preliminary title report and review that document to give the homeowner an opportunity to address any issues.
5. Walk Away
One other possibility is that the buyer simply changes their mind, and walks away from the transaction. In this case, buyer usually forfeits their earnest money, and that would be easy to do, if it’s a small amount of $500 or $1000. The best way to address this is to ask for more earnest money, especially in a multiple offer situation.
In conclusion, be very careful in evaluating an offer before accepting it. Don’t choose the highest priced offer. Choose the one that is most likely to close, because if the deal falls through, getting back on the market will statistically reduce your eventual sale price.