In Shift Tactic #12: Bulletproof the Transaction – Issues and Solutions, Joe Quattrucci describes six specific issues where a transaction could go wrong. Any of these six issues could result in a delay, confusion, or even a lost opportunity. Therefore, real estate agents need to focus on these issues to ensure a successful real estate transaction.
Shift Tactic #12: The Six Issues
Once a buyer signs a contract to buy a house, it would seem as if the hard part is over. However, in any real estate transaction, there are a multitude of factors that come into play. Post-signing issues include the following:
- Inspections and Repairs
- Loan Approval and Funding
- Other Contingencies
- Co-Op Agent
When you look at this list, it can seem deceivingly simple. After all, the buyer did have a pre-approval, correct? The comps were fairly close to the agreed-upon price, right? The inspection period is set by the contract, so things there should be straightforward, shouldn’t they be?
Not so fast…any one of these six issues could completely derail all of your hard work!
The Six Solutions for the Six Issues
1. Inspections and Repairs
Generally inspections offer home buyers peace of mind. Having an expert assess the home’s condition and provide a thorough report lets buyers know what they are getting into. But what if the report shows some significant issues? Common problems found during inspections that might cause buyers to pause include:
- Electrical wiring
- Roof age and condition
- Environmental issues
- Wall construction
- Moisture and drainage problems
What is the solution? As the Listing Agent, talk to the sellers about a pre-inspection, so that you can offer perspective buyers and their agent a full report about the home’s condition. This prevents most renegotiating during the inspection period and typically allows the transaction to move forward more efficiently.
As the Buyers Agent, recommend a number of qualified professionals that can help the buyer investigate and address such issues. Allow the buyer to choose who they want to work with, but be ready to provide contact information. Remember in Shift Tactic #12, you want to bulletproof the transaction. An inspection noting moisture issues is one thing; a follow up discussion on how to remediate the issue could help the deal move forward.
Home appraisals offer an opinion of the home’s fair market value. These are paid for by the buyer in most cases and are often a requirement for them to obtain financing. However, if the appraisal comes in lower than the agreed-upon price for the home, this may derail the transaction. Why? Because financial institutions will not lend more than what the home is worth.
What is the solution? A low appraisal is an opportunity for the agent to work with the buyer on a negotiating strategy. While sellers may believe a low appraisal is incorrect and be reluctant to drop the price, it certainly should be a discussion point. Many sellers and buyers negotiate on this point to ensure the sale proceeds. Another solution is to get a second appraisal to see if the first one was incorrect or had some kind of other issue such as bias. A second appraisal at a higher value may make for a very persuasive case that the first one was not correct. Other than renegotiating the price or getting another appraisal, the only other option is for the buyer to come up with the difference between the appraised value and the sale amount in cash, to be paid at closing.
3. Loan Approval and Funding
At this point in the transaction, one would think loan approval and funding should be simple. The buyer should have a pre-approval letter from their lender. However, several concerns can undermine this process:
- The mortgage application process discovers additional credit issues
- Delays may crop up if the buyer did not secure the loan by the loan contingency deadline
- Questionable financial decisions by the buyer may derail their creditworthiness
What is the solution? Remember, this is Shift Tactic #12. You need to bulletproof the transaction. Therefore, you should consider having a number of mortgage lenders to which you can refer your buyer. It is also imperative for you to tell your buyer to refrain from any large purchases during this time period. Often a backup lender can provide financing if one lender falls through. You might recommend your buyer apply to multiple lenders in order to secure the best solution for their needs.
4. Other Contingencies in Shift Tactic #12
What is an “other contingency?” Ability to obtain financing is one contingency. Another contingency might be for the buyer to sell their own house before buying the property. As a result, the transaction is contingent on the sale of the buyer’s home. If there is no sale, then the contract for the next home ends.
However, contingencies could be a number of other things. It really means depending on certain circumstances. As a result, circumstances could be a myriad of other things such as:
- The ability to complete a job transfer
- Inspections show the home in good overall condition
- Roof life is longer than 10 years
- Specific personal property is part of the transaction
- Seller completes work they note will be done such as connecting to a sewer system
What is the solution? For Shift Tactic #12, you have to bulletproof the transaction. Therefore, for each contingency noted by the buyer, identify a solution. Then share it with the buyer if the contingency arises. Be creative and pay attention to details. Do not leave things to chance! If the seller is going to connect the home to a sewer system, recommend to the buyer that they have an inspector on hand to view and confirm the work is correct. If the buyer’s job transfer is taking longer than expected, a solution could be to have them work with a property manager to maintain the new home during the transition.
5. Co-Op Agent
In real estate transactions, the cooperating agent owes their duty of loyalty to the sellers. It is in their best interest to ensure the buyer completes the transaction, but they are not responsible for that side of the transaction; you are. However, they will most likely want to ensure consistent communication with you confirming deadlines are being met and the transaction is on track to close. There may be disputes regarding issues such as the procuring cause for the transition. With Shift Tactic #12, how can you bulletproof issues like these?
What is the solution? Always follow the National Association of REALTOR® Code of Ethics in all of your dealings with cooperating agents (download the 2022 Code of Ethics and Standards of Practice). The code of ethics outlines your responsibilities to both your client and to cooperating agents. This is the surest way to bulletproof the transaction.
Once the buyer signs the contract to buy a home, the clock starts ticking. There are many deadlines that must be met in order to have a successful transaction. Missing a deadline means you may need to ask the seller for an extension. Will the seller agree? There is no guarantee of that.
What is the solution? KNOW YOUR CONTRACT! You should have a full understanding of what is in the contract and the corresponding dates that require action by the buyer and the seller. Place these dates on a timeline tracker and follow up each day to be sure things are progressing. Do not assume your buyer knows anything about what has to happen, or that the cooperating agent will help you keep things on track either. This is your job. Find a good software program, calendar, or white board to map things out. You might consider hiring an administrative person to do this important work for you so you can focus on your own strengths. Remember the words from Shift Tactic #12: Bulletproof the Transaction!
Real Estate Market Shift Tactic #12: Bulletproof the Transaction – Issues and Solutions with Joe Quattrucci
When you are facing several issues in a real estate transaction, it pays dividends if you are aware of several solutions. As Joe Quattrucci notes, you must have a complete understanding of where things could go wrong if you want to ensure a successful closing. This does not mean that things “will” go wrong. However, unpleasant surprises rarely warn you before they are sprung upon you. With a pocketful of solutions at the ready, you will be sure to bulletproof your real estate transaction!
To learn more, be sure to check out Joe’s series of blog posts on the market shift. In this series, Joe presents the issues and then teaches you how to position yourself for success. Here at Keller Williams Arizona Realty, our industry-leading coaching program provides you with the tools you need to beat the shift and propel your real estate business forward.
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