Offer amount higher
Waived financing (cash)
Offer $ direct toward seller CC’s
Buyer pays Title
Post-occupancy for seller to move out slow
Use Seller’s Lender/Inspector reference
Just like products have labels, so do houses. Theirs just come in the form of disclosures. And some houses may affect the person living in them's health. Here's some insight, received directly from a licensed home inspector:
MOLD - Moisture is the enemy, and is the life source for mold/spores. A water or moisture leak behind a refrigerator, under the sink, etc. is wet, dark environment that mold grows in. Once the cause of the leak is stopped, the mold can not remain active. It eventually dies. However, both dead and live mold/spores can still be a health issue for some people if not cleaned/removed.
LEAD-BASED PAINT - Back in the day, before 1978, the paint had a highly toxic metal in it which is harmful if ingested. Not smelled. But eaten. Unfortunately, young kids used to eat paint chips from the baseboards, etc. and this was how the problem became known.
CHINESE DRYWALL - During the boom 2001-2006, we couldn't keep up with all the demand for new construction. So we asked China for help. And unfortunately they mixed in their garbage with their drywall pieces, manufacturing this synthetic drywall. While it sounds hazardous, the main victim of this drywall was copper. Primarily, the HVAC systems, and electric panels. The gas from this drywall would turn them black and eventually the HVAC and electricity would malfunction/shut down.
RADON GAS - Comes from the earth, naturally. Picture the earth smoking cigarettes, this is the smoke cloud. However, imagine the earth only takes one puff and puts it out. It's not excessive, and it only becomes a hazard if it can accumulate. Say in a basement or a contained room. But once an outlet or door is opened, the gas escapes into the atmosphere and then there is no more concern. Ventilation, naturally. Not necessary to test for. But everything has warning labels, just in case.
ALUMINUM WIRING - Was a great idea for conductivity to go with aluminum. However, the devices connected with them weren't originally designed with aluminum in mind (junction boxes, outlets, switches) so a fire hazard presents itself. Most common up until the 1960's. Copper is the go-to now...
GALVANIZED PLUMBING - Another system that became outdated and corroded away. Most homes are using copper, plastic, or PEX (a synthetic combo of metal and plastic). Regardless of the system, most don't last more than 40-50 years....
ASBESTOS - Another method that became known-hazardous and outdated. Building homes containing asbestos. Which is a hardened mineral, that when broken contains millions of microfibers which, once airborne and inhaled became a health concern. Think of it as a sleeping dragon. It's use and trade became restricted by the 1980's. It's removal requires a special hazmat team.
SINKHOLES - Rainwater is the best known culprit. The level of earth beneath our soil, but not quite as deep as the drinking water aquifer we tap into, gets run down with drain water, standing water, or rainwater. And some of the rocks dissolve in that layer, causing them to sink further down, creating the depression in the earth over time. These can be remediated.
One of the most common reasons a deal gets killed is the property's condition itself via inspections/appraisals....
First and foremost, do note that all INSPECTORS, APPRAISERS, and LENDERS are different. While they all generally <should> follow a similar code, some of them are more relaxed than others. But where we can improve our own skillset, our own eagle-eye, is by being selective with certain buyers (loans) when our client is on the sell side. And also being selective with certain properties (homes) when our client is on the buy side. This way things align, or at least give you a head start on setting the best expectations you can....
In a nutshell, FHA/VA Loans are stricter when it comes to the property appraising. Appraisers are trained to focus on all things SAFETY and FUNCTION. Repairs flagged, and are "subject to", must be repaired BEFORE approval/closing. Common repair items the appraiser will look for are environmental issues (gas, sinkholes, etc.), safe and functioning electrical, plumbing, and HVAC systems, at least two years of life on the roof (free of leaks), structurally sound foundation for life of loan, unpermitted additions, defective paint, accessible/clear crawlspaces, free of wood-destroying organisms.
Conventional Loans are generally focused on the "4 Point Inspection" being acceptable for an insurance company to deem the property insurable. This of course will likely imply that anything summed as a FIRE/WATER hazard needs to be replaced. Exposed wiring, plumbing/roof leaks, etc. Some lenders will allow repairs be made after closing, with proof of repairs being submitted in order to uphold the insurance policy. But these decisions are up to that appraiser to flag or not and that lender to underwrite or not.
Side notes: Mold is a health concern yes, but not a contingent remedy for loan approval. An appraiser will be more concerned with the source of the mold tho - and of course recommend it's removed.
Appliances do not have to be present. They do however have to be operational. If they are not, their loss of value can be deducted from the overall appraisal amount.
If you have a listing - it's highly advisable you are able to categorize that property into which loans would "work" or not. This will help your client select the best buyer option, and potentially save them time. If you have an active buyer - its highly advisable you are able to search and show properties that are more suited to their loan guidelines. This will help your client potentially save time and inspection/appraisal expenses.
Lastly, get comfortable communicating with the lenders involved, they are the ones ultimately buying these properties, hence the guidelines!
Roofing: Minimum 2 years of life needed to procure homeowners insurance via 4 Point report.
A lot of great built-in verbiage inside of our As-Is contracts that already protect both buyers/sellers. Here's some insight on some of the lines and how they protect your respective clients:
Line 55: This protects the buyer if there is a delay due to the delivery of the buyer's loan CD. CFPB requirements clause means if the Closing Disclosure was sent out to the borrow/buyer and the three-business-day-rule-for-them-to-review the loan docs happens to fall on or near the closing date then it must be extended - up to 7 additional days. Meaning the seller can not refuse to extend - and pull the rug out from under the lender - as this is automaticonce the contract is executed.
Line 67: Unless line 72 is checked, automatically states that a seller is to deliver a vacant home upon closing.
Line 89: Finance contingency. This protects buyers using a loan, always check this box, as it gives them at least a 30 day window to get their financing underwritten and approved by the lender, otherwise receiving their deposit back. Lines 115-119 allowing them to terminate the contract if they can't get approved, grants them their deposit back, assuming they aren't in default.
Line 96: If property doesn't appraise sufficiently then buyer can get their deposit back.
Line 250: Disclosures. Verifies that a seller isn't keeping anything regarding property's condition from buyer that can materially affect it's value.
Line 261: Inspection period. Gives buyer time and right to cancel contract in their sole discretion if property isn't acceptable. Inspection period begins the day AFTER the EFFECTIVE date. Note: The effective date is the day when the last party signs and delivers to the other party. The last day of the inspection period continues up until 11:59pm. And should your client wish to cancel beforehand, all you need to do is give any kind of written "notice" to the listing agent of the buyer's intent. And they get their deposit back.
Line 386: Protects Buyer from having to close with exceptions, clouds, defects on the title still. Automatically extends closing date by 5 additional days if cloudy title is delivered within five days of current closing date, in order to give seller time to cure them (30 day cure period). Once clear, title company can deliver a clear title commitment. If seller can’t cure within 30 days, buyer can back out and receive deposit. Free of liens per line 424. Note: Open Permits don't count as clouds on title.
Line 413: Protects investor buying tenant-occupied homes. If lease/tenant/estoppel information is not delivered or provided within 10 days or as late as 5 days prior to closing, buyer gets deposit back.
Line 432: Time. Any periods/windows (other than effective date) ending on a weekend or holiday get pushed to the next business day.
Line 146: Costs paid by Buyer
Lines 102/106/127: Protect seller from buyers defaulting with their loan/financial qualifications. Buyer must keep seller informed of status. After loan commitment period expires (30 days by default) the seller can request a cancellation of contract, if buyer hasn't obtained loan approval yet.
Line 250: Implies seller has disclosed all known material issues with property. Anything outside of their realm of knowledge would not hold them liable.
Line 538: If it's not in writing it doesn't have to be honored. Be sure to include all necessary terms, in writing.
Line 581: Holds seller harmless (outside of property disclosures) from claims of defective property conditions discovered at or after closing.
Line 466: Seller shows receipts for work complete during contract.
Line 289: Seller assigns all treatment, maintenance and warranties.
Line 135: Costs paid by seller
Line 508: Access and utilities provided by seller for walkthrough, inspection, appraisal.
Line 321: Holds us harmless from any information, claims, or conditions of the property altogether.
Line 562: Also holds us harmless, waiving us from any buyer claims of defective property conditions discovered at or after closing (outside of original seller property disclosures).
Knowledge is powerful, hope these help you all save deals and avoid pitfalls!
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