Market Update August 18, 2021

SAVING YOUR BUTT IN A SELLER’S MARKET – AS A SELLER

While we are entering the traditional slow season we are still in a Seller’s Market. While this bodes well for those who will be wanting to sell their property, they are also exposing themselves to risks due to the protections that buyers are waiving. While at first glance receiving a sure-fire offer might seem appealing, let’s take a look at how the three biggest waived contingencies could impact you.

1. Home Inspections – when buyer’s waive this contingency, they waive the ability to inspect the house prior to purchase. While this is great for selling purposes, if a homebuyer should discover a major issue (e.i. expensive) after they moved in, they might just phone an attorney to see if they can make the seller recoup some of the losses. Therefore, when filling out the Seller Disclosure (form 17), regardless of whether an inspection is happening or not, always be honest about known defects to the property that may impact value. Not disclosing certain problems in a home’s past, from flooding to pest infestations, might land you into hot water. A seller pre-inspection puts you into a better position of knowing what could come back to haunt you, and shows that you’ve acted in good faith prior to selling.
2. Appraisal Contingency – this is another buyer waiver’s that says, in the event a lender won’t approve sufficient funds for the purchase of the house (because the lender thinks the house is worth less than what the buyer was willing to pay) the buyer is still in contract. Should the buyer pull out of the contract because of a low appraisal and insufficient funds to cover the difference, this means you get to keep their earnest money. While this sounds great, having to put your house back on the market hurts after a failed sale could hurt you much more than any earnest money can make up for. To avoid such a situation, avoid accepting the highest offer with a low earnest money (typically 1-2%). It’s best to accept a slightly lower offer with a high downpayment (meaning a low appraisal is irrelevant) or accept one or two back-up offers should the first offer fall through.
3. Sale of Property Contingency – If you are planning to put your house on the market and buy another one… you might find yourselves homeless before you know it! In this market, your house will snatched up before you know it, in all likelihood way before you find and successfully purchase that ‘right house.’ Adding a rent-back contingency that gives you the ability to remain in your house for a little while longer, even after its successful sale, giving you extra time without having to find a place to rent or have to live with in-laws. This would also allow you to avoid including a Sale of Property Contingency in your offer when you do find that house you’d like to make an offer on