A Sale is never a sale until it's a sale!

 If there is only one thing I hope you will remember when you decide to sell your home, it is this ... "Your home is not sold until it has closed and the proceeds from the sale are in your checking account!"  Anything can happen once your home home goes under contract, so there is no such thing as a "sure deal!"

Here are just a few areas that can cause a transaction to fall apart  ...

• Inspections - The very first thing a buyer and seller will have to come to terms with once the property goes under contract is the inspection.  What repairs (if any) will have to be made on the home to satisfy the buyer and who will pay for them.  I will have an article on this later in the year, but suffice it to say that this is probably the number one reason homes don't sell once the contract is signed.  Here is an article I wrote on inspections.  But even if you get past the inspections, as the seller, you are not "home free"

• Title work - The title company is working in the background to make sure they can insure the property for the buyer when it closes.  They will be standing behind the new owner of the property and defend them against someone else trying to lay claim to it.  You just cannot believe how many issues can come up on title searches.  Here is just one example ...

  • Liens -  If someone has filed a lien against the property, chances are the title company is not going to insure the home until the lien is cleared.  A lien is most often created by a contractor who did work on the home and was never paid for it (called a mechanics lien).  A seller might not even know about it.  It could have been filed when the builder didn't pay a subcontractor for work, but if it is recorded, it will appear in the title search.  The lien has to be paid off (often in a negotiated settlement between the seller and the lienholder) and released by the lienholder or the seller is going to have problems selling the home to anyone.  We lost a sale of an $800,000 plus home this year because of a questionable lien which was placed on the home.  No-one knew about it until a week before closing.  It was for a very sizeable amount.  The seller just didn't have the money to pay it off nor did he think he owed it in the first place.  The lienholder refused to release the lien, the title company said they would not insure the home, and the buyer walked the deal.  And don't think a homestead exemption is going to protect you from having a lien placed on your home. Whether a lien is enforceable or not, they can scare off a buyer and kill a deal just as quickly as a bad inspection.  What title company or buyer wants to inherit someone else's problem?

• Surveys - Often times, the survey is not delivered until just before the home is ready to close.  Why?  If the buyer is paying for it (and they often do) they don't want to go to this expense unless they know the home has passed inspections and their financing is in place.  We have had surveys delivered to the title company just minutes before a closing.  We don't like that, but quite often that is out of our control.  If there is a problem with the survey, you might not know it until you are sitting at the closing table.  Here are just a few of the sticky issues we have seen with surveys ...

  • A fence (or building) you thought was on your property is on the neighbors property (or vice versa) or over a setback line.

  • There is flood plain on the property you did not know about. 

  • There is a utility easement you did not know about running right through the middle of the property where you want to put your home.

  • The setbacks from the street or from the lots on either side will not allow you to build the size home you want

  • The lot surveys out to be less than you were told.

• Appraisals - As if it wasn't tough enough to get a buyer and seller to agree on the value of a property, we still have to hope the appraiser will agree on the negotiated price.  Here is an article I wrote on this subject.  The buyers typically pay for the appraisal up front early in the process, but the lender orders it for them.  The lender also makes the call on which appraiser to use.  Unfortunately, appraisals, like surveys, are often the very last things ordered.  Many lenders have a bad habit of letting this slip until the very end.  Sometimes they are even directed by the buyers not to order the appraisal until the inspections and financing periods are over.  It is not uncommon to have an appraisal come in the day before closing and the home not appraise.  Then you have a real problem on your hands.

• Financing - Let's say you are selling your home and an offer comes in.  Your agent is prudent enough to ask the buyer for a prequalification letter from a reputable lender.  The letter arrives by fax from a large lending institution.  The loan officer states in the "prequal letter" that the buyer is qualified to buy the property (with a few caveats).  It looks the lender is saying the buyer can afford your home, so you sign the contract.  Keep in mind all that letter means is a lender spoke with the buyer, asked a few questions about their finances and stamped out a quick form letter saying something to this effect ... "if the buyer has not lied (or exaggerated) about their financial situation, knows exactly where they are with their finances at this point in time, and they are not keeping anything from me, they can afford to buy the home."  That letter is not binding to anyone, especially the lender, so never rely completely on it.

So why even ask for a prequal letter?  We always do because at the very least we know that a lender has made a preliminary review of the buyers financial status and told us that they should be able to buy the property. 

Lenders can change the rules with their buyers during the transaction.  After a thorough review of the buyers finances (and or credit) they might decide they cannot deliver on the rate they originally quoted.  The buyer might have forgotten about a recurring expense when they spoke to the lender the first time.  Or the credit history may not be there.  Remember, the lender is not tied to the contract between the buyer and seller in any way.  They tend to work at their own pace and unfortunately, the poor ones seem to have a total disregard for the importance of meeting contract deadlines (sorry, I'm venting here :-).  This has created some real abuses and caused more than a few buyers to either lose the home they want to buy or their earnest money. 

We only work with lenders we know and trust, but if we are representing the seller, we are at the mercy of the lenders who are brought to us with their buyers.  Trust me when I say a lender can either be your best friend or you worst nightmare when you are buying or selling a home.  We lost a $500,000 plus sale in 2005 when a lender waited until the day before closing to inform the buyer that they had decided to charge a higher interest rate than what was originally agreed upon several weeks earlier.  The buyer said "no" and walked away from the home, losing his earnest money.  What happened to the lender?  Nothing!

• The Difference Between Funding and closing - Your home has just closed so now you can finally go sign that contract on another home or lease.  Wrong!  There is a big difference between closing and funding!  Closing means the paperwork has been signed by both the buyer and seller, but that's all.  The property is not legally conveyed until the funds from the buyer (or their lender) are wired to the title company and the title company has wired those funds to the seller.  Can a home close and not fund?  Absolutely.  In fact, it almost happened to us one time.  You can click here to read the story. 

It is also important to note that quite often a home does not fund on the same day that it closes.  Sometimes it will not fund until the next day, or, if it closed on a Friday, it may not fund until Monday.  Wiring with many institutions stops at around 3:00 central standard time, so we always encourage buyers and sellers to close in the morning.  A delayed funding can really throw a wrench into the works, but we are adept at protecting our sellers in this area.  One of the ways is a Seller's Short Term Residential Lease.  Click here to see an article I wrote in that regard.

• Unscrupulous buyers - Fortunately, I have only had one experience in this area and I never want to have another.  But it taught me that anything can happen, even at the closing table.  I had a shrewd commercial investor many years ago sense a weakness on the seller side and tried to drive a harder bargain literally at the closing table.  Although this is pretty rare, it can still happen.  Here is that story if you are interested.

Bottom Line For Sellers ...

• Never take a sale for granted!  Be cautiously optimistic as the hurdles are being cleared, but always remember that anything can happen on a real estate transaction!

• Never sign anything that commits you to buying or leasing another home until your home has closed and funded! 

Tom Grisak Estate Homes Realtors, Inc - Texas License # 0329533

Your Realtors for Allentexas, Fairviewtexas, Lucastexas, McKinneytexas, Murphytexas, Parkertexas, Prospertexas