Always like to offer a word of caution. Taking action on a whim or through making possible inexperienced assumptions, without consulting your real estate agent, may be hazardous to your real estate transaction and, thus, your pocketbook. All questions, no matter how difficult to ask, or how small they may seem, should be run by your agent.
Let’s take a look at three common scenarios and show you why you need your agent’s counsel.
“We found a brand new house at Heavenly Knolls!”
“We don’t mean to hurt your feelings, but we’re pretty sure we’ll be using that helpful real estate agent we met at the sales office – is this a good idea?”
Sure, it seems convenient – the agent is right there in the new-home community in which you want to buy, so you won’t have to make an appointment to see her – you can just pop in whenever you like, right?
Consider this: that agent represents the builder or developer. How will she do her ethical duties to you and the builder, simultaneously? More than that, does she have any ethical duties that she owes you? If you wouldn’t hire your soon-to-be-ex-spouse’s attorney to handle your divorce, why would you hire the builder’s agent and hope that he or she will have your best interests in mind? Dual agency is a fine line to walk for even the most ethical agents.
As a buyer, you pay nothing for the services of a real estate agent. Be selfish – get your own. That way you’ll know for sure that there is someone in your corner at all points during the process.
Here’s my seller’s disclosure statement. I was so busy I just checked “no” on all the boxes. That’s ok, right?
Sure it is, if you like litigation.
The typical seller’s disclosure statement asks something to this effect: “Are you (seller) aware of any significant defects/malfunctions in any of the following?”
You checked “no” on all the boxes, which means that you aren’t aware that the basement floods every time we have a heavy downpour, despite you making that very clear to me, your agent.
Of course, the buyer, who suffered the loss of all his basement furnishings, will need to prove to a judge that you were aware of and actually concealed the problem. But, since you shared your travails with your buddy across the street, the buyer won’t have to do much digging. Neighbors are frequently deposed in these cases.
Disclosure laws are different in many states and even in many counties within states. Depending on where you live, if you’re found guilty of concealing material facts about the home, you could be held liable for the buyer’s monetary losses (compensatory damages), be forced to pay punitive damages on top of that and, in rare cases, the buyer is allowed to cancel the purchase and give you back the house.
If the concealed defect results in substantial harm or death to the buyer, you could end up in prison, like the homeowner in Vermont who deliberately failed to disclose a faulty driveway heater to the family of four who purchased the home.
All but one member of that family (an infant) died of carbon monoxide poisoning, the former owner was convicted of involuntary manslaughter and was sentenced to four years in prison.
By the way, in some parts of the country, this duty to disclose may cover up to a 10-year period, post-sale.
We understand how hard it is to expose even the home’s tiniest flaws to the prospective buyer, but to not do so may turn out to be exorbitantly expensive. Take your time with the seller’s disclosure statement and answer each question honestly.
I can’t believe we’re closing in just two weeks! Did I tell you we’re shopping for furniture and appliances this weekend? We got an awesome financing program for them!
This one is so common, and so sad. In the excitement in the run-up to closing, many buyers begin to imagine furnishing the new home. Many others actually take steps toward buying the furnishings. It’s a huge mistake.
Shortly before closing your lender will most likely pull your credit reports again, a process known as a “soft pull,” because it doesn’t affect your credit score. This is the lender’s final assurance that you truly can afford the monthly payment and that you will actually make that payment.
Applying for credit for those new appliances or furniture will show up on the soft pull and will catch the underwriter’s attention. The new credit changes your risk profile and the new monthly payment for the items you purchase with that credit may change your debt ratios so much that you will no longer qualify for the loan.
It does happen and it’s heartbreaking. Until you close on the house, don’t apply for new credit, don’t switch jobs or move money around to different accounts. Keep your financial situation exactly as it was when you applied for the mortgage.
The last time I had this very thing happen, I was representing the seller in a sale. The day of closing showed up and the sellers arrived with two babies and a stroller in tow. They were ready to get in and get closed! Unfortunately, the buyer’s agent, who was sitting slumped over in a chair, said his buyer wasn’t coming. To my chagrin, I asked him why. The response was, “Well, he took advantage of the Black Friday sale after Thanksgiving and financed a house full of furniture.” In short, the bank called the closing off. They had pulled his credit right before closing and the deal was dead.
Communicating with your real estate agent, even if you think what you are about to do is innocent or non-threatening to the process, is the wisest move you can make during the real estate transaction. You never know just how huge it may turn out to be.