- Unexpected surprises are a major reason transactions fall apart.
- Sometimes you have to go to great lengths to find the right answer -- and sometimes the right people -- to solve the problem.
- Navigating through costly unexpected transaction issues requires a top-notch team of professionals.
There’s an old adage in the real estate business that no two deals ever go wrong the same way twice. Another truism is that money solves almost every problem that you will encounter. The issue is negotiating who will have to pay out of pocket to make that happen.
In the following, I’ll chronicle how to save a deal by sharing some of my experiences both professionally and personally.
Inventory is at record lows, prices are still increasing in many areas, and interest rates have dropped when the predictions were that they would increase. When this happened in the past, buyers would purchase almost anything.
Today, that is not the case. Buyers expect properties to be close to perfect, and if not, they either expect the seller to fix the issues, or they walk away from the deal.
Unexpected surprises are a major reason transactions fall apart, especially when those surprises require big dollars to fix. When things go wrong, you need strong escrow, mortgage and title professionals who will work with you to solve any issues that occur.
This is a primary reason strong agents are so adamant about using people they know — these professionals partner with the agent to close the deal rather than losing it.
Over zealous attorneys
The recent sale of my mother-in-law’s house has been a case study of “if it could go wrong it did go wrong.”
The survey showed the house was located 36 feet from where the plans said the house was.
When my in-laws added a big bonus room, bedroom and bath, the builder and the city did not catch that they were encroaching into the 25-foot setback.
When the buyer’s attorney received the report, he fired off a letter disapproving the report. He went on to say that based upon his reading of the CC&Rs (covenants, conditions and restrictions) that it would take signatures of all 100 homeowners in the association to get a variance.
Our agent hadn’t really encountered a situation like this before. I explained to her that a primary function of the board was to avoid this type of situation and that I wanted to see the CC&Rs to determine how they set forth resolving setback issues.
I also personally contacted the president of the title company and discussed what would be required for them to issue a policy. Based on his review of the CC&Rs, he said all that was needed was a vote of the board of directors and a signature from the owner next door. He called the attorney and was able to persuade him to relent.
The only problem was, the title company couldn’t locate the owner.
Because I was in town for the memorial for my husband’s stepfather, I met with the president of the title company on a Saturday afternoon, and we spent 90 minutes tracking down the owner next door, who was living out of state. Fortunately, she was agreeable, and the deal closed on time.
Without the support from the title officer, we would have lost the deal and incurred significant costs coming up with an alternative solution to obtaining 100 homeowner signatures.
Punitive retrofit requirements
Retrofits at the point of sale are common and include items such as low-flow showerheads, smoke detectors, carbon monoxide alarms, water heating strapping, automatic earthquake gas shut off, and so on. These safety concerns make sense, and most sellers are prepared to make them.
On the other hand, punitive retrofit requirements are becoming increasingly more common as many municipalities use the point of sale to force owners to comply with more restrictive building or zoning ordinances, install expensive “green” upgrades, or limit growth with stricter density requirements.
In our case, the city required us to build a whole new septic field because the house was originally permitted for three bedrooms, not four.
That was a $10,000 problem. Because we had already shelled out for a new roof, new stucco, a new deck and repainting the entire property, I asked our agent to go to the buyers and negotiate to split the cost. They agreed. Our agent’s skill saved us $5,000.
Inspectors and HOAs gone wild
Ultimately, your problem-solving ability and persistence in keeping both parties at the negotiation table can be the difference between closing versus losing the deal.
To illustrate this point, I listed a $1 million townhome where the six units in the building shared a common attic. The termite inspection report came back with termite damage in the attic.
When we went to the HOA (homeowner’s association), they were unresponsive to our requests to address the problem. They were paying for pest control, and there couldn’t possibly be a termite problem.
The lender would not fund the loan without a clear termite report. I arranged for another termite inspection. The second report can back with the same results.
The HOA management company still refused to deal with the problem. It would require a special assessment to cover the cost of tenting the 15,000-square-foot, three-story building. The clients were livid and ready to contact their respective attorneys.
After numerous attempts, I finally reached the president of the HOA. He was reasonable and agreed to have their pest control company inspect the attic, provided that we paid for the inspection. The seller and buyer agreed to the third inspection.
The HOA inspection revealed that the two previous reports were in error. What the two previous inspectors had found were dead beetles, not termites. There was no active infestation.
Even more money
Last spring, Texas overwhelmingly voted to prevent having a use tax assessed on the sale of property. In contrast, New Mexico has a services fee tax on sellers that in our case resulted in an extra $3,800 tacked on to the commission.
Most states don’t have this fee, but some legislatures are eyeing this as another source of revenue. This is why your state and local association PAC (political action committee) contributions matter — they are critical to protecting both consumers and the industry from these additional costs that make selling even more challenging.
The bottom line is that navigating through costly unexpected transaction issues often requires a team top-notch professionals who understand how to quickly resolve challenges and get the deal closed, no matter what happens.
The question is, how good are the players on your team?
Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, author and trainer with over 1,000 published articles and two best-selling real estate books. Learn about her training programs at www.RealEstateCoach.com/