For years, my husband has been amazed as I report back to him my daily activities as a real estate broker. We constantly joke, “You couldn’t possibly make this stuff up!” Every Monday morning, as I sit with my Paradise Realtors in our weekly meeting, we discuss their activities – past, present and future, and as we lament or celebrate their trials and tribulations, someone ultimately exclaims, “You couldn’t possibly make this stuff up!” When I have lunch or cocktails with one of my professional colleagues, we trade tales of success and woe, and the waitress will overhear the laughter as we exclaim, “You couldn’t possibly make this stuff up!”
Throughout my real estate career, I have participated in thousands of transactions, and no two are the same. There are often twists, turns, and nuances that occur, and inevitably, it is one’s ability to navigate through the maze that creates the positive outcome that everyone hopes for. To me, a real estate transaction is similar to a game of chess. I have to be thinking 12 steps ahead, planning for all of the possible contingencies that might occur, in order to protect my client and make sure that we have the highest chance of getting to closing.
Below are 10 errors that can create havoc and cause a real estate transaction to go south:
- Errors in Qualifying for a Mortgage: There is so much involved in properly pre-qualifying a buyer to get a mortgage. It is critical that the lender fully examine all materials, including tax returns, bank statements, credit reports, divorce paperwork, and any other necessary supporting documents, prior to issuing a pre-approval. It is devastating to all involved if a buyer finds out days prior to closing that the loan was denied because the person qualifying the buyer did not do their homework.
- Appraised Value vs. Market Value: Understanding the difference between the appraised value and the market value, or marketability, of a property can be an important distinction that can have a huge impact on the true value of a property. This will be particularly important in situations in which there is distribution of property in a legal case, such as divorce, termination of a partnership, the sale of a business, or an estate sale
- Underestimating Carrying Costs and Repair Costs: When evaluating the affordability of a property, it is customary to look at PITI (principal, interest, taxes and insurance) as well as HOA/Condo dues. Often overlooked are the other costs, such as electric, water, pool and lawn maintenance, etc. In addition, when considering purchasing or remaining in a property, it is critical to take into account the age and condition of the appliances, roof, A/C, and anything else that might need repair or replacement. Sometimes, these carrying costs or potential repairs can add up to make a property unaffordable.
- Details of the Contract DO Matter: The addition or subtraction of a single word, paragraph or addendum can be the difference between a successful transaction and a disaster. It is important that the Realtor and real estate attorney work together to ensure the best outcome for our client.
- Missing Signatures or Initials: One missing initial or signature can cause a contract, listing agreement or lease to become invalid. It is important to make sure that we dot every “I” and cross every “T”!
- Deadlines DO Matter: There is a reason why contracts have dates and deadlines for contingency periods. If a deadline is missed in a contract, it can have devastating consequences.
- Probate/Trust Document Details: Understanding the nuances of trust documents, probate documents, and a power of attorney is essential when they are involved in a transaction. It is important to enlist the expertise of an experienced attorney early in the process, to avoid any last-minute surprises.
- Finding the Right Inspector: An inspector that is overly dramatic can kill a deal, and an inspector that is not thorough can miss major problems that can be very costly to a buyer.
- Emotional, Psychological and Financial: In my opinion, the area that most often leads to errors in judgment with regards to real estate occurs when clients make choices based on emotions rather than a comprehensive plan. It is important to help them make decisions about their housing based upon a combination of emotional, psychological and financial considerations. By helping them sort through the issues they will get the best outcomes.
- Putting Together a Good Team: It truly takes a village to complete a real estate transaction. Putting together an experienced team and utilizing extensive contacts within the professional community is critical to the success. This includes an array of attorneys, financial professionals, inspectors, mortgage brokers, insurance agents, and service professionals.
Throughout all of my real estate transactions, I become a trusted adviser, not only to my clients, but to all of the other professionals that are involved throughout the process. It is a tremendous responsibility, and even though it sometimes feels like April Fools, it is definitely no joke!