Let’s face it, a Real Estate deal or transaction is going to fail or fall through. Someone is going to forget to order something, write something up, or something is going to be too late to the table. It happens, and unfortunately, it happens, perhaps all too often. To the dismay of everyone involved, a deal often becomes dead in the water, and can’t close for what can perceivably be, avoidable errors.
Errors, mistakes, faux pas, or whatever you choose to call them, they can cost thousands, if not millions of dollars in real estate losses. Knowing some of the instances in which these have occurred, or have been narrowly avoided can be a warning to everyone, and hopefully help anyone avoid lawyers, lawyer fees, and lawyer headaches. What are some of the things to be on guard for? Here is a short list, and I mean short, because this is only an overview that is intended to remind us to be very proactive when it comes to negotiating and moving forward in a Real Estate transaction.
How to avoid Costly Mistakes (Basic issues) in Real Estate Transactions:
- Sign, Initial, date and time where necessary-The number of contracts that are missing signatures and initials that are required is fathomable. Too often, there appears to be a lot of rushing to sign papers to buy or sell a property. It appears as though those who are signing the document, are squeezing the act of signing into their schedule. Please take the time to read what you are signing, but more importantly, where required, initial the document, or this may cause a delay in the process, or provide a scrupulous seller or buyer an out to a contract.
- Make good copies of originals-With advent of faxes, copiers and scanners and the like, originals become blurred or indelible, or just plain hard to read. Where possible, include the original document with the difficult document, even if it does not have all of the signatures. This will help others down the line to make sense of the intent of the document. Or, call forward to advise the person who is subject to receive the documents to be aware, and to call back for a clearer copy.
- Document/record for your records - (Date, time, who said what, where and why) any antidotal information pertinent to the file-It seems insignificant if someone said that they sent something on Thursday, and a week has gone by. But during the buying and selling process, this small recorded statement may come back to bite you if you can’t recall that it was said, who said it, and when it was promised. Make a note in the file cover, or keep a journal of the activities that go on relating to the home buying process.
- Keep a record/Keep a record in a set place- It is amazing, but everyone does not keep records. Everyone does not have a file, or a safe place to keep files. Have a set place to put your important papers. Not knowing where your papers are at a critical moment during the home buying process, it could cost you the deal.
- Know all of the players (as many as possible) and communicate with them at least once during the process/document- How many people could be involved in buying and selling a house? A ballpark estimate: 100 people (depending on the type of purchase and if using a Real Estate Agent). Wherever possible, get to know who are the players. You may not speak to all of them, or need to speak to them, but be aware of the role that each group and/or individual plays in making it possible to buy or sell a home. That include the Title Company, the Appraiser, the Home Inspector to the Home Warranty company, who are just a few of those who take an active role in the sale of a home. Knowing each individual’s role helps you to understand where, if possible, your deal may have a problem, and how you can backtrack, if necessary, to minimize any damage(s) from occurring.
- Any mistakes, or errors should be pointed out immediately and addressed, even if you are the one who made the mistake-Mistakes are not uncommon in a real estate transaction. From a failure to initial a change, to a failure to date a document, to a failure to address a repair in an amendment, mistakes can happen. Generally, those mistakes maybe overlooked, ignored, or addressed by either the buyer or seller. The question is when will that error or mistake jump out and create a problem? The worst time for an error to come up is at the closing table. It is at a time when the buyer(s) and seller(s) are ready to close the deal. An error that could have been addressed well before closing, with possibly no damages, or loss to be incurred, now becomes a big stick for the one the error favors. It is at this point the error, depending on the circumstances, could result in both parties agreeing to disregard the error and move forward, or to be compensated, right then and there, at the closing table, or someone deciding to take legal action.
- Ask for clarification/or information as needed-assume nothing-A lot of documents are going to be signed back and forth between buyer(s) and seller(s) during the home buying process. While many professionals explain what it is you maybe signing, those professionals in their absent-mindedness, may ask you to sign a document using jargon that is exclusive to their profession. For example, “Please sign this SRT form, or this BBO2 form and will give you the right to do A, B, C.” As the one signing, you want to believe that no one would ask you to sign something that would harm you financially, and you may not want to look like you don’t know what is going on. But to be honest, you may not know what is going on, and you should ask your agent, lender, Home Inspector, or anyone else to explain more clearly what it is you are signing, using plain English.
- Take note of dates and times in the contract and abide by them/Amend as necessary-Dates and times are included for a reason in contracts. Many people disregard these dates and times, believing that there are circumstances of a non-related matter that outweigh those dates and times, until someone presents them with a cancellation and failure to return their deposit, or request their deposit back as a buyer. These restrictions are there to help buyers and sellers to determine how serious the other is regarding the purchase and sale of the property. If one or the other is oblivious to the dates and times from the outset, the buyer or seller may cancel and move to another property.
- Confirm funds- “Do you have the money?” Whether you are financing or paying cash, the seller in a real estate transaction wants to know if you have the means to purchase their property. If you are offended by this as a buyer, perhaps you should not attempt to purchase or buy property. Too often sellers take their homes off of the market under the presumption that the buyer has the means to buy their property. This is not to say that sellers have not confirmed whether the buyer could or could not buy, but that even with a confirmation, most often tentative, a seller can be lead to believe that a seller can purchaser their property. As quiet as it is kept, by the time comes to close on a deal, the lender could send a letter atthe last minute, indicating that they buyer cannot finance the deal, despite a pre-approval letter having been received. On the issue of cash, the bank could indicate that the buyer is unable to provide the cash because they either spent the money, or that the funds did not get wired in time from another source.
- Confirm Taxes-If going through a lender, one of the forms that they provide a potential buyer is a form http://www.irs.gov/pub/irs-pdf/f4506t.pdf. You should be able to learn how long it takes to obtain a copy of your taxes for the lender. But a failure at all to file taxes, is a reason not to pursue buying a house, at least through a lender. This is not an endorsement not to file your taxes, but a reminder that by not filing taxes, that you, as a buyer, can cause a seller to loose valuable time, and perhaps seek damages against you as a buyer for tying up their property.
The above 10 points are not a total list of how deals can fall through. There are deals that may have fallen through due to illness, back taxes, liens, succession, and a host of other issues that can favor or not, the buyer or the seller. The real issue here is to make sure that as a buyer, and a seller, being proactive in the process to where regardless of the professionals who are involved in helping you to buy or sell a property, you are not abstained from responsibility for the outcome if a deal falls through.
There are anywhere from 50 to 100 people involved in helping buyers and sellers to complete a transaction that when it comes down to it, make take 30 minutes to complete at the closing table. A lot goes into making those 30 minutes or so go smoothly, and it takes a number of licensed, certified, and committed professionals to ensure that the sale goes off, without a hitch, and that the sale does not fall through. If you should take anything away from this article, don’t look to who can be blamed, but how to avoid situations that can cause a deal to fall through.
Thanks and best wishes on the sale and purchase of your next home.