As I reflect on the all of the loans that I have closed over the years, I have to admit that each one of them has had some drama associated with it.
Some “drama” is more memorable than others—and I’m sure that you have your own stories!
While there will always be a little drama with each real estate transaction, I read an article the other day about how listing agents can minimize it when an offer is presented and accepted.
So, I wanted to share some of those tips with you.
Explain the Sales Contract in Detail: What normally happens is that the contract paragraphs are explained in general terms, like “this clause explains what will happen in case of a default”. Explain in laymen’s terms each and every clause on the contract.
Explain what happens to the earnest money deposit: – Where it’s deposited and how it will be credited at the closing or refunded (or not refunded) if the deal falls through.
Explain contingencies: This includes the time frame needed to meet those contingencies and what happens if they are not met. If they can be extended. Negotiated. Or waived.
Explain Inspection Reports: Don’t downplay any of the issues on an inspection report. What might not be an issue with you or the seller may be a major hang up for the buyer. Each big or little problem may be an issue, so warn the seller not to get upset or offended when the buyer is asking for repairs.
Explain the lending process: If there is mortgage contingency, explain the loan approval process. How the file goes from pre-approval to processing. To appraisal review. To underwriting. To closing. Talk about some of the issues that you have experienced in the past but that you have absolutely no control over – nor does anyone else due to the borrowers’ Right of Privacy rules.
Explain the appraisal process: If anything blows up a real estate sale, it’s the appraisal. Explain the difference between a CMA and an appraisal. Explain how long it might take (in some areas of the country, it could take up to a month). That the seller does not get a copy of the appraisal (unless approved by the buyer). What happens if the appraisal comes in lower than the sales price? Is there an appeal process (depending on the type of loan)? The option to renegotiate the sales price. Or cancel the deal all together.
Explain title insurance: Why the seller must provide title insurance. That both the seller’s and the buyer’s records are searched for any liens, collections, judgments, or legal issues. Explain the “conditions” outlined and, in some instances, why a land survey may be required.
Explain the closing process: In addition to your Sellers’ Net Sheet, show them a blank copy of a closing disclosure that they will be reviewing and signing at closing. If the seller has a mortgage that will be paid off at closing, explain how the payoff might be different from your estimate due to additional interest or an escrow shortage. Talk about how taxes are pro-rated at the time of closing and how it will affect the sellers’ final check. Give them examples of the other documents they will be signing at closing.
Just a few other suggestions—
- Create a checklist for yourself so you remember to explain everything in detail. Ask the seller to sign it after you are done as proof if something “hits the fan” later on in the transaction.
- Give the seller a blank copy of an inspection report. Sales contract (with notations). Closing documents. Any other paperwork that you think is important.
- Consistently call after each “event” and reiterate the explanations that you had with them when the offer was accepted.
While this may not eliminate all the drama (issues), it covers most of the potential questions, and how the selling process works may ultimately get you more referrals due to the fact that you are both knowledgeable and personable.