Colorado Real Estate Agents Are Writing Offers That May Endanger Buyer’s Earnest Money
When there is a seller’s market people get into emotional buying. The one person in the transaction that should be level-headed and not let the emotional decision to be made is the buyer’s agent. Sometimes buyers want a home so bad they make decisions they shouldn’t A buyer agent should explain to their client that their earnest money may be in jeopardy if they waive too many contingencies in the contract to buy/sell. Waiving appraisals and inspections could have a serious consequence to buyers.
What is Earnest Money?
Earnest money is used as a protection for sellers when there is a contract on the table for their home. Earnest money is an amount of money a buyer must put down to buy a property. It is a pre-payment, in other words, before the final contract, all monies are paid by the seller. After the closing, the buyer has the right to pay back the seller this amount which guarantees that the buyer can walk away with the home if they decide to walk away. It is also in the contract that if a home doesn’t sell within a certain period of time the buyer must cover the shortfall of money on the house’s sale. Buyers’ Liabilities Homebuyers should have a lot of cash to make the home a reality. A down payment should be 20% or more of the home’s sale price.
Sites like Redfin and Trulia will often report on the number of offers for a home, but buyers often overlook the importance of inspection scores. A buyer should be looking at the combined scores from the multiple inspections. A buyer should understand what those scores mean. If there is a problem with a home, the seller may be able to get the issues resolved prior to a sale. If not, the buyer is going to have to pay for them as they are a major part of the deal. Waiving Valuation There are times when a home is priced low enough to allow buyers to waive inspections, appraisal and a higher priced inspection to take place prior to closing. The buyer should always have a second opinion of the home.
Every agent should have their own appraisal in house. If your buyer’s agent can’t find his own appraisal, which should be able to be done within 24-48 hours and confirmed by a second professional, then you have a serious problem. Your buyer is either getting a shoddy appraisal, or the buyer’s agent is pulling the wool over the buyer’s eyes, thinking it’s a good thing to waive the appraiser. A lot of time and effort should be spent verifying the appraisal before giving your buyer a green light. For example, on some properties, it might be OK to waive the appraisal, but it doesn’t mean you should do it. It’s important to note that for properties with fast moving prices, I would be more inclined to offer more than the appraisal value to get the deal done.
Waiving Credit Reports
After two bidders start working on the purchase, the buyer’s agent should inform them the bank could pull their credit reports. I’ve found that if a homebuyer’s agent has been in a home buying transaction that may involve an extended closing time, they should be provided copies of the buyer’s credit report along with the information from the prior credit scores to protect their client’s buyer’s earnest money. Waiving inspections If there are any buyers that have caused damage to a home, they should immediately notify the seller’s representative to let them know. Buyer’s agents do not want any buyer’s remorse if there is a legal contract and work that needs to be done. The buyers should be made aware if there is any repairs required prior to the close.
Waiving Title Policy
Waiving a title policy is extremely risky in real estate deals, and could cause a mess and possible delays for you, your lender, and the Realtor. Be careful when you’re looking for homes to buy. If a seller will waive your right to purchase title policy on a property, make sure you have a correct understanding of what this means. Is the waiver more of a pre-purchase condition and not an issue after you have closed? Make sure you ask questions before you sign. Waiving Inspection Requirement Waiving an inspection is not a good thing if it’s an uninhabitable property. You want to make sure a property is ready to close and sale before you waive inspections. After closing on the home there could be issues that need to be addressed.
Ending the Consequences of a Buyer’s Agent
The bottom line is it may be time to pause and think about waiving contingencies for a good agent who knows the sale laws of your state. It may be time to call an agent who knows you and your real estate broker well, to save you from the severe financial consequences that you could experience. The bottom line is you are selling your home, there are contingencies to the sale contract; if you waive too many contingencies you may be inadvertently voiding yourself of your earnest money. In a small way it may feel like you will lose if you don’t write those contingencies down. However, if you are in that situation, your earnest money is in jeopardy. There are ways to protect your good will in the transaction.