Be A Better Agent

6 COMMON “WHAT IF” REAL ESTATE TRANSACTION SCENARIOS

Posted on 06/21/2022 by Mike Aden

One of our primary responsibilities as a real estate advisor is to provide an extraordinary experience for our clients during a real estate transaction

A few of the ways we can do this include setting proper expectations, demonstrating expertise, and communicating effectively. 

However, even when we have been painstakingly careful to do these things, there will be times during a transaction when a scenario comes up that we did not anticipate.

Below are six scenarios that CHR agents have encountered within the last 60 days and how they were able to respond quickly (and ethically) to ensure that their client still had an extraordinary experience!

1. THE SELLER PURCHASED THE HOME 10 YEARS AGO. IN THE BUYER’S INSPECTION IT IS DISCOVERED THERE ARE STRUCTURAL ISSUES. THE SELLER BELIEVES THEY HAVE A STRUCTURAL REPORT FROM THEIR PURCHASE AND WILL LOOK FOR IT. YOU ARE REPRESENTING THE BUYER.

  • Will a lender lend on a home that has structural issues?
    • A lender MAY lend on a home with structural issues if they feel the risk level is minimal or feel that the issues have been corrected prior to closing.
  • What must be disclosed and to whom? If the current contract terminates what is the seller’s responsibility for disclosure?
    • EVERYTHING must be disclosed!  Anytime a Seller is made aware of any material defects, they must disclose those items to any prospective Buyer.
  • What if the listing agent states not to send the structural report, do they still have the responsibility of disclosing it? What if the buyer agent sends the report anyway?
    • Yes, they must still disclose, even though the information was shared verbally, disclosure must take place.

2. THE SELLER PASSES AWAY A WEEK BEFORE CLOSING, YOU ARE REPRESENTING THE BUYER.

  • What next steps do you take, and can you move forward with the purchase?
    • If the estate allows for the contract to proceed, yes, the purchase may continue.  It all depends on how the estate is set up.  The property may be held up in Probate however if there is no will and/or power of attorney in place.
  • Is your earnest money returnable?
    • It can be returnable if both parties agree that it should be.  However, EM return may be held up in probate also if the EM Release is not able to be executed.  There is also opportunity to work with Title to see if an exception can be made if there is no other party to the contract.
  • What happens to the property?
    • One of three things potentially will happen
      • Property is held up in probate
      • The contract proceeds as outlined in the Purchase Contract
      • The contract terminates

3. THERE IS A SQUARE FOOTAGE DISCREPANCY IN APPRAISAL VS WHAT THE LISTING AGENT PUT IN THE LISTING.

  • Can the buyer object to the appraisal? Can the price be changed based on price per square foot?
    • A Buyer can always object to what they choose to, however, square footage is not a typical “objectionable” item related to appraisal.  Price can always be negotiated if both parties agree.
  • What disclosure would you need to make in the listing to avoid this?
    • Best practice is to include the following in the MLS under Private Remarks: “Buyer to confirm all square footage.”
  • Is this a lender condition? What is the lender’s role?
    • This is typically not a lender issue.

4. YOU ARE LISTING A PROPERTY AND THERE IS TALK ABOUT AN HOA SPECIAL ASSESSMENT COMING UP.

  • Who is responsible for paying the assessment or is it negotiable?
    • It is always a negotiable item.  However, it is important to reference the HOA documents to see if it specifies who is responsible for paying current special assessments and/or if the Buyer can assume the remainder of the payments or if the Seller must satisfy prior to closing.
  • If an assessment is pending but written notice has not been given, is the seller responsible for when the notice is given?
    • This would not be a Seller’s responsibility if the assessment has not been clearly determined.
  • As a buyer’s agent, how do you counsel your client around HOA rules and regulations?
    • It is always best to direct your clients to contact the HOA directly if there are questions/concerns or clarity needed.

5. YOU ARE REPRESENTING THE BUYER AND THE TITLE COMPANY FORGOT TO COLLECT THE DEPOSIT FOR THE POST-CLOSING OCCUPANCY AGREEMENT.

  • Who is responsible for holding and collecting the security deposit?
    • This is determined in the Post-Closing Occupancy Agreement.
  • What if it was my responsibility to make sure it was collected and I forgot, is there recourse?
    • The best recourse is to contact the Listing Agent to see if the Seller will still agree to provide the security deposit post-closing.  There is a chance they may not.  If the Seller will not provide, the agents may be responsible for correcting the situation and providing it for the clients.
  • Is it the title company’s responsibility if they did not follow the documents and collect the monies?
    • If Title was specifically directed to collect the and disperse and that did not happen, then yes, it becomes their responsibility.  Although, it is also the responsibility of the agent to review Final Settlement Statements to confirm that it is being collected.

6. YOU ARE LISTING A PROPERTY WITH A WELL AND A SEPTIC SYSTEM.

  • Who is responsible for transferring each with the county?
    • It is the Seller’s responsibility to transfer with the county.
  • What inspections need to be completed?
    • Well Inspection:
      • Flow/Recover test
      • Potability test
    • Septic Inspection:
      • Flow Rate
      • Leech Field Flow and Absorption Rate
  • Can a property close if the septic transfer cannot be done prior to closing?
    • A property “may” close if the county provides for the appropriate “post-closing” documentation with a specific date for the work/transfer to be completed post-closing.

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