Home sellers have a right to feel optimistic, even bullish, about selling a house today: Demand is sky high, and with record-low levels of homes for sale, eager buyers will do just about anything to get their hands on your place, offering extra time in your home after settlement, vacations, and cash over appraisal.
Overall, this is good news for home sellers, who can expect high sales prices with few (if any) strings attached. Yet although sellers are poised to have a easy ride, the reality is that this crazy seller's market is causing buyers to make some desperate moves. And those can considerably complicate home transactions—not just for buyers, but sellers, too.
Here are a few key things buyers are doing today that could cause problems for sellers—and how you can sidestep these potential pitfalls.
1. Homebuyers are waiving the home inspection
In the past, buyers would typically include a home inspection contingency with their offer—a safeguard where a home inspector would check out a house for issues, which might lead to more haggling for repairs before the deal is done. Today, however, a growing number of homebuyers are waiving this contingency in an effort to entice sellers in a highly competitive market with a smoother (and faster) sale.
While waiving a home inspection is certainly a substantial risk for buyers, it can be risky for sellers, too. Why?
Because if homebuyers discover an issue after they move in that requires expensive repairs, It’s logical to think that, in many cases, one of the phone calls a buyer would make is to an attorney to find out if they can pursue the seller to recoup some of the losses.
This is particularly true if a home seller knew about an issue and didn’t mention it to the buyer. In fact, most states require sellers to submit a seller disclosure / dislcaimer form revealing certain problems in a home’s past, from flooding to pest infestations. Keep quiet (or just forget to mention the problems), and you could face some severe consequences. The seller should always disclose latent defects and if the listing agent is aware of any material defects they have to disclose them as well.
Even if the new homeowner may not have a case, it could cause the seller to spend money on legal fees as well as time spent trying to remediate the issue.
2. Homebuyers are waiving the appraisal contingency
Another common safeguard buyers often rely on is a home appraisal contingency.
A home appraisal is where a lender evaluates how much a house is worth, and offers to loan buyers only that amount. If the appraised price ends up lower than what the buyer offered to pay you, then the buyer must make up the difference—or ask the seller to lower the price.
Today, more homebuyers are waiving their home appraisal contingency to help make their offer successfully stand out amid intense bidding wars, and to speed up the buying and closing process.
The problem, though, is that in hot markets where bidding wars are common, homebuyers often find that the price they’ve offered is a whole lot higher than what the appraiser says the home is worth. As a result, it becomes harder than ever for buyers to cover the difference. And this, in turn, could cause the deal to fall through.
If a homebuyer waives the appraisal contingency and they back out of the deal for any reason, the home seller would be entitled to the earnest money deposit, provided the buyer and seller signed the contract.
But keep in mind that the prospect of putting your house back on the market after a failed sale could hurt you much more than any earnest money can make up for. Typically your first offer is always the best offer, try to negotiate.
3. Homebuyers are racing to close the deal
Waiving contingencies such as home inspection or appraisal generally turbocharges the closing process. And this is supposedly good for sellers, except for one problem: What if you had hoped to buy a new home before moving out? Then you may suddenly find yourself in the same crazy seller’s market as your poor buyers—and it may take you much longer than you’d ever imagined to buy a new house.
The fix: This is one area where home sellers would be smart to add a contingency of their own to their real estate deal.
When you counter the deal make sure you add a contingency giving yourself enough time to find another home and get to settlement, or even better, if your buyers are open to it, propose a rent-back agreement where the buyers allow you to remain in your old house and rent it from them until you’ve found a new home. This may not be ideal for your buyers’ timetable, but then again, if they really want your house, it’s one way their desperation truly can work in your favor.
There are even buyers who are offering additional time for the sellers after settlement in the original deal, so don't be afraid to ask for it.
If you need help with buying or selling make sure to give one of our trusted O'Brien Realty agents a call today at 301-863-2400.