This article is intended for Real Estate Agents but a good overview for Sellers as well.
1. Federal, state and local disclosures and requirements
Sellers are required to provide buyers with all federally mandated disclosures such as lead-based paint, flood zones, FIRPTA, etc.
State requirements include the proper delivery and execution of agency documentation plus other state and local requirements as well.
For example, in California there is a mandatory “environmental hazards” disclosure, a separate state version of “FIRPTA, a “Special Studies Zone” disclosure for active earthquake faults, as well as a “Mello Roos” disclosure.
In brush or other high-risk areas where standard homeowner insurance policies are not available, the agents must coordinate the buyer’s application to transfer the current owner’s California “Fair Plan” insurance policy or help their client obtain a new policy. The same is true for areas that require flood insurance.
Some cities also have requirements. For example, Los Angeles requires a “City Report” as well as the installation of automatic gas turnoff for earthquakes, installation of low flow toilets and shower heads.
2. Financing contingencies
What do you do when a seller asks: Why should I pay you a full commission when all you have to do is to put a sign in the front yard?
Explain by saying:
Your agent really earns his or her commission at the negotiation table and handling transaction problems. If any of the items on this list occur, they can cause your transaction to cancel:
- The buyer is unable to obtain a fixed-rate loan as per the contract.
- The appraisal comes in at less than the sales price.
- The buyer gets cold feet and tries to back out.
- The buyer doesn’t qualify.
- The interest rates tick up and a poorly trained listing agent failed to counter back on the original offer that the buyers would accept a loan for up to a half percent higher than the amount written in the financing contingency.
These are just a few of the challenges agents solve on a daily basis, none of which, by the way, can be solved by technology or a poorly trained agent.
3. Inspection contingencies
Inspections are one of the places where agents really earn their commission. This is especially true when there are multiple offers and the winning buyers try to recoup part of their higher bid by disapproving as many items as possible on the inspection report.
For example, I once had both sides of a $900,000 transaction on a townhome where the units had shared attic space. The termite report came back with $12,000 worth of termite damage.
The seller refused to pay for it, but even if he had wanted to, he couldn’t have done anything about the problem because it was in the common area.
After three other inspectors and numerous discussions with the HOA, we finally discovered there were absolutely no problem with termites at all — there were simply some dead beetles. The existing wood damage had occurred a year earlier prior to the last treatment.
The point here is that a savvy agent can save both parties time and money as well as protecting them from unscrupulous inspection services.
4. Coordination of real estate affiliated services
In addition to the above, agents must coordinate the title services, escrow, attorneys, as well as a host of other service providers.
If your company provides a moving services bureau or concierge services that assist buyers with change of address, movers, repair people and the like, this adds another layer to your “project management” list.
5. Resolving disputes between the parties
In addition to coordinating all the aspects of the transactions, when disputes arise, the agent is usually the first line of defense for their principal. Agents know how to work around appraisal problems, title issues, differences in opinion as to whom is responsible for repairs, etc.