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Hot real
estate markets can mean high
home prices and that's great
for home sellers. But all
sellers will not benefit
equally. Also, extreme
markets can be risky. Here's
what to watch out for:
As tempting as it might be,
don't automatically assume
that you're going to receive
a huge price for your home.
The media tends to report
the excesses in the
marketplace. You'll see a
listing that sold with 35
offers, or one that sold for
hundreds of thousands of
dollars over the asking
price. You're not likely to
find reports about the
listings that sold with only
one offer. Yet, many homes
sell this way.
Even if you do receive a
flurry of fabulous offers,
you could end up selling for
a much lower price. The
number of failed
transactions usually climbs
during a sizzling market.
For example, a home recently
sold in the Oakland Hills in
Northern California for
considerably over the list
price. The offer that was
accepted was $100,000 higher
than the next best offer.
Within a day that buyer
backed out. The seller's
euphoria waned when $100,000
of profit evaporated
overnight.
In frenzied markets, buyers
feel pressured to push their
offer prices higher in order
to be competitive. It's not
uncommon for buyers to break
through their financial
comfort zone in the peak of
a multiple offer contest.
After more sober
consideration, a certain
number of these buyers
realize they made a mistake
and withdraw from the
contract.
Sellers in this situation
wonder whether they're
entitled to keep the buyers'
good faith deposit money.
You'd need to consult an
attorney for the answer. If
the purchase contract
includes an inspection
contingency, the buyers may
be able to back out without
penalty, depending on how
the contingency is written.
Before you count on the
proceeds from your sale,
make sure that the buyers
have removed their
inspection contingency.
Buyers, who are particularly
generous at the offer stage,
could end up settling the
score a bit by asking the
sellers to repair defects
found during their
inspections.
HOME SELLER TIP:
Beware of offers made
without contingencies. This
may seem like a seller's
dream. However, no
contingency offers can lead
to trouble, especially when
the buyers don't understand
what they're getting
themselves into at the time
they make their offer.
For example, if the contract
doesn't have an appraisal
contingency and the property
appraises for less than the
purchase price, the lender
might not be willing to give
the buyer enough money to
close the sale. If the buyer
has enough cash to make up
the difference between the
purchase price and the
appraised value, and he's
willing to do so, the sale
can close. But, if the buyer
is short of cash, you may
have to reduce the purchase
price to keep the deal
together.
Letting a buyer purchase
your home without the
benefit of an inspection
contingency can be very
risky, particularly if there
were no pre-sale inspection
reports for the buyer to
review before making an
offer. What happens if the
buyer finds significant
defects in the property soon
after closing?
This is another legal
question that requires an
opinion from a knowledgeable
real estate attorney. The
seller could have liability,
or face and unpleasant legal
hassle after closing. It's
best to counter an offer
that does not include an
inspection contingency to
provide the buyer an
opportunity to inspect.
THE CLOSING: You can
minimize your risk somewhat
by providing pre-sale
inspection reports. But,
these shouldn't be a
substitute for buyers having
the opportunity to perform
any inspections they deem
necessary.
Dian
Hymer is author of "House
Hunting, The Take-Along
Workbook for Home Buyers"
and "Starting Out, The
Complete Home Buyer's
Guide," Chronicle Books.
Copyright 2005 Dian Hymer
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