Friday, February 5, 2010

You Might Not Need A REALTOR IF.... Reason #7

You Might Not Need A REALTOR IF....Reason #7
you love stress, and can handle managing the 'contract to close' process.
Tick * Tock * Tick * Tock

Managing the contract to close part of the transaction is one of the more mundane parts of the process, thus the reason that real estate agents on both sides of the transaction delegate much of this tedious work to trained assistants and transaction coordinators.  In a perfect transaction, it is a matter of going through a checklist prepared based on the contract provisions and ensuring that you 'check the boxes' as quickly as possible, and without missing any deadlines.

Sadly, there are very few perfect transactions; and there are critical components of this process that MUST be managed or the transaction may not be successful.  The more complicated the contract, the more complicated the process.  The more emotional the parties, the more difficult each step is and the longer it takes... meanwhile, 'tick, tock, tick, tock'.

There are usually multiple deadlines put into a contract.  Many of them are quick, and some are confusing. Many deadlines read: 'X days after the date that notice is sent'.

The standard language in many contracts states if something is not delivered properly to the other party, or not completed within a particular time frame, the transaction is void. Understanding the contract is crucial, managing the contract is even more important. You've worked hard to get to this point. What if it falls apart now?

If you have one, the listing agent (in combination with the buyers agent and/or their assistants) will manage and coordinate this process.  Assistants are trained to alert the listing agent anytime a 'caution' flag is flown so the agent can intercede and get things back on track before they become a problem.

Below are examples of common components that must be managed:

  • Immediately following the ratification, the lender begins (or hopefully, continues) the verification process for the loan. Buyers will be asked for an endless supply of documents.

  • Title work is ordered.

  • Inspections are completed as required.  This may include general home inspections, pest and environmental inspections, and inspections by contractors, lenders, arborists, surveyors, soils consultants, etc.  Following any and all of these inspections, more negotiations may be required, and these negotiations can be highly emotional, as they are completed when the buyers' euphoria is gone and buyers' remorse has set in.  Meanwhile, sellers have emotionally moved on and started counting their proceeds thinking they are "done".  It seems the smaller the issue, the harder the negotiations.  I recently had a $500K+ transaction fall apart over a dispute about the cost of a repair - the disagreement was essentially over $1400.  Again, refer to the tips on negotiating your real estate contract, which were written in a prior post (CLICK HERE).

  • If applicable, the property owner association documents are ordered.  Ensuring proper delivery, understanding the required components of the resale packet, and the review period, are critical.  Discovering that something about the home is out of compliance with POA requirements - existing architectural guidelines and maintenance requirements (a fence that needs to be moved or rebuilt); or learning about unusual requirements (i.e. neighbors' first right of refusal to purchase the property); or being advised of outstanding monies due are just a few of the potential issues.  In Virginia, during the review period, the buyers can literally walk away from the transaction even if there are NO PROBLEMS, so it is a critical component of the transaction.

  • The appraisal is conducted.  If it goes well, the owners and agents may have very little involvement other than providing access and answering the appraiser's questions.  However, if the appraisal comes in low, you will really need an agent to assist you with providing information and in the appropriate ways to handle challenging the appraisal.  If this is a government loan (i.e. FHA) a low appraisal could affect the price you're able to get for the property even if you find new buyers.  Some segments of our marketplace are appreciating again, and so appraisal issues are increasingly common, especially when there are many comps that are distress sales.

  • Title work is reviewed by the lender and title insurance company and hopefully approved.  Issues that come up include any number of things - unreleased or improperly recorded liens, deaths in the chain of title, earlier title defects, unrecorded quit claim deeds, judgements in the names of the buyers or sellers (even if it was someone with the same or similar name, but not the parties to the transaction), survey issues, easements, even trouble getting payoffs from lenders when mortgages have been sold.  Admittedly, the vast majority of these issues can be resolved by a good title agent, but the listing agent may play a hugely supportive role in resolving some of these issues - perhaps just in keeping all parties calm and negotiating a delay in settlement to allow resolution; but perhaps in tracking down information that satisfies the concerns of the title agent or lender.

  • Once you've gotten through ALL of this stuff, and the loan has been approved, then the agent attempts to ensure that the closing company receives the loan package in a timely manner, reviews the preliminary HUDs (settlement statements), and compares the statements to the seller's expectations and ensures that everything is accurate.

  • The listing agent also coaches the seller on things like utility and insurance transfers, and ensures a final walk through is done by the buyers at closing, and a form to that affect is signed. 
With so much going on in so little time, it can get crazy.  In fact, it is not unusual for there STILL be negotiations going on between the parties at the settlement table or even afterwards.

If you are a seller and have decided to do this on your own, I wish you well.  If it goes well, you'll think "see, that was a breeze" and if not, well, good luck. 

I know that many sellers hire limited service agents to assist with certain aspects - marketing, and perhaps some negotiating, but coordinating the sale falls to the owner.... and since most of the time the owner is unfamiliar, often the buyers agent will take control of the process.  While this is a nice courtesy and the owner probably feels that they are getting the best end of the deal - receiving services not paid for - they are sadly mistaken.  A buyers agent will be processing the sale, with everything being tilted to the advantage of his or her clients... NOT to the interest of the sellers.  Again, depending on the transaction and the parties, this may or may not result in a negative outcome for the sellers...but they really should be aware that the buyers agent's job is to "represent the buyer", at all times.

So, my advice to sellers managing the 'contract to close' part of the transaction by themselves:  Pray that your buyers want to be fair with you, and keep the valium handy - just in case! 

Special Note About Agency:

Whenever I hear a customer (note: not a client, there is a big difference) talking about an agent who was 'dishonest' or 'unfair' the vast majority of the time the issue is the customer chose to be unrepresented - perhaps for convenience, perhaps because they didn't want to incur the costs - but the result is a party who is not represented. The outcome can be that the unrepresented party felt 'jilted' by the lack of service or getting caught off guard with an unexpected obstacle, which may cost them.

Please understand, we have a job to do, we are supposed to represent the party that hires us. This is why we have you sign a document that says you understand that we represent the other party. We won't tell you in what ways we will provide an advantage, anymore than you would tell any opponent your strategy. That's the deal. If it makes you uncomfortable, hire your own agent.

Otherwise, proceed with caution. Many of us are very good at our job, which is to maintain an advantage for our client, without alerting you. We are NOT being deceitful.

I do not provide this full and blatent disclosure to scare you, just to make things perfectly clear.  There is a lot of misconception here.  I have been in many transactions where a party was unrepresented.  I always do my best to be fair, honest, and forthcoming.  I advise my clients that is the best way to negotiate a transaction.  However, if doing so provides them with a disadvantage, and if there is no law that requires disclosure, then client confidentiality requirements overrule my desire to be forthcoming with the customer.  Again, just understand this is my job.  Sometimes, agents don't like our jobs.  But, we do them just the same.

Stay tuned to the REAL ESTATE WHISPERER for the rest of the posts in this series.

In the meantime, if you need honest feedback about whether you should hire a REALTOR to sell your home, and if you're in the Loudoun/Dulles area, feel free to call me. I am happy to talk with you over the phone about some of the pros/cons of hiring a real estate agent.



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