Money Matters – Things to be aware of when purchasing a home

 In the current market environment, with a somewhat diminished market inventory sellers are placing some difficult if not unwarranted demands or constraints on buyers – which the buyer should be aware of to reduce extraneous costs, misunderstood obligations, and legal commitments that may ultimately be hard to get out of.  Here are 5-issues that may come up when buying a house:
#1 – The house is offered for sale in an “AS-IS” condition – which means no warranties or guarantees offered.   This does not necessary mean that the seller is aware of deficiencies in the property.  The buyer must approach the purchase of this home carefully though and that means a physical inspection by a licensed physical inspector or contractor.  And should this individual have concerns over issues that may be outside their scope such as HVAC systems, electrical systems, septic systems, pools, etc. – it is very important that an expert in that industry completes a detailed inspection as well. As an example, regardless of how beautiful the pool is on a home that my client is buying I always have the buyer have a complete system check on both the physicality of the pool but all the auxiliary equipment as well. Example – a client that is in escrow right now suspicions were raised when the seller would not pay for a septic certificate nor help us in finding where exactly the septic system was so my client could do his own investigation.  Well we found it and are having the inspection done at my buyer’s cost but most definitely worth it as a damaged or for that matter a new septic system can cost tens of thousands of dollars.
#2 – The seller wants the buyer to remove their appraisal contingency up-front, i.e. against the normal contingency timelines. Why you may ask?  Simple answer = the listing agent and the seller don’t think it’s going to appraise for the list price, or the inflated agreed upon sale price due to multiple offers and the buyer’s hysteria to get the home no matter what the cost.  Think of this in that what the seller is trying to do is simply take some of the buyer’s new found sweat equity and put it in his/her pocket. This ploy was recently requested from a buyer of mine when we were told that in order to procure the home, i.e. the seller to accept our offer, we would have to raise out bid $20,000 to $30,000 over the full price we had written and remove our appraisal contingency.  This was done in a phone call not a CAR form by the way. This meant that my client would have to come in with his down payment and the difference between sales price and appraised value.
#3 – The seller wants to shorten the contingency periods that are standard to the California Association of Realtors Purchase Contract – from the standard 17-days for all inspections and 21-days for the loan.  In today’s lending environment with the new TRID policies and procedures in place the big banks are having a tough time doing a 45-day escrow much less have the due diligence time frames shortened by the seller.  The buyer must have a really good lender whether a bank, direct lender, or a mortgage broker that is on top of the contingency restrictions agreed upon by both seller and buyer.  I am now consistently being asked for extensions on these time periods because the buyers had not got pre-approved as they said they were or the lender and/or realtor simply can’t get their act together.
#4 – The seller wants the buyer, even though already pre-approved with the lender of their choice to get pre-approved with their compatriot in arms, friend, family member, etc.  My wife, Melanie and I, have owned a mortgage company for over 25+ years. We just recently had two incidents concerning this issue that we have changed our whole concept regarding this unwarranted demand and will never allow this to happen again.  We had a client that wrote an offer on a property owned by the listing agent’s daughter, and through the course of our offer being negotiated we were asked to send a complete loan application to her son at a major bank before final seller acceptance. This individual told his mother that the funds for the down payment that were in an equity account at a major broker dealer were at risk because of the fluctuations in the market, and should a sudden crash occur the buyers did not have the 20% down as was noted in the pre-approval letter from my “in-house” lending company.  The listing agent cancelled the counter offer that was out to us and took another offer.  My clients lost being able to buy that home because of the gross misconduct of the agent but the inexperience of a loan officer because they could have qualified with as little as 5% down.  The other occurrence concerned my client removing his contingency (that he wanted to sell his home first and then concurrently close on another) to secure a property and place it in escrow as the seller would not take a contingent offer.  We were forced to send the file to an internet lender who quickly came to the assumption that my client could not afford to do that when in fact he could qualify for both payments and really didn’t need to sell his current residence to buy another home.  He is currently in escrow on another home.
#5 – The seller asks for a per diem penalty should the buyer not be able to perform to the agreed upon COE (close of escrow timeline).   Let me first say that as a Real Estate Broker we have never asked for that. Buyers will see this in a multiple counter offers, and may be accompanied by seller also requiring a shorted escrow period and contingency timelines as well.  We avoid asking for this by probably vetting the buyer through the pre-qualification process, i.e. proof of funds, FICO Scores and a Fannie Mae DU underwriting decision + we maintain constant contact with the buyer’s lender asking for weekly updates and if we hear something we don’t like we contact the selling agent immediately with our concerns.
Let me preface this with the fact that buyers and sellers alike are truly blessed when it comes to the professionalism and hard work ethnics of most all the Real Estate Agents that both work and live here in Santa Clarita. Our Real Estate Company – Oak Tree Realty, helps clients all over the state of California.  We have had “every trick in the book” tried to be pulled on us in some of these outlying areas.  My recommendation is that you seek the guidance of professionals in this industry – whether it be title, escrow, lenders, appraisers, physical inspectors as they know the professional men and women who are going to “watch your back” and give you sound advice through one of the biggest financial decisions you will make in your life.
For more information please contact Douglas J. Sedam at 661-295-2400 or visit www.thepaseogroup.com