One of the greatest fears in the home selling process is accepting an offer with an unqualified buyer and not closing at all. Another massive concern is ending up homeless. This is where the Mortgage Mark Team can help. More on that later.  

While potential issues can’t always be prevented, there are actions that a seller can take to reduce the potential pitfalls. Below are various topics of concern when selling a home, as well as possible solutions prevent (or eliminate) issues.

Greatest Fears When Selling a Home

There are many emotions associated with the sale of a home. First excitement, then stress, then annoyance, frustration, back to excitement, fear, anxiety, impatience, sadness, relief, and finally, back to excitement.  

Selling a home is a full time job – even when everything goes perfect. What compounds the stress is when something unexpected occurs.

Potential Issues When Selling a Home

Below are potential areas of concern when selling a home. 

  • Not Knowing How Much You’ll Make 
  • Unexpected Income Taxes and Paying Capital Gain Taxes
  • Not Maximizing Profits (i.e. not getting as much as you should)
  • Failed Contract Negotiations 
  • Accepting an Offer from an Unqualified Buyer
  • Contract Issues
  • Bad Home Inspection
  • Low Appraisal Value
  • Delayed Closing
  • Not Closing
  • Ending Up Homeless
While the aforementioned list isn’t all encompassing, these are the most common fears when selling a home.
man sitting at a desk thinking and stressing
 
Mark

Mark Pfeiffer

Branch Manager
Loan Officer, NMLS # 729612
972.829.8639
MortgageMark@MortgageMark.com

Initial Fears

Below are the primary issues that occur before a purchase contract is executed with a buyer. Each section has a potential solution to avoid the pitfalls.

Not Knowing How Much You’ll Make (& not knowing the closing costs)

Learning the costs of selling a home, and calculating the sales proceeds is one of the first steps when selling the home. The amount of funds received at closing may dramatically impact the seller’s ultimate decision – especially if the next chapter includes purchasing a new home. 
 
A seller’s future purchase may be impacted if they don’t net as much as they initially expected. With lessor funds their down payment options could be jeopardized, and subsequently, so could their loan approval.
 
How does a seller determine how much will they will net from the sale of their home?  The answer: download our seller’s net sheet and determine the actual numbers.
 
Potential Solution: check out our seller’s net sheet page for a list of closing cost when selling a home. By downloading the Excel spreadsheet from that page, a very accurate bottom-line number can be calculated. 

Unexpected Income Taxes for Capital Gains

At the time of this article, a homeowner that is selling a primary home (that they’ve occupied for two of the last five years) can avoid capital gains if the profits are less than $250,000 for a single person, or $500,000 for a married couple.

The risk could be that a homeowner uses all the proceeds for the purchase of a new home, only to find out during tax time that they owe a big bill for capital gains.  

There are caveats to these rules so check out our capital gains page for more details (and contact your CPA). 

Potential solution: learn about capital gains and contact your CPA. 

Not Maximizing Profits

Maximizing profits and getting the highest sales price isn’t always the same thing. The reason for this relates to seller concessions. Seller concessions are funds allocated to the buyer to cover various costs. 

For example, a home that sells for a $500,000 purchase price, but has $15,000 in seller concessions actually nets the seller $485,000. Conversely, a home that sells for $495,000 but only has $5,000 in seller concession actually nets the seller more money, $490,000.  

Moreover, sellers often reduce their sales price too much when they’re unaware of other alternatives. For example, our List and Lock Program can help maximize profits for a seller by keeping more funds in their pocket by providing buyers a below-market interest rate.

Likewise, a 2/1 temporary buy down can often provide a greater benefit to buyers beyond that of a price reduction. These programs can also be great marketing tools. Homebuilders promote these programs constantly in high-interest-rate environments.  

Potential Solution: call us to discuss how to utilize financing tools to attract buyers and put keep more money in your pocket.

Failed Contract Negotiations

Another potential risk when selling a home is having a potential buyer on the hook, only to then have them walk away and not purchase the home. 

Aside from sales price, the condition of the home is often the subject of dispute during negotiations. Obviously the condition of the home will impact what someone is willing to pay for the home. 

Potential solution: address potential repairs and required maintenance before listing the home. If finances are tight, explore doing a home equity line of credit (HELOC) to use the home’s equity to finance the repairs.  

Note: there are renovation and rehab home loans available (like Fannie Mae’s HomeStyle, Freddie Mac’s HomeReady, and FHA’s 203k); however, a second lien mortgage is recommended to minimize the costs (and mortgage paperwork).

Accepting an Offer from an Unqualified Buyer 

One of the biggest fears when selling a home is accepting an offer from an unqualified buyer. It’s a terrible feeling to go weeks under contract only to find out (often the day before closing) that the buyer isn’t qualified and the home needs to be relisted. 

Potential solution: do more homework up front and speak with the buyer’s lender before accepting the offer. It’s absolutely astounding how 99.9% of sellers (and Listing Realtors) don’t do their homework. 

Here are questions to ask the buyer’s lender about themselves as well as other questions to ask the lender about the buyer.

Seriously, this may be the most important step in this entire process. It will prevent sooooo many problems. A great lender can minimize a bunch of issues – that’s what makes them great. They make it look easy. (And yes, we’re great. Call us.) 

Contract Issues

An experienced Realtor is worth every penny because their experience and knowledge sets the stage for the transaction. An experienced lender can tell if a Realtor knows their craft based on how a contract is written.

Writing a lender-friendly contract is incredibly important for both the seller and the buyer. Purchase contracts can create issues in a variety of ways. For example, seller concessions may exceed loan program guideline, non-realty items may be excessive, repair amendments may have verbiage that instigates inspections, and so on. 

Potential solution: learn how to select a great Realtor and write a lender-friendly contract

Bad Inspection / Renegotiations 

A bad home inspection can have serious repercussions: it can scare a buyer, costs the seller money, or break up the whole transaction. 

Potential solution: address potential repairs and required maintenance before listing the home. As stated above, if finances are tight, explore doing a home equity line of credit (HELOC) to use the home’s equity to finance the repairs.  

Note: a seller could hire their own independent home inspection before listing the home to anticipate these issues; however, there’s risk in this as well. 

A seller is typically required to disclose known problems with a home via the seller’s disclosure. Ordering an inspection in advance will make the seller privy to all of the home’s faults. A seller may then be found liable if every known issue is not probably disclosed to a potential buyer. (And buyers may be scared off because of the amount of issues). 

Lender Issues for the Buyer

The following fears become pertinent once a purchase contract has been executed.

Low Appraisal 

This concern is valid and ranks amongst the most stressful once the contract is executed. A low appraisal value can bust a transaction. 

Potential solution: there are two potential solutions for this issue.

First potential solution: learn how to prepare the home for an appraisal as a seller as well as how to avoid appraisal pitfalls.

Second potential solution: a seller can order an independent appraisal before listing the home. While that appraisal cannot be utilized by a buyer, it will provide insight to the seller from an Appraiser’s perspective. 

We realize a Realtor will provide guidance as well; however, their specialty is determining what a potential buyer will pay for the home. Check out our appraised value vs. sales price: prepare for the worst article for more details.

Conversely, an Appraiser’s function is determine the value based on comparable homes sold in the area. These can be two drastically different numbers. Think about the COVID years when the market was nuts and buyers bid over the appraised values.

What someone pays and the market value can differ. Learn how an appraised value is determined.

Third potential solution: in the event an appraisal does come in below the sales price, check out our how to fight a low appraisal. It’s worth noting that it’s very difficult to get values changed; however, it’s worth a shot and having a great lender can make the difference. 

The Worst Scenarios

Below are three of the biggest fears when selling a home. Not closing at all and/or ending up homeless are the two biggest fears when selling a home. 

Delayed Closing

Delayed closings are not fun. Aside from the scheduling nightmare of all the moving parts, the impact on various lives can be a dominoes effect. 

The potential solution for this is the same as the next section. See below. 

Not Closing 

A terrible possibility is not closing at all and having to terminate the purchase contract due to the buyer having financing issues. Below are two potential solutions for this stage; however, the truth is that the second solution should have been completed long before this juncture. 

Potential solutions: the first action would be to have the Listing Agent communicate with the buyer’s lender often – at least once a week. While this may not prevent the issue, it may reduce (or at least predict) an issue is pending. 

A great Listing Agent will “grill” the lender and ask lots of questions. A weekly call between the Realtor and the lender will be revealing. Often times potential underwriting issues are shared.

While this isn’t ideal, often times parties can work through these issues together. Again, this may not prevent an issue, but it will provide a more advanced notice… and when there is time, there are options. 

However, if the lender is not being responsive, that’s typically not a good sign. At this stage there won’t be much that a seller or Listing Agent can do other than wait. 

The second recommended action is really something that should have been done before executing the purchase contract: have the Listing Agent speak with the potential lender and have them ask these questions about the buyer and these questions about the buyer’s lender before executing the purchase contract. 

Ending Up Without a Home

The greatest fear after selling a home would be not being able to purchase another home due to an inaccurate pre-approval from a lender. 

Potential solution: this solution should be obvious. Pick a terrific lender with decades of experience, thousands of loans closed, and a fantastic team.

Feel free to call us and we’ll be happy to walk you through the home buying process and get you pre-approved

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