Consumers frequently approach our firm with a For Sale by Owner transaction that they would like us to handle. This is even more prevalent when the market is red hot, and people want to capitalize on the increased sales prices. Unfortunately, these types of transactions are missing one of the most important components in the entire closing process: A REALTOR!
Real estate agents play a crucial role in every closing process, particularly in FSBO transactions where the parties are often unrepresented. Many of these transactions are either intra-family transactions or where the clients have mutually agreed to the transaction’s terms amongst themselves and just need the deal documented so they can effectuate the transfer of the property. In my experience, however, clients without realtors rarely have all the terms worked out and have missed many key considerations that are extremely important to the transaction. This is where the negotiation pitfalls begin.
Financial Considerations
As you may be aware from negotiating your own contracts, there are many deal points that the DIY negotiator often forgets to consider especially when they are trying to put together a deal on their own. There is much more to real estate transaction than just coming to terms on a sales price. Some DIYers forget to consider the implications of closings costs, such as transfer and recordation taxes, or who will be paying for them. Others miss items such as pre-occupancy or post-occupancy arrangements and the calculation method for valuing those occupancy time periods. They often forget to account for how seller closing cost assistance will factor into their final bottom line. Some sellers may have a “walk away figure” and want to have all the financial numbers calculated so that they net a certain amount. Disappointment often creeps in when the parties begin to realize how much they lack the crucial understanding of the particulars and processes involved in determining a transaction’s bottom line.
Inspections and Contingencies
Another area of misunderstanding for the realtor-less consumer is not understanding how to negotiate the number of inspections that must be done, within what time frame, or the ability to determine any related contingencies. All too often I hear that the purchaser would like to proceed with “whatever is normal” which as you know, is negotiated relative to each transaction. We frequently also have clients who do not perform the required due diligence within the agreed upon time which creates more legal issues. They also do not have the experience required to deal with appraisers or appraisal valuation problems that may arise.
Value of an Agent
It is no secret that when an agent is involved in a closing, the chance that closing will be successful skyrockets. Additionally, consumers who engage realtors are generally much more satisfied with the process. Agents are often the glue that keeps a transaction together. Some days they are professional negotiators, other days, emotional counselors. The myriad of roles real estate agent plays, their experience, and proactive attention to details are often what keeps a closing on track. Coordinating a walk through prior to closing, reminding the buyer to wire in the cash to close or notifying the parties that possession of the property is to be given at the time of closing are just a few of the tasks on any agents preclosing to-do list that benefit all parties, and make a smooth settlement experience and successful transaction.
Brad Walsh is the Vice President of Eagle Title and serves as Counsel to Liff, Walsh & Simmons, Eagle Title’s affiliated law firm. Brad is recognized by the legal community as a Super Lawyers Rising Star and as a Leading Lawyer in Arundel County.
This article appeared in the October 2021 edition of Chesapeake Real Producers.