Due Diligence... What Is It? How Can It Help You as an Agent?
How many agents are performing their due diligence when listing a property for sale.
- Are you certain there is sufficient equity in the home for you to get paid?
- Have the Sellers borrowed again their mortgage ?
- Have they increased their mortgage since purchasing?
- Have they put a 2nd mortgage on their home? or even a 3rd?
- Are there any registered liens again the property from creditors?
I had a phone call a few years ago from a past client who asked if I could write a Letter of Opinion on the value of her house for her bank. She said she had found herself in a bit of a financial mess and I suspected she was applying for a second mortgage. I found out later that she was behind on her mortgage payments and the bank was threatening to foreclose.
I knew she was having a difficult time since her husband had passed away, and her work hours were being reduced. At that time she had to take in her brother and sister-in law to help her with her monthly commitments.
She said she would stay in touch, and would most likely be putting the house on the market soon.
Well, she called me a few nights later, and I went to her home to list it, BUT not before I asked to see all her mortgage documents to see if she actually still had some equity in her home to pay expenses, i.e. commission, lawyer fees. etc.
As it turned out, she did have some equity, about $50,000 after commission, lawyer fees, etc.
It is so important that we do our due diligence before listing a property. We could end up selling a home that has more debt than it is worth, and nobody gets paid!
That happened to me a few years ago, when I was representing the Buyer. As it turned out when the lawyer was searching title about 10 days prior to closing, he discovered were liens registered again the home. These liens amounted to more than the value of the house, which meant there was "zero" left to pay anyone!
It all turned out in the end and the lawyer negotiated with the creditors, and we all ended up getting paid, but it could have turned out badly for everyone.
Do your DUE DILIGENCE!! and verify mortgages to ensure there is sufficient equity in the home you are selling!!
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