Someone once asked Abraham Lincoln what he would do if he had eight hours to chop down a tree. His response? “I’d spend six hours sharpening my ax.”
For the last tactic of our “Shift” series, we’ll talk about bulletproofing the transaction. When it comes to real estate, being forewarned means being forearmed. We must educate our clients and tell buyers and sellers what to expect—it keeps the drama out of the transaction.
With that in mind, here are the specific transaction issues you need to bulletproof:
Inspections and appraisal repairs. Things can go wrong during inspections, whether it be unexpected findings, inspection report complexities, confusion about who pays for what, etc. There are also repair timetables and potential doubts about the home’s worthiness to consider. That’s why we focus on setting up expectations up front for buyers and sellers. Oftentimes, we’ll have our sellers have their homes pre-inspected before listing, and it might be a good idea to attend the pre-inspection with the buyer or seller. Also, we always help select and supervise the vendors based on track record and quality, and we reassure buyers throughout the process.
When it comes to appraisals, they can sometimes be an issue in downward-trending markets when they don’t support the home’s contract price or loan type. The condition of the home can present issues, too. In these cases, you want to provide as much information as possible to the appraiser up front. You also want to help buyers find additional funds to close on the loan and negotiate with the seller and the lender for funds. You can always ask for an appeal if the appraisal doesn’t match your valuation.
Loan approvals and funding. Potential issues here include credit issues, delays in application, documentation problems, and the lender’s failure to approve and fund. To stay ahead of these issues, select an originator who will get the buyer through the full underwriting process prior to home shopping. You can also offer to assist buyers with paperwork or refer them to a credit counselor and then have them reapply or do a parallel loan application.
“The bottom line is, successful people know how to shift.”
In terms of buyer credit issues, there are seven don’ts of mortgage funding that you should educate your buyers on up front and throughout the home purchase:
- Don’t change employment status
- Don’t make any major purchases
- Don’t increase credit card debt or miss any payments
- Don’t change bank accounts or make undisclosed large deposits
- Don’t apply for a credit card, cosign on a loan, or make any credit inquiries
- Don’t spend money you’ve set aside for closing
- Don’t delay providing all necessary paperwork
Other contingencies (the sale of the buyer’s house, getting third-party approvals on short sales or distressed properties, etc.). In this case, you want to take backup offers on your listings and know who to communicate with during complex transactions. Also, be sure to get preliminary title reports on your listings and read them before going on the market.
Co-op agents. We hear plenty of complaints about co-op agents, but let’s do our best to keep our own egos out of the negotiations and assume that these agents are less educated about the market. They may be unintentionally giving bad advice due to poor communication, or they’re making bad vendor selections. In any case, you can stay ahead of this by clarifying your clients’ intentions. Own the process and deliver sound communication throughout.
Deadlines. You might have tight inspection or repair deadlines, or the selected closing date won’t work. We often see occupancy issues with taking possession and delayed approval because of delayed documentation being delivered by the buyer to the lender. In these cases, be sure to confirm appraisal and inspection appointments and follow up on their progress. Build in some buyer and seller flexibility up front, prepare them for any common delay issues, and manage your closing checklist.
Being proactive in the transaction will help everyone focus on the positive. Also, keep your clients intentional and flexible, and make sure you keep all players in the transaction accountable. Be a problem-solver and be customer-centric in handling whatever goes wrong.
That wraps up our “Shift” series and the various tactics millionaire agents use to thrive in a shifting market. The bottom line is, successful people know how to shift. You can’t do all things at once, so focus on what’s important first. Remember that we “fail” our way to success, and keep in mind the words of the Serenity Prayer:
“God, grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.”
As always, if you have any questions for us about your continued success in a shifting market or about today’s topic, please let us know. You can also visit our website to sign up for our agent newsletter, our business planning clinic, or to book a one-on-one appointment with our team. We’d love to have a conversation with you!