Sellers Must Protect Themselves Against Escape Clauses(Just about everything has become more difficult for sellers these days.)
Sales are transacting at record low year-over-year paces, prices are falling so profit margins are down and this slight correction experts had been forecasting may now turn out to be much longer and drastic than anticipated.
One of the underlining factors of why sales are so incredible low is because sellers are having a tough time adjusting mentally to the fact that they are no longer in that profitable booming market.
If, by chance a seller does suck it up and conduct a sale (usually after slashing thousands of dollars off the original asking price) there is now an inherent risk that the sale will fall through in the late stages. The article, “Keeping Deal Together Most Important Task,” written by M. Anthony Carr and published in Realty Times November 10, 2006, provides tips for a home owner to help prevent a sale from crumbling just when everything appears to be finished.
“During the not-so-distant sellers market, if a buyer fell out of the transaction, no sellers worried. They would simply keep some or all of the buyer's deposit funds, release the contract, take the next buyer in line and most likely get thousands of dollars more for the property now that it's aged on the market a few weeks longer.”
However, this is a far cry from the current market as buyers can now change terms and agreements in the contract for their own personal benefit. Even once the contract is officially set up, there is nothing preventing a buyer from looking around for another, better property before closing documents are closed, and opt out of the contract without any penalties using one of a variety of escape clauses.
And while everyone (especially agents and sellers) would like to believe that a contract is legally binding, preventing both buyer and seller from backing out, there are several possible ways to renege on the contract.
“As you're looking over the contract, note several paragraphs that should be in your agreement and make sure they get performed to protect yourself from a deal falling through the cracks.”
“One of those clauses is the financing contingency. You want to be sure that the buyer can actually perform on this one and the sooner the better. Look over the various aspects of this contingency -- the deadline of when they are to apply; what kind of financing (conventional, VA or FHA, etc.); interest rates; principle amounts, just to name a few.”
This contingency can damage the closing in a variety of ways. First you have to make sure they qualify for ma refinance they listed. Also, find out if they have listed a specific loan web rate. If the rate changes, which is very possible, the buyer may be dropped out of qualifying for ma refinance. This could obviously be avoided if the buyer applied for ma refinance prior to signing the contract with you.
“This contingency can get pretty sticky for both the buyer and seller if home values are slipping. First of all, if the appraisal comes in less than the contract amount, someone has to make a new agreement on price or come up with more money.”
Basically, the contract that you once believe was chiseled in stone, can now easily be cracked. Read all the said terms and try to protect yourself from a broken contract to the best of your capabilities. Go over everything with your real estate agent as well because he or she is on your side and wants the deal to be completed so that it is funded.
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