What you need to know about the risks associated with selling your home without an agent

By Laura Wehnes

If you were to ask a Real Estate professional, or anyone who has recently been in the market to buy or sell a home, about the current market, you would get the same answer: we are in a very strong sellers’ market -- one of the strongest sellers’ markets in history. Because of this, there are many sellers who believe that they can easily find a buyer and navigate the process themselves. However, there are some potential risks in this market for sellers. Sellers need to consider all of the different contingencies that they may come across and what they mean.

As I go through multiple offers with my sellers, there are many things that we consider and have conversations about besides price. I have found that without a professional, some sellers have made decisions strictly based on their bottom line and not looking at the full package, which includes terms and contingencies. This has led to some sellers being disappointed after the initial excitement of a great offer when the buyer has had a mutual release. In this article we will go over a few of these issues and things to think about before you decide which offer you will accept.

1) Financing In the contracts, there are two options: to be contingent on getting financing or not be contingent on financing. There is not a cash offer option. This allows people to write an offer that can be just as attractive as cash, but still gives them the option to get a loan. When a seller gets an offer that is not contingent on financing, they should make sure that the offer comes with either proof of funds or preapproval. The seller can also ask the buyer’s agent if they have been fully underwritten. When that is the case, the information on the property is all that remains in order to get full commitment.

When a seller gets proof of funds, showing that the buyer is paying cash, I like to ask a few extra questions. If I find out that the buyer is a hedge fund or out-of-town investor, I ask the agent about their relationship with the buyer and the percentage of time that buyer gets to the closing table. I might ask them for extra earnest money to try to make it more unattractive for the buyer to just walk away from the contract even if there are no other contingencies.

2) Inspections In the current market, we are seeing a few different options regarding inspections that buyers are using. These options include waiving inspections all together, doing inspections and taking the property as-is but leaving the option to mutually release if there is something they aren’t comfortable with, or stating they won’t ask for any repairs under a certain amount. Personally, I don’t care for options that appear to have a grey area. Therefore, the third option is not usually my first recommendation. I think it can leave too much interpretation. Who is determining the cost of the repair? What if two people don’t agree on what the repair is? This makes it difficult to determine where the earnest money goes and often leaves both parties unhappy.

The option to waive all inspections always looks the most attractive to sellers. It makes them more comfortable that the buyer is going to get to the closing table, and they are not inconvenienced with more people in the house and negotiating a second time. I have even seen some sellers take a lower price in exchange for getting inspections waived.

The third option is that the buyer can do inspections but is still going to take the property as-is or has the right to back out of the contract if they need to. I suggest this option for sellers. In my professional opinion, this takes some long-term risk away from the sellers. If there is a major defect with the house, it will be found. While that can be a fear for some, the reality is that if a buyer does not do the inspections and finds a defect afterwards, they might contact an attorney and try to get some restitution from the seller who they believe should have known about the issue. This may or may not go anywhere, as I am not an attorney and every situation is different, however, it would cost the seller money to defend his/herself.

3) Appraisals Because house prices are increasing quickly, appraised values can fall short. To compensate for that, some buyers are putting in appraisal gap coverage to give the seller some confidence that, if it doesn’t appraise at the purchase price, they are willing to come up with some additional funds. The other option is to waive the appraisal all together so the buyer would be responsible for any difference. If a seller gets an offer like this, their agent should ask the buyer for a copy of their proof of funds and their preapproval to show that they have the financial ability to do so.

Every kind of market in Real Estate brings challenges and opportunities for buyers and sellers. It takes a professional to help navigate the contract effectively and help keep your interests as protected as possible. Many of these issues work at the same time, therefore there are multiple decisions you must make at the same time. It is best to have an agent to help you direct the best decisions for you. Make sure you know your Real Estate professional, their experience, and exactly how they can help you through the process.

If you are thinking of buying, selling or investing in Real Estate in Missouri or Illinois, call me for a free consultation. You can reach me at 314-608-2299 or email me at laurabw@kw.com.