Stars don’t have to align perfectly in order for the sale or purchase of a home to end up at the closing table – but it never hurts.
Most real estate transactions start easily enough. The buyers make an offer on a home they love and the sellers accept if they are pleased with the price and terms. The parties happily sign the contract, thinking the hardest part of the deal is done.
However, that is only half the story as it relates to moving a sale from contract signing to closing. Negotiations, deadline management and effectively addressing details, all with the client’s best interest in mind – are critical to closing the deal. There are points in the process when things can and sometimes do go wrong; not every contract ends in a successful closing. In fact, according to MetroList, nearly 30% of residential real estate contracts are canceled before closing.
The real estate market is healthy in Metro Denver, including Castle Pines Village, Evergreen, Boulder and the mountain resorts of Breckenridge and the Vail Valley, where Fuller Sotheby’s International Realty maintains offices. Home prices are appreciating, and the days-on-market (to sell) are diminishing due to low inventory. Buyers and sellers work to achieve the most favorable deal from their perspective. Instances of sellers fielding multiple offers, often over the asking price, are not uncommon.
Buying or selling a home is a complex business arrangement. Brokers should discuss the process with sellers when the home goes on the market, and when the buyers begin home shopping.
“Very often the subject of marketing and pricing consumes the discussion when a home is listed,” said Shannel Ryan, managing broker at the award-winning Cherry Creek and Clayton Street offices of Fuller Sotheby’s International Realty. “Sellers and buyers in this market should insist on a solid discussion with their broker on potential pitfalls, strategies to overcome obstacles and the broker’s actual track record in getting from ‘under contract’ to ‘closed.’”
Once a contract is signed, experienced brokers transition from being a marketing specialist to the role of a skilled negotiator, who knows how to analyze contract terms, weigh negotiation options and anticipate other factors that can make or break the transaction, Ryan added.
Here is a look at some of the most common pitfalls that derail a closing and strategies our seasoned brokers use to steer the process to successful outcomes for their clients.
Foolproof Financing: With the multitude of changes occurring in the mortgage industry, the outline of how the buyer intends to deliver funds for the purchase is absolutely critical. Even though a contract to pay cash was written, is it truly the buyer’s intention to pay cash? If so, a verification of funds is a must. The intention to secure a mortgage should be supported by an official letter from a reputable lender that illustrates the buyer has been approved based on a full credit report, tax returns and all other supporting documentation required by an underwriter. A lack of due diligence here can be the ultimate deal breaker.
Inspections: “An upfront discussion with all parties must establish that the purpose of a home inspection is to identify items that pertain to safety, possible health hazards and functionality of major home operating systems. Sticking to these items allows for a smoother inspection negotiation, void of anger and frustration, and does not include cosmetic items that would have been already visible during the initial visits to the home,” suggested Steve Blank, managing broker at Fuller Sotheby’s International Realty’s downtown Denver office.
The Property Must Appraise: The home must be priced properly and supported by applicable and recent comparable sales. High demand creating an “over-the-listed price” contract, does not guarantee an increased valuation in the eyes of the appraiser. If the property does not appraise, will the buyer be willing to pay the difference in cash at closing…or will the seller agree to take less than the contract price?
These acute details should be addressed and understood at the time of contract and not left to re-negotiation at the appraisal deadline.
Having the statistics to reassure buyers that they’ve made a smart decision with their hearts and their wallets can help avoid or mitigate the “buyers’ remorse” that can sneak up after a bidding war on such a major purchase.
Contingency Homework: Is the seller being asked to accept an offer contingent on the buyer selling his or her current residence? In the event this would be a desirable situation (and it is most often not), both seller and broker should thoroughly investigate the conditions under which the primary residence is being offered. Is it priced right and in excellent condition? What competition does the home have? Is the buyer represented by a well-qualified broker who will communicate all activity and feedback on the property? These are questions that Steve Blank suggests that a seller should ask.
Dates and Details: While it seems obvious, all dates in the contract must be adhered to in order for a contract to remain enforceable. Buyers, sellers and brokers alike are to operate carefully, but swiftly to deliver all documents on time and respond immediately to questions about dates, deadlines or requests for further documentation.
Courteous Communications: Brokers must represent clients’ best interests and focus on smart business resolutions so everyone can get across the finish line. High emotion, when not skillfully managed, can lead to last minute chaos.
Flexing marketing muscle is an important step in attracting buyers’ offers and our proprietary systems are second to none. However, the process from under contract to close is best managed by a highly experienced negotiator and broker with a proven track record of success. Fuller Sotheby’s International Realty brokers average over 12 years of experience and close to $10 million in annual sales production. Keen to the process, our brokers can navigate the entire experience from the sign in the ground to the closing table.
