by Joshua B. Rosenzweig (Winter 2018)
Finally, after months of searching, you found the perfect home for your family. It has a big backyard for the kids to play. A fence to keep your dog from running away. An open floorplan conducive to hosting friends and family. And, a finished basement that will allow the kids to play for hours without trashing the rest of the house.
Then, you move into the house, and you realize the huge backyard is a pain to manage. The dog hates going into the yard. The open floorplan does not give you any privacy when, for example, your in-laws come to visit. And, that perfect finished basement? Well, the kids enjoy watching television in the family room instead.
After a few years, you begin searching again, and due to prosperity at your job, you realize the perfect house is just around the corner. But, what do you do with the first perfect house you found? It’s time to call your realtor and let her know you want to put the house up for sale. So, you get the house cleaned. Maybe you even put a fresh coat of paint on the walls and re-finish the wood floors that the dog has scratched over the years. Then, you list the house.
After a week of waiting, an offer comes in, and, a second offer comes in. Before you know it, your house is the subject of a major bidding war. Finally, the bidding reaches a price you can live with, and you sign the contract. The hard work is done, right?
What do you do next? Call your attorney. Your realtor is going to guide you on what will get your house sold, and, your realtor is familiar with the terms of the contract. However, even though your realtor has handled exponentially more transactions than you have, your realtor is not an attorney.
Once you accept an offer on your house, it is your attorney’s responsibility to make sure the terms of the offer meet your needs. It is not only the purchase price that you need to be concerned with when selling your home. You need to make sure there is sufficient earnest money to keep the buyer’s attention. You need to make sure the closing date works for your schedule. Remember, if you are buying a new house, and your new-home purchase is contingent upon you selling this house, make sure that your closing on the sale lines up with the closing on the purchase. Understand what other contingencies are applicable to the deal – does the buyer need to get a mortgage? If so, by when must that mortgage be obtained?
At the same time your contract details are being worked out, your buyer is performing an inspection. Within five business days of accepting the buyer’s offer, and during your attorney’s review of the contract, your attorney gets a letter from the buyer’s attorney asking for 37 inspection repairs. For example, an outlet in the basement is not GFCI protected, so the buyer wants it replaced. The water-heater is showing its age, so the buyer wants it replaced. The roof has missing shingles, so the buyer wants them replaced. As if negotiating the contract itself does not impose enough stress on you, now you have to carefully respond to each request while keeping the following thought in mind – “If I say no, is the buyer going to walk away?”
Often, buyer inspection requests can seem like personal attacks. Nobody wants to be told that their house is “sub-par,” and inspection requests feel like that. But, if you’re selling your home, you have to remember that a buyer just wants the house to feel like “home” as well. Of course, getting the best deal is also an important consideration. Regardless, when the laundry list of requests come in, discuss them with your spouse or confidant, discuss them with your realtor and discuss them with your attorney. You have plenty of advisors that can help you respond accordingly.
So, you get through the contract negotiations. And, you find yourself giving the buyer a bigger credit than you wanted for inspection items. But, at least you know you will still walk away from this sale with sufficient funds to cover the closing costs on the purchase of your next real, perfect home. You’re done worrying, right?
Wrong!!! If the buyer’s purchase of your home is contingent on financing, then your buyer still has a mortgage to obtain. And, you still are obligated to make the inspection repairs agreed to and convey clear title to the buyer. Well, what can go wrong with that?
First, regarding inspection items, it is easy to forget to do something agreed-to. I have been to plenty of closings on behalf of buyers where the sellers’ attorney has no proof of an agreed-upon repair. To make sure this does not happen to you when selling, follow-up with your attorney about the inspection repairs to make sure you have completed everything you agreed to do. And, keep receipts to show the work has been completed.
Second, concerning title, it is the seller’s responsibility to convey clear title. Therefore, your attorney may ask you to produce evidence concerning payment of work done on the home. For example, you had the kitchen redone in the short time you owned the property. But, your general contractor did a poor job making payments to the supplier of your new granite counter-tops. As a result, a mechanic’s lien was recorded against your home. Your attorney is going to need your assistance in getting this defect remedied before closing. After all, your buyer can walk away from the deal if you cannot convey clear title (i.e., title free of any liens or encumbrances) at closing.
Ok, so the contract is done. Inspection items are repaired, title has been cleared, and your buyer has received a firm commitment for a mortgage. You’re done, right? Well, again, there is the small matter of the closing. At closing, as seller, you are relieved of appearing personally provided your attorney has had you pre-sign the seller’s documents (usually, a deed, affidavit of title, bill of sale and transfer tax declaration) and you have given your attorney a power of attorney to execute documents on your behalf.
If your realtor, your attorney, the lender and the closer (i.e., the person at the title company in charge of collecting all of the documents and wiring out funds) are on the “same page,” your closing should proceed smoothly. There is always the chance that the buyer does not show, however!
Stay involved in the sales process. As an individual with the largest stake in the transaction, you need to know how the process works and what to expect along the way. Ask questions of your realtor and your attorney. Both of them work for you. Selling your home can be scary, but it does not have to be.