FSBO Nightmares
What To Do When Things Go Wrong!
Buyers and sellers in the real estate market often believe in “Murphy’s Law”: If something can go wrong, it will! That may be a little pessimistic but, just in case, I want you to be prepared for any situation that could go awry. Read more about what could happen and what to do about it.
What if the Sale looks like it is going to fail?
Commonly called a "Sale Fail", these happen more often than even real estate agents like to admit, and the more of a Buyer's Market, the more likely it will happen to you. Do everything you can to keep it from actually happening if you become aware of a sudden problem during the escrow period but the time to avoid it is before it happens, if possible. Personally, I think the two leading reasons for sale fails are:
a. Buyer's Remorse - After having their offer accepted by you it is not unusual for the Buyer to progress quickly from 'Yea!" to 'What have I DONE?" Making sure the buyer understands they have a legal period of time to further consider the property (the property disclosure period) and/or if they have included an 'Inspection period", they do not have to make a fast decision, can often overcome that situation.
b. Buyer Financing Problems - Please see the section below for a discussion of that possibility and a good way to prevent it.
Some additional situations that may arise and cause your sale to fail are discussed farther down this page
Saving the sale
Carefully consider what the costs will be to you if the sale does fail. It may be time to make an additional concession to the Buyer if it is not too costly. Also, one of the best things you can do to prevent a sale fail is to have a back-up offer ready to go from someone else. If the Buyer knows someone else is ready to step in if he/she terminates the contract, they are more likely to not want to risk losing the sale from their own side.
Unsatisfactory Inspections
What happens if you get an inspection and it says your roof needs replaced, your electrical system needs rewired and your plumbing needs redone? First thing, don’t panic! Just because the inspection report found these problems doesn’t mean you have to fix them. You could negotiate the repairs of these deficiencies with the potential buyer. If you find that lowering your asking price means keeping the buyers interested, it could mean you’ll save more money than if you had to make all the repairs yourself!
Nit-picky Inspectors
Not all inspectors are alike; some will find more problems than others. Just remember, you don’t have to make all the repairs they identify. That said, there may be certain repairs the lender requires for them to complete the loan.
Under Oregon law, you are required to list any known problems that your house has in the Seller's Property Disclosure statement; however, you will not necessarily be liable if there are unknown structural problems. Some sellers will get their home professionally inspected to know what they’re dealing with before puuting the home on the market.
Unreasonable repair requests
If your potential buyer is demanding unreasonable repair requests, you have the right to refuse them. This is where a home warranty is especially important. For only about $300-$500, you can offer a home warranty that covers major problems with the home and/or the major appliances for a specific period of time (typically one year). The warranty won’t cover existing problems but it will go a long way to making your buyers more comfortable about buying your home.
Bad Appraisals
If the Buyer is getting a loan, the vast majority of the time the lender will require an appraisal. For conventional loans, the lender contacts an appraiser of his choice; for FHA and VA loans that appraiser comes from a pool. If the appraiser assigns a value less than the agreed sales price, the lender may limit the amount of the loan that will be available to the buyer. The buyer will then question the sales price.
You and the Buyer have few options:
- If the two of you agree the house is worth the agreed upon sales price, you, the seller, may consider taking a Second Mortgage for the difference in the appraisal price and the slaes price. There are inherent dangers in this solution; seek legal counsel to reduce your risks as much as possible.
- In a very few cases, you and the Buyer could request a second appraisal, basically challenging the original appraisal. This seldom is acceptable to the lender and incurs extra costs.
- You can reduce the price you are charging the Buyer to the appraised value.
- You and the Buyer can agree to terminate the sale. If this happens you will need to review the financial conditions in the sale agreement regarding earnest money, etc. Hopefully, you will have engaged an attorney to represent you who prepared the agreement. Regardless, seek legal counsel if there is any depute between you and the Buyer at this point.
Security Issues
There are security issues that arise when you put your house up for sale. For example, the safety of your home, possessions and yourself when showing your home or during open houses.
In “Selling Your Home – A FSBOs Guide to Keeping it Safe”, Michelle Annese provides these seven tips for keeping you and your home safe while showing your home. Click Here to access that guide.
- Fully screen callers before allowing them an appointment for seeing your home. Ask all the questions: name, existing address, and telephone number. Where are they employed? Why are they looking to buy? Do they have a family in the area? Any children? Ask as many questions until you feel comfortable with this person.
- Do not let unannounced visitors into your home unless you have their information first. If you are alone in the house, have them come back later when there are others home. There is no reason why someone cannot make an appointment with you. Make sure there is more than one person in your home when showing your property. Remember, safety in numbers.
- If you must show your home alone keep a cell phone with you. If you are in danger of a potential buyer, call 911 for help. In the event in needing to get away from someone run out of the house into your vehicle or neighbor’s house. Remember, your life is more important than property. Most criminals interviewed say they do not want to harm anyone when taking property, but if a person puts up a fight, so do they. Property and things in your home can be replaced, your life cannot!
- Tell your children, even if they are older to not let anyone in the house unless you are there. Even teenage children should not let anyone into the house. More assaults are committed on young people from the ages of 15- 25 years of age than any other age group.
- Be very aware of virtual tours. When creating a virtual tour, make sure there are no expensive objects displayed in the room(s). Criminals look for opportunities such as these to target homes to burglarize.
- Let neighbors know you are selling your home. Check with them on a regular basis to see if anyone has been around the house when you are not there. Criminals will use an open house, or a walk-through to pose as a potential buyer to scope out properties to burglarize later.
- Keeping the curb appeal not only adds value when you are selling a home, but adds to the safety of your home as well. Criminals say they look for high bushes near windows, not well-lit areas of a home, and concealed entrances to gain access to a home. Keep bushes trimmed low, repair or add higher wattage light bulbs to existing lights, and keep entrances well lit as for prevention.
What if No One Shows Up
What if, after going through the time and expense of preparing your home, no one shows up, even for an Open House? Well then, it’s time to evaluate your marketing efforts, your price and terms, and the outside appearance of your home. It is not unusual for potential buyers to drive by and not come in due to perceived neighborhood or house condition problems. If you’ve taken all the marketing advice I’ve provided and put it into action then perhaps it’s time to rethink the pricing of your home. If you haven’t done it already, request a free Property Investment Portfolio (PIP) from me to find out what homes have recently sold for in your area that are similar to yours, who your competition is, are there current pending sales (indicates if there are buyers), and also homes that were on the market and didn't sell.. This will provide a good starting point for an accurate selling price. Remember, the right price for your home, is the price that the market is willing to bear.
If you’ve tried everything else and your home still isn’t selling, don’t get frustrated, call your FSBO Coach! My specialty is selling homes that owners haven’t been able to sell on their own. As a real estate professional with years of experience, I have the skills, resources and knowledge of the market to help you sell your home.
Disputes
Disputes can arise at any stage of the home selling process. In order to minimize these disputes, I’ve provided a few scenarios and how to handle them.
Before-Closing Disputes
Two of the most common before-closing disputes involve the terms and the possession time of occupancy. In order to minimize these disputes, be sure to get everything in writing. Be sure that any stipulation discussed and agreed to is put into the contract. This includes when the buyer will take occupancy. This will help alleviate any “he said, she said” kinds of disputes.After-Closing Disputes
If you run into a situation where a buyer is saying, “I thought this was included”, your written contract should resolve those types of issues.If, after taking occupancy, the new owner finds structural or other problems not identified at the time of sale, you may find yourself in litigation.
Negotiating Disputes
If discussions and negotiations have been unable to resolve disputes, the buyer might decide to take their case to Small Claims Court or put it through arbitration. To be ready for these situations, do your research on the processes in order to help your case. Find out about the Small Claims Court process here.If you choose arbitration, you agree to abide by the decisions made by a neutral third party that has heard both your side and your buyer’s side of the case.
Buyer Financing Problems
It can be extremely frustrating to find a buyer that wants to purchase your home and you go through all the steps for them to take ownership only to find out that they can’t get financing. That’s why it’s a good idea to pre-qualify buyers prior to forging through the selling process. This can best be accomplished by 'making friends' with a good mortgage lender.
Require buyers who need a loan to pre-qualify with a lender you trust. You can make it clear to the buyer that they do not have to use that lender for the actual loan, but by taking this step, both you and the buyer can be better assured the transaction will reach a successful conclusion. You will find your 'lender friend' is willing to do this without cost, because they have an opportunity to turn your buyer into their customer, whether that buyer buys your home or a different one.
Requiring this extra step of the buyer will save you from a lot of headaches later on, and also give you a better indication just how serious that buyer is in purchasing your property!