You have just negotiated a deal with a buyer and managed to sign the sales contract. The good news is that you’re almost there. The bad news is that you’re not quite there. Even though the buyer has signed the sales contract, there’s still room for the deal to fall through. Two big parts of the for sale by owner housing transaction still lay in the balance – the inspection and the buyer’s mortgage.
Housing Inspections
With most standard sales contracts, the buyer has the right to have the property inspected. If these inspections aren’t satisfactory to the buyer, the deal could end up turning bad. There are three major types of inspections that the buyer can have completed.
- Termite Inspection. Depending on your state’s laws either you or the buyer could be responsible for the termite inspection. If it is your responsibility as the seller, then you must have a letter from a licensed pest control company that states your home does not have any termites. Whether you or the buyer pays for the inspection, it is your duty to clear up the problem before closing.
- Roof Inspection. Should the roof inspection result in repairs to be completed, you are required to cover the repairs.
- General Inspection. This is an inspection of major appliances, air conditioning, heating, plumbing, and electrical systems. As the seller, you are required to repair or replace any of these items that fail inspection.
Avoid inspection problems by having your own inspection completed before you put the home on the market. That way you have time to make the repairs before a buyer’s inspector catches them. In many cases, it is cheaper to make these repairs when your own inspector finds them.
Alternatively, you sell the home “as is.” Such a stipulation must be included in the sales contract.
Mortgage Fall-Through’s
Your buyer’s ability to purchase the for sale by owner home is contingent upon his or her approval for a mortgage. If the buyer does not get approved for a mortgage that is large enough to buy your , it is a major deal killer. Without financing, it is impossible for the buyer to purchase your . You certainly aren’t going to give it away.
What can you do to avoid this problem? Pre-qualify your buyers. Ask prospective buyers for a pre-approval letter from a lender. Serious buyers will have already gotten pre-approved for a mortgage. Make sure the amount the buyer has been pre-approved for will cover the sales price of your home.
You might also work with the buyer to obtain financing. If you are working with a real estate attorney, he or she might be a resource that can assist the buyer in contacting a lender or mortgage broker. Alternatively, you can contact a local real estate agency to get recommendations on lenders or brokers.
It is a good practice to work only with those buyers that have been pre-approved for a mortgage. This diminishes the likelihood of a deal-killing surprise later on in the for sale by owner housing transaction.
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