Elizabeth Colton Walls's Blog

One More (BIG) Reason Contracts Fall Through

Elizabeth Colton Walls (Fridrich & Clark Realty LLC) — Sat, 24 Nov 2012 10:56:24 -0800

Note: This article references business practices in Middle Tennessee. Customs in your region may be different.

The most common reason that contracts neglect to close is a problem(s) with the inspection. In an earlier post, I mention two other reasons, but the inspection ranks as numero uno.

What Is An Inspection?

An inspection is a visual analysis of the condition of the Property and its systems.
Including termite inspection and inspections of the “heating systems, cooling systems, electrical systems, plumbing systems, structural components, foundations, roof coverings, exterior and interior components, and other site aspects that affect the Property, and environmental issues.”
An inspection excludes “matters of purely cosmetic nature (e.g. decorative, color or finish items.)”
An inspection is a Buyer’s right.
An inspection is paid for by the Buyer.
An inspection is conducted by a licensed home inspector AND additional professionals at the Buyer’s option.

What Is The Time Frame For An Inspection?

To be conducted during normal business hours.
To be conducted within (TBD) days of the Binding Agreement Date.

What Happens After The Inspection?

Buyer presents a list of unacceptable findings and terminates the agreement, or
Buyer accepts the property “AS IS,” or
Buyer presents the Seller with a list of items to be repaired or replaced.
Buyer and Seller have (TBD) days to agree upon which items are to be repaired or replaced with “like quality or value by the Seller” (the Resolution Period.)

Snafus

When laid out in orderly bullet points, this sounds perfectly understandable. It’s not.

The potential for confusion (feigned or real) is enormous.

But if you (and your agent) are creative, flexible, and patient, the inspection provides valuable information about your prospective home. And it need not derail the purchase in the process.

2 Reasons Real Estate Contracts Fall Through

Elizabeth Colton Walls (Fridrich & Clark Realty LLC) — Mon, 08 Oct 2012 09:06:59 -0700

Note: This article references business practices in Middle Tennessee. Customs in your region may be different.

I love a surprise. As in, I’m entitled to 20% off the already low price, the milk is still good despite being past the expiration date, or there is no traffic on I-65 S.

But surprises are not only unwelcome when buying or selling a home, surprises put contracts in jeopardy.

Contracts frequently fall through because one or more contractual contingencies weren’t met. Such as:

APPRAISAL

Often an agreement is contingent upon the “appraised value either equaling or exceeding the agreed upon purchase price.”

One way to head off potential problems is for the seller’s representative to be sure the appraiser has the current information about the property. Such information might include:

Dates and description of home improvements
Copy of the floor plan
Description of neighborhood amenities
Comparable market analysis

If the appraised value is less than the agreed upon sales price (surprise!), there are options:

Buyer leverages the appraisal to negotiate a lower price or obtain credit for repairs.
Buyer (or seller) orders (and pays for) a reappraisal. It could be that the appraiser is not familiar with the local property values. Talk to the lender about the appraiser’s background in evaluating similar homes.
Contract terminates.

FINANCING

Many hands, many documents, and many requirements mean many opportunities for surprises in the loan process:

Buyer doesn’t formally apply for a loan within 5 days after the Binding Agreement Date.
Buyer doesn’t provide a conditional commitment letter from the lender within 20 days after the Binding Agreement Date.
The earnest money check bounces.
Buyer financing falls through.
Buyer waives the financing contingency, but the stock he was planning to liquidate to purchase the home drops 25 points leaving him unable to close.
Buyer waives the financing contingency, but reserves the right to obtain a loan, which is denied.
Buyer waives the financing contingency, but the life insurance proceeds on which he was counting don’t materialize.
Contract terminates.

Don’t be surprised. Know your contingencies.

7 Red Flags in a Property Disclosure

Elizabeth Colton Walls (Fridrich & Clark Realty LLC) — Tue, 04 Sep 2012 11:56:47 -0700

Note: This article references business practices in Middle Tennessee. Customs in your region may be different.

It’s all there.

The nitty gritty information about the house.

If you bother to read it.

And yeah, the seller is required to complete one.

A quick glance at these 7 questions on the Tennessee Residential Property Condition Disclosure provide a good overview of the condition of the house.

1-Are all of the questions answered?

Could be sloppy; could be hiding a problem.

2-How old are the heating and air conditioning systems?

Big ticket items. Don’t know means they need to be replaced.

3-What type and how old is the roof?

See above.

4-Did the seller respond “Yes” to any questions?

Such as, are you aware of any defects with the interior walls, ceiling, floor, windows, insulation, plumbing, or environmental hazards?

5-Is there a reference to the May 2010 flood?

There are several questions about water damage and flood. Review them all.

6-Is the exterior made of synthetic stucco?

If so, has it been inspected recently? Why not?

7-Is the house located in a historic district?

If so, you may need to reconsider the addition of a 3-car garage. Ask for a copy of the regulations.

Satisfied? Now read the Disclosure more carefully. Still satisfied? Permission to get serious about this property!

Should You Sign a Buyers Representation Agreement (BRA)?

Elizabeth Colton Walls (Fridrich & Clark Realty LLC) — Wed, 29 Aug 2012 05:18:44 -0700

Note: This article references business practices in Middle Tennessee. Customs in your region may be different.

Should You Sign a Buyers Representation Agreement (BRA)?

I don’t know. What is it?

Ahh. This would be the first problem.

The BRA outlines the terms of the relationship between the agent and her client.

Ideally buyers sign this document at the start of the house hunt, but sadly, this important document is usually signed by all parties at the time of an offer.

Should you sign the agreement sooner? YES!

If you answer the following five questions in the affirmative, there is no reason for hesitation:

1-Are you serious about buying a property within the next 60 days?

Smart agents work with buyers who are committed to moving now (not when the child graduates from high school 4 years from now.) By the same token, buyers want assurance that their agent is working efficiently to find that perfect property in a reasonable time frame.

A signed BRA confirms the time frame for the move.

2-Have you and your spouse agreed on features and price of your new home?

If not, read this sad tale and complete the exercise at the conclusion. Your agent can’t help you if she doesn’t know what you want.

A signed BRA confirms the buyer’s preferences.

3-Have you completed a buyer questionnaire or had a lengthy conversation with your agent about your specific needs, the home buying process, and financing the home purchase?

A detailed discussion of the process saves everyone headaches (and heartaches) later.

A signed BRA indicates an understanding of the key issues involved in buying a home.

4-Has the BRA been explained to your satisfaction?

BRAs may vary from broker to broker, but include many of the same elements. For example, how is the agent compensated? What is the agent’s fiduciary responsibility to her client?

A signed BRA means the buyer and her agent understand their commitments.

5-Do you trust your agent?

If you don’t, get out of the car now!

Reviewing a BRA is an opportunity to clarify the client/agent relationship and discuss the expectations of both parties.

Don’t go house shopping without it!

Whether or Not to Walk-through

Elizabeth Colton Walls (Fridrich & Clark Realty LLC) — Wed, 15 Aug 2012 10:19:50 -0700

The closing on your new home is only a few days away.

The only hurdle between you and your dream home is the walk-through a/k/a the Final Inspection.

With visions of paint chips dancing in your head, you might be tempted to skip this step. Don’t!

1-What Is A Walk-through?

As a buyer, you have the right to conduct a final inspection of the property no later than 1-5 days prior to the closing. The purpose is to:

Confirm that the property is in the same or better condition than it was at the time of the binding agreement.

Confirm that any repairs which were agreed to as a result of the original inspection are complete.

Confirm status of miscellaneous property such as landscaping and fixtures.

Confirm the removal of the sellers’ personal possessions and debris.

2-How To Conduct A Walk-through

Hire a contractor or inspector to accompany you.

Check the receipts for the repair work against the inspection contingency release.

Does the receipt correspond to the work requested?

Have the vendors been paid in full?

Test all the systems: HVAC, plumbing, electrical.

Check for inclusion/exclusion of miscellaneous property.

The sellers are not allowed to remove property such as blinds, bathroom mirrors, or boxwoods unless it is agreed upon in the contract.

Check for the removal of sellers’ personal property and debris.

3-What If Walk-through Prompts Walk-out?

It happens. The toilet doesn’t flush, the dining room chandelier is missing, and the basement is full of ruble. Relax. There are options.

Request that the seller repair, replace, or remove the property prior to closing.

Negotiate a credit to repair, replace, or remove the property.

Proceed to closing but hold back funds pending receipt of paid invoices for completion of the work.

Most of the time a walk-through is uneventful. But if the property’s condition is not as it was or improved, it’s better to know before you move in.

5 Myths About the Real Estate Profession

Elizabeth Colton Walls (Fridrich & Clark Realty LLC) — Tue, 14 Aug 2012 08:42:27 -0700

When I talk to someone about a career in real estate, I frequently discover that they hold a misguided belief in one (or all) of the following myths.

Real estate is a good career, but allow me to debunk these myths before you quit your day job!

5 Real Estate Myths Debunked

1-A Real Estate Agent Works Flexible Hours

If by flexible, you mean the opportunity to work 7 days a week and evenings, yes, real estate agents have flexible hours!

Home buyers look for property in their free time, which is nights and weekends.

2-A Real Estate Agent Just Shows Houses

Oh pleez! On a typical day, you will

Analyze feedback

Be accountable

Create a marketing campaign

Diagnose the problem

Evaluate comparable market analysis

Find a way

Gauge buyer needs

Host an open house

Investigate a creepy basement

Justify price

Know the competition

Listen

Make an offer and (1) counter and (2) counter (3) and counter

Negotiate everything

Offer a shoulder to cry on

Prepare a listing presentation

Quit while you’re ahead

Recommend lender, landscaper, and lunch spot

Settle a dispute(s)

Take action

Understand

Vote someone off the island

Write a blog post

Xplain multiple offer process

Yodel (only kidding! just checking to see that you’re keeping up!)

Zip here, there, and everywhere

AND show houses

3-A Real Estate Agent is Just a Salesperson

Good agents are good sales people, but they also run their own business. If you don’t know how to manage a business, you will go broke fast.

Agent Inc. includes the following departments: accounting, human resources, sales, marketing, public relations, legal, customer service, tax, and regulatory. Understand them all.

4-A Real Estate Agent Has No Business Expenses

Granted you don’t need a warehouse full of widgets, but you need more than a business card and a car to get started. Below are some typical expenses.

Continuing education and private coaching

Licensing fees, association dues, and insurance

Advertising and marketing expenses

Computer equipment, software, and tech support

Mobile phone

Web site design and maintenance

Office supplies

Monthly fee to Broker

Health insurance premium

AND the car

5-A Real Estate Agent Makes a Lot of Money

Real Estate agents earn a good living or not. See all of the above!

Why You & Your Spouse Must TALK Before You Begin the House Hunt

Elizabeth Colton Walls (Fridrich & Clark Realty LLC) — Mon, 13 Aug 2012 09:36:07 -0700

He Wants a Weight Room; She Wants a Home Office

The Scene: Sunday PM in the basement of the 13^th prospective house.

The Players: A couple (formerly charming) and their Realtor (long suffering.)

ACT 1

WIFE A weight room? Are you serious?

HUSBAND Yes, I’ve always wanted one.

WIFE We don’t own any fitness equipment.

HUSBAND Yes we do, the treadmill in the basement.

WIFE The one from college? When was the last time you got near it?

HUSBAND If I had a comfortable room, I would use it.

WIFE Well, this basement is barely big enough for my home office. A weight room is out of the question!

Husband stomps off. Realtor studies the ceiling. Two children begin to cry.

Needless to say, the house does not make the cut.

Could this sad scenario have been avoided?

Yes. Ideally, buyers complete a questionnaire (mine is 5 pages)and/or have a substantial conversation about their wants and needs with their Realtor before hoping in the car.

But in addition, I suggest that buyers complete the following exercise on their own. Silly? Perhaps. But really, how drama can you tolerate ?

AN EXERCISE FOR BUYING A HOUSE TOGETHER (Full disclosure: I did not originate this exercise. I would give credit to the author or instructor, but I can’t remember where I heard it!)

Individually, prepare three lists—do not look at your partner’s list until the exercise is completed!

My home must have the following features (include neighborhood requirements). This list should be short, 2-6 items.

It would be nice if my home had the following features. This list can be a bit longer.

In a perfect world, the following features would be ideal. Blue-sky thinking.

Get together with your partner and compare lists. Hmmm. Shocking isn’t it?

Prepare one list that includes your agreed upon wants and needs. This is the list you give to your Realtor.

Now go forth and purchase a home!