Do you remember when you were a kid and you would ask your mother if a friend could spend the night or you could go somewhere and she would say “Go ask your Father!”. You would dutifully march to your father and he would say “That is up to your Mother” and you instantly knew that you were caught in a state of limbo, destined to go back and forth between them. The bottom line is they rarely said yes on the first attempt (may be that’s wrong with the world now) and never without consultation. In every instance, if you asked in front of a friend or put them on the spot the answer was ALWAYS NO. In all fairness, I was kind of a pest and rarely gave up in such scenarios which probably makes me well suited for handling real estate transactions which are surprisingly similar. Below is a list and a brief description of the huge number of people who have to say YES in order for a transaction to close successfully.
1. The buyer and seller. Actually the buyer and seller have to agree with each other at least 3 times to satisfy the requirement of a “meeting of the minds” in a purchase contract. Negotiating in a real estate transaction is an art more so than a science. If you ever doubt the necessity for a strong negotiator as your agent, keep in mind that 9 out of 10 for sale by owner transactions fail because of the inability of the parties to come to an agreement..
2. The Home Inspector: A good inspector will never tell the buyer that they should not purchase a home but will instead point out the flaws and dysfunction's of a home objectively. The second time a buyer and seller must agree is on the repairs, if any, that will be required in order for the buyer to complete the transaction.
3. The Lender’s Computer: Generally the first step a lender will take before proceeding with a transaction but after compiling all of a borrower’s documentation is running the file through a Direct Underwriting or DU program. This finding will usually yield an approve eligible and generate a list of preliminary conditions which must be met.
4. The Lender’s Appraiser: The appraisal is performed to protect the lender from over-lending on a particular piece of property. It is NOT necessarily the actual value of the home. If an appraisal comes in below the agreed sales price then either the appraisal must be challenged or more commonly some re-negotiation occurs constituting the 3rd time the buyer and seller must agree.
5. The Lender’s Underwriter: Once all of the documentation has been collected including verifications of income and the appraisal, an actual human underwriter reviews the file and almost invariably asks for some additional documentation or conditions before they will provide the loan.
6. Potentially the Guarantor of the Loan: Entities such as Fannie Mae, Freddie Mac, FHA and VA typically also have to agree to guarantee the loan.
7. The Title Company’s Legal Department: The Title department checks the property and the parties for outstanding liens and judgments against the parties. If you have a common name, you may have to clear liens from people with similar names. Not pay them, just prove they are not yours.
8. The Title Company’s Escrow Department. When everything else is complete, the Escrow company receives all of the funds and documentation from all of the parties including the buyer, seller, lender, county assessor, homeowner association and the agents, balances the transaction so that each parties obligations are met and finally records the transaction as a neutral third party.
While most of this occurs behind the scenes and rarely are the clients involved in each and every step, we as agents are required to orchestrate all of this activity. This requires a good real estate agent to be intimately familiar with each of these steps. In addition, a good real estate agent also has the responsibility to represent his or her client while at the same time has a legal obligation to treat the other party fairly.
In the almost 30 years I have been selling real estate, I have encountered snags in each of these areas and most of the time am able to overcome them but not always. If the transaction is salvageable, I routine save it. Many agents simply do not have the experience to know that a lien can be overcome by the Homestead Protection or that an appraisal can be challenged successfully. Additionally, a great number of agents live from closing to closing or in other words from paycheck to paycheck. This creates a major problem in discerning when it is in the best interest of the client they represent to cancel a contract or when offering advice to their client.