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Not All Sellers Are Equal
Hot real estate markets
can mean high home prices and that's great for home
sellers. But all sellers will not benefit equally. Also,
extreme markets can be risky. Here's what to watch out
for:
As tempting as it might be, don't automatically assume
that you're going to receive a huge price for your home.
The media tends to report the excesses in the
marketplace. You'll see a listing that sold with 35
offers, or one that sold for hundreds of thousands of
dollars over the asking price. You're not likely to find
reports about the listings that sold with only one
offer. Yet, many homes sell this way.
Even if you do receive a flurry of fabulous offers, you
could end up selling for a much lower price. The number
of failed transactions usually climbs during a sizzling
market.
For example, a home recently sold in the Oakland Hills
in Northern California for considerably over the list
price. The offer that was accepted was $100,000 higher
than the next best offer. Within a day that buyer backed
out. The seller's euphoria waned when $100,000 of profit
evaporated overnight.
In frenzied markets, buyers feel pressured to push their
offer prices higher in order to be competitive. It's not
uncommon for buyers to break through their financial
comfort zone in the peak of a multiple offer contest.
After more sober consideration, a certain number of
these buyers realize they made a mistake and withdraw
from the contract.
Sellers in this situation wonder whether they're
entitled to keep the buyers' good faith deposit money.
You'd need to consult an attorney for the answer. If the
purchase contract includes an inspection contingency,
the buyers may be able to back out without penalty,
depending on how the contingency is written.
Before you count on the proceeds from your sale, make
sure that the buyers have removed their inspection
contingency. Buyers, who are particularly generous at
the offer stage, could end up settling the score a bit
by asking the sellers to repair defects found during
their inspections.
HOME SELLER TIP: Beware of offers made without
contingencies. This may seem like a seller's dream.
However, no contingency offers can lead to trouble,
especially when the buyers don't understand what they're
getting themselves into at the time they make their
offer.
For example, if the contract doesn't have an appraisal
contingency and the property appraises for less than the
purchase price, the lender might not be willing to give
the buyer enough money to close the sale. If the buyer
has enough cash to make up the difference between the
purchase price and the appraised value, and he's willing
to do so, the sale can close. But, if the buyer is short
of cash, you may have to reduce the purchase price to
keep the deal together.
Letting a buyer purchase your home without the benefit
of an inspection contingency can be very risky,
particularly if there were no pre-sale inspection
reports for the buyer to review before making an offer.
What happens if the buyer finds significant defects in
the property soon after closing?
This is another legal question that requires an opinion
from a knowledgeable real estate attorney. The seller
could have liability, or face and unpleasant legal
hassle after closing. It's best to counter an offer that
does not include an inspection contingency to provide
the buyer an opportunity to inspect.
THE CLOSING: You can minimize your risk somewhat by
providing pre-sale inspection reports. But, these
shouldn't be a substitute for buyers having the
opportunity to perform any inspections they deem
necessary.
Dian Hymer is author of "House Hunting, The Take-Along
Workbook for Home Buyers" and "Starting Out, The
Complete Home Buyer's Guide," Chronicle Books.
Copyright 2005 Dian
Hymer
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