Top Five Potential Deal Killers (and how to avoid them)
There are approximately 8,127,453 reasons a real estate deal might fall apart. Lucky for you, we don’t have time to write about all of them.
A great real estate agent’s job (i.e. what people hire RAGE to do) is to proactively address as many of these as possible prior to selling a property, and then manage any surprise issues that come up once the buyer and seller have a signed contract.
Some issues are easy fixes, others are a bit more tricky.
Here are the Top Five Deal Killers we see and solve to keep deals alive.
Inspection Red Flags
Did you know? No home is perfect. A few years ago we sold a $1.6M brand new luxury home in one of Denver’s most coveted neighborhoods. When the buyers did their inspection, they found out the home wasn’t in perfect condition. It was brand new and still needed the builder to fix a few things.
Whenever a home sells, the buyer has the right to do an inspection prior to closing to ensure any quirks or concerns are solvable at a reasonable price. Negotiating costly “red flags” concerns like structural problems, a broken sewer line, or defective plumbing or electrical systems requires an experienced agent who can navigate through repair negotiations. Otherwise, the inspection red flags might kill the deal.
2. Home is Uninsurable
Hurricanes. Tornadoes. Floods. Fires. Landslides. Earthquakes. Hail. Natural disasters happen all the time, and homeowners who have loans on their properties are required to have proper insurance. Specific geographic regions might require special insurance (e.g. if your home is in a flood zone). This information must be identified and disclosed as part of a sale so proper insurance can be purchased. On occasion, a seller might have filed an insurance claim, collected the insurance payout, then either pocketed the money or never completed the necessary repair work. This can prevent a future buyer from obtaining adequate insurance on the home - and perhaps kill the deal.
3. Title Disputes
When a home sells, the deed (document showing official ownership) transfers from one person or entity to another. It’s essential that seller has the legal right to sell the property to the buyer and that there is no one else who might have a claim to the property. For example, if a married couple gets divorced but both persons share ownership of the home (i.e. “held title”), one person can’t secretly sell the home without telling their ex-spouse. Consider a different scenario: a homeowner might leverage their home as collateral to obtain a small business loan. If that business fails, it’s likely they still need to pay back that loan using any proceeds they receive at the time of sale. Both on-the-record and off-record disputes are to be resolved prior to the sale and transfer of ownership - otherwise it can kill the deal.
4. Low Appraisal
A buyer’s lender will almost always require an appraisal to verify the home is worth (at least from the bank’s perspective) what the buyer is paying for it. If a buyer quits making payments, the bank might need to eventually take the home back and sell it to recover their initial investment. Sometimes, the contract price of a home is higher than what the appraiser says the home is worth, in which case the buyer and seller will need to negotiate new terms - or the low appraisal could kill the deal.
5. Buyer Loses Ability to Qualify for their Loan
Most home buyers obtain a loan to purchase their home. A good real estate agent should partner with a mortgage lender to do everything in their power to confirm in advance that the buyer’s financial status is secure. This includes verifying employment history, income, savings, credit score, source of downpayment, and debt. False information or insufficient documentation can result in the buyer failing to qualify for their loan. Additionally, even when the information provided is accurate and documented, the buyer always runs the risk of job loss, drop of credit score, or mistakenly relying on income that isn’t eligible by the bank’s standards (under-the-table pay, certain overtime pay, etc.). If the buyer loses the ability to qualify for the loan, it could kill the deal.
In most of these cases, there are creative solutions or preventative measures that can avoid these issues ever arising in the first place. Our job is to provide guidance from start to finish and do everything we can to provide you with a smooth, five-star home buying or selling experience.
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We hope this content serves you well as you seek to be savvy homeowners and make wise financial decisions for your future. If you'd like to chat further or are considering moving in the coming months or year, let's get a meeting scheduled today!
Josh & The RAGE Team
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This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal, or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
