Sellers

What happens when the buyer or seller breaches the purchase contract?

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Remedies available to buyer when the seller a materially breaches a purchase agreement contract include:

  • Abandoning the transaction by entering into a mutual cancellation of the purchase agreement and escrow instructions
  • Acquiring the property by pursuing specific performance of the purchase agreement
  • Pursuing the recovery of money, whether or not the buyer still wishes to acquire the property

For example, when the seller resells the property to another buyer at a higher price after accepting an offer from the original buyer, the original buyer may pursue specific performance and demand the seller adhere to the purchase agreement.

However, if the original buyer decides not to pursue specific performance, the seller is liable to the original buyer for the difference in price. A buyer’s money claims include:

  • General damages, money directly expended or the monetary value lost in the transaction
  • Special damages, money collaterally lost due to the seller’s breach
  • Prejudgment interest at the rate of 10% on all monies recovered.

A buyer is allowed to recover expenditures incurred prior to a seller’s breach to prepare a property so they can take possession, such as construction costs advanced by a buyer for upgrades and alterations. However, the purchase agreement by its provisions needs to reflect the intention of the buyer to incur these expenditures.

Conversely, a seller of real estate faced with a materially breaching buyer needs to promptly decide whether to:

  • Enforce the purchase agreement;
  • Re-market the property for sale; or
  • Retain the property and postpone or entirely forego any resale effort.

A seller’s total recoverable losses when promptly re-marketing and reselling the property include:

  • Carrying costs of mortgage interest payments, taxes, insurance, maintenance and utilities incurred by the seller and interest on the seller’s net equity between the date of the breach and the date escrow closed on the resale less the property’s rental value when the seller remains in possession; and
  • Any reduction in the seller’s net proceeds on the resale below the net proceeds the seller was to receive from the breaching buyer’s transaction due to:
    • The increased closing costs the seller additionally paid, such as the new buyer’s nonrecurring closing costs, financing fees on the resale and mortgage prepayment penalties; and
    • Any decline in the property’s resale price.

When the seller takes the property off the market or is not diligent in their resale efforts, their recovery of money is limited to their out-of-pocket transactional expenses, property operating expenses incurred before the buyer’s breach, and any move out and move back relocation expenses to fulfill their performance under the purchase agreement.

When the seller remains in occupancy through the date of the breach, these costs are offset by the rental value of the property.

Costs to Sell Your Home

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To make an informed decision about the arrangements and conditions for selling your property, you need to know the costs you will incur on a sale. Selling costs consume some of the price you will receive and thus reduce the amount of net sales proceeds on closing.

Selling costs you will likely incur in the preparation and sale of your property include:

  • Home inspection report (HIR): The fee a home inspection company charges to conduct an inspection of the property and provide an HIR you use to properly prepare your transfer disclosure statement (TDS) your agent hands to prospective buyers.
  • Structural pest control report and clearance: The fee a pest control operator charges to inspect and submit a report on their findings and the costs of repairs necessary to eliminate any infestation and repair any existing damage or condition allowing for infestation.
  • Compliance with local ordinances: The costs associated with retrofitting, curative permits and any repairs necessary to meet local ordinance standards as a requisite to a change in ownership.
  • Natural Hazard Disclosure (NHD) report: The fee charged by a third party for a review of the county records and the preparation and submission of an NHD report on the natural hazards affecting the property due to its location.
  • Smoke detector/water heater safety compliance: The costs incurred to install smoke detectors and water heater bracing to comply with local ordinances.
  • Home warranty insurance: The premium charged by a home warranty insurance company to issue a policy to the buyer.
  • Escrow fee: The amount charged for escrow services to process the closing of the sale.
  • Recording fees/documentary transfer tax: The combined recording fees and transfer taxes collected by the county recorder to convey title.
  • Title insurance premium: The premium the title insurance company charges to issue a policy of title insurance on your conveyance of the property.
  • Reconveyance fees: The reconveyance fees and recording fees charged when your mortgage is paid off to release the mortgage liens from the record title to the property sold.
  • Broker fees: The fees earned by the transaction brokers and paid on the close of escrow for the sale of your property.

Your agent estimates the expenses you are likely to incur on a sale of your property by preparing a seller’s net sales proceeds sheet and reviewing it with you when listing your property for sale and reviewing the merits of each offer received to buy your property.

What is my Home Worth

What Happens If I Withdraw My Listed Property From Sale?

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Occasionally, a situation arises which causes the owner of a property listed for sale to withdraw their property from the market. This owner has the option to voluntarily withdraw their listed property before it sells or the listing expires.

Reasons an owner may have for withdrawing a listed property from sale include:

  • A change of job;
  • A family crisis;
  • The inability of the market to deliver the desired selling price; and
  • Other personal reasons.

An owner who withdraws their home from the market is not breaching the listing agreement. However, they do interfere with the broker’s expectations of locating a buyer and earning a fee.

Therefore, the owner needs the broker’s consent when withdrawing the property from sale. If not, withdrawal triggers the broker’s right to collect a full fee as agreed. 

When the owner and the broker mutually agree to a withdrawal of the property from the market, no fee is due the broker, unless:

  • The owner and broker agree to the payment of a sum of money for the marketing effort undertaken and the opportunity the broker lost to earn a full fee by locating a buyer; or
  • The property is sold within the listing or safety period — with or without the broker’s involvement — in which case the full fee is due to the broker.

Conversely, the broker is entitled to a full listing fee when the owner’s conduct, without the broker’s consent, causes the listed property to be:

  • Withdrawn from the market;
  • Transferred to others;
  • Further leased; or
  • Otherwise made unmarketable.

Further, the full fee due the broker compensates them for the time, effort and money invested in the marketing of the property before the owner removed it from the market. Also important is the broker’s lost opportunity to locate a buyer and earn a full fee under the listing.

If you have questions about listing agreements, your homes value or the market. . . I am only a phone call or email away.

What is my Home Worth

Escrow: What to Expect at Your Signing

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As you near the end of your transaction, and when Escrow has received and prepared the required documents, you will be contacted to set an appointment for you to review, approve and sign your documents. This portion of your transaction is referred to as “the signing” and will usually occur a few days prior to your actual close date.

This instructional video will prepare you for what to bring and what you can expect at your signing.

https://cdn.jwplayer.com/players/wf24yDA9-LsoZqqIj.html?jwsource=cl

Closing Disclosure

The Closing Disclosure is also required to be given to you by the CFPB. While your lender is charged with providing this document, it may assign that responsibility to your escrow or title company. You’ll receive your Closing Disclosure at least three business days prior to your transaction closing.

What is Escrow?

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Buying a home is an exciting event, but the process of completing that purchase can be complex. When you make an offer on a property and sign a sales agreement with the seller, the next step is to open an escrow account. This account keeps funds and paperwork in the care of a neutral third party – like an escrow or title company – until all the requirements of the sale have been met.

To complete the purchase of your home, you’ll have a major role to play throughout the escrow process. Your escrow officer will be required to follow the closing instructions and meet the requirements outlined in the sales contract you and the seller previously signed. It’s important to direct any questions regarding the escrow process to your escrow officer, and any questions about your loan directly to your lender. Watch this video to learn more about closing your transaction. And congratulations on your new home!

What is Escrow Infographic

Real Estate Agents and Agency: What Does It Mean For You?

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There are agents, and then there are agents. Yes, it sounds confusing. That’s because the term “agent” is often used in a casual manner, referring to any real estate practitioner. But, agent also refers to someone with whom you’ve established a formal agency relationship—someone who represents your best interests in a real estate transaction and owes you fiduciary responsibilities. Agency relationships are usually established in writing with buyer agency agreements, and require:

  • Loyalty
  • Obedience
  • Disclosure
  • Confidentiality
  • Reasonable care and diligence
  • Accounting
Continue reading →

Key players involved in the real estate transaction

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The buying and selling of a home is an event that requires the services of a number of professionals. Here are the key players involved in the process: 

Listing Agent/Realtor – This person, hired by the seller to market and guide the sale of their property, helps the seller to get the highest possible price and best terms in the sale of their existing property. The seller pays the listing agent who splits that fee with the agent representing the buyer.

Buyer’s Agent/ Realtor – The buyer’s agent helps someone looking to purchase a new property to find potential homes, engage the listing agent for showings, and obtain the best possible price and terms for the new property.

 Lender – The lender can be a bank or mortgage company that loans the money to the buyer so that they can purchase the property. 

Loan Officer/ Mortgage Broker – Representing the lender, the loan officer works directly with the buyer/borrower to prequalify them, complete the loan application, and put together the documents required for loan approval. 

Loan Underwriter – The underwriter, who works for the lender, assesses the borrower’s ability to repay the loan by reviewing all assets and past credit history, as well as the property details, appraisal, and title search reports. Then, they will generate detailed reports of their findings before making final loan approval. 

Title Company/Title Insurance – When you buy title insurance for your property, a title company searches public records and archives to find any title ownership irregularities – and remedy, if possible – several types of ownership issues. After this search, the underwriter will determine the insurability of the title. 

Escrow/Closing Officer – An escrow or closing officer, usually employed by your real estate agent or title company, works with all participants to facilitate a successful closing of a real estate transaction. At closing, they will collect the purchase money funds from the buyer and lender as well as the settlement costs from each party, then disburse the funds in accordance with the HUD-1 settlement statement and record the necessary documents to transfer ownership of the property. 

Appraiser – An appraiser works on behalf of a lender and provides a market analysis and valuation of the subject property. An appraiser’s finding is subjective and combined with market findings of sold properties within the surrounding neighborhood. 

Termite Inspector – This visual inspection is conducted by a state-licensed professional hired to look for signs of infestation or damage to a structure by wood-destroying pests, standing water, earth-to-wood contact and plumbing leaks. 

Home Inspector – A home inspector objectively and independently provides a comprehensive analysis of a home’s major systems and components and is normally hired by the buyer. 

Insurance Agent – An insurance agent helps a home buyer determine the homeowner’s protection coverage needed and assists in locating the right insurance policy to fit those needs.