How to keep a deal alive when selling
Experienced real estate investors have learned once they get a property they are selling under contract there are a lot of steps and issues that can arise before closing that can either delay the closing or break the contract. These issues can cost you more holding costs and maybe cost you purchasing your next deal. When I was rehabbing and building homes in a 10-year span, I only had one buyer break a contract. These are the tips I learned to mitigate these matters to close on time.
First, let us go over a typical residential transaction to understand how many people are involved. You as the seller and your listing agent have negotiated a contract with a buyer and their real estate agent. You should have a preferred title company for your closing (see #2 below). The buyer will typically have a different title company. The buyer has a lender, most likely a mortgage broker. A home inspector will be hired by the buyer. A list of repairs will be your responsibility so you or your contractor will manage subcontractors to come back to fix repairs. A pest control company will be hired for a termite inspection. The lender will order an appraisal. The appraiser will conduct a site visit at the property. So anywhere from 10-20 people will be involved in your transaction.
Take the bull by the horns
Out of the 10-20 people involved, you are the most motivated to close the transaction to get your funds. Therefore, you cannot just sit back and expect it all to get done. Most of the people involved do not know what other people are doing. Create a closing checklist to make sure tasks are completed or to remind you to follow up on the progress.
Use a reliable, quality Title company
Split closings are now the norm. Do not use a title company just because the seller is using them even if they might be paying your closing costs. You need legal representation and if you are working with an escrow agency for multiple transactions you should negotiate a discounted closing fee. You will build a relationship with the 1-2 people at the title firm and since you give them a lot of business, they will work hard for you.
Follow up with the lender frequently
Just within the mortgage company, there can be several people involved with one loan. The broker might have an assistant, a processor, an underwriter, and a manager. Some lenders have their process more streamlined than others. For example, some do not order the appraisal until the home inspection contingency has been removed. Depending on the market, appraisals can take 2-3 weeks to complete. The broker also has an underwriter usually in a different office or a different state that brings up additional conditions for the buyer. Your listing agent will have to get updates from the buyer’s agent. However, if you feel the closing might get delayed due to the lending, the listing agent might need to intervene (see #5 below).
Meet Home Inspector and Appraiser in person
Dropping by to introduce yourself to the home inspector can make a difference. For one, it shows you are standing behind your project with confidence. It also gives you a chance for the home inspector to ask you any questions about the property. Your conversation will most likely result in fewer doubts on the home inspection report for the buyer.
It is important that the appraisal is valued at the sales price at a minimum. Appraisers are busy and usually conduct several site visits in one day. You or your agent should have some comparables (comps) you looked at when you priced the home. It is a good idea to offer those “comps” to the appraiser. Most of them are happy to take them because it saves them sometime when writing up the report. Also, appraisers work all over a large area so you might know the area better than them and can educate them about it. They will ask a lot of questions about what renovations you have completed. Therefore being on-site with them will help tremendously.
Meeting in person you also build a repour with these professionals so when you see them on a future project, they will feel more comfortable and most likely help speed up the process.
Hire a “bulldog” agent
With this many people and steps involved to get to the closing table, there can be many different issues that may arise. If one person does not deliver on-time it can delay the whole process. Unfortunately, your listing agent can be led on that everything is going well and a few days before the closing an issue is discovered that could have been prevented or solved earlier. Instances like this are when you need an experienced and firm listing agent that will fight for you to get the deal done. Some transactions the listing agent will have to do a lot of the buyer’s agent’s job to keep the deal on task. Since you, the seller, have the most at stake, when issues arise, your agent needs to get the others in the process to understand the importance of this transaction. A “bulldog” agent will fight for you and get others motivated to do their job correctly and on-time.
It has been said, “the deal is never done until you get the check”. By following these tips you should get your check more often and quicker than other investors.