Seller Beware!

Caveat Emptor, or Buyer Beware is usually what is heard among the leary purchasers of the world.  However, here at QClosings.com, we are often more worried about sellers than buyers.  Many times it is the seller who ends up in a precarious situation when the closing is set for the 30th and the buyer doesn't show up until the 15th of the next month.  For that reason, we often warn our clients to look as closely as possible into their buyers' financial, emotional and credit history to discern whether a delay in closing is possible. 

The first step in deciding to accept an offer from a buyer is the financing contingency.  Of course "cash is king," but most people need a mortgage to purchase real property.  So, look to the amount financed.  Is the loan to value ratio higher than 80%? If not, you have a buyer who has managed to accumulate some cash and is likely to easily obtain financing in a conventional manner.  If the loan to value ratio is higher than 80%, then the buyer may not have the track record to obtain financing with the strength of the earlier said buyer and may have to seek alternative mortgage programs to finance his purchase.  Here is where closing dates no longer have the meaning to which they are intended.  Whenever more paperwork and more detailed substantiation of a buyer's creditworthiness come into play, there exists more reasons for the lender to slow down the process and delay committment to finance or the actual funding of the purchase price.

Step two:  Ask your Realtor for some emotional and personal background of the potential buyers.  Is this their first house?  First house is not a drawback, but a positive.  First time buyers are usually very dedicated to closing and getting into their new home as soon as possible.  Do the buyers have other irons in the fire - - i.e. offers on other houses with $500 or $1000 deposits going with all their offers.  In this instance, they may abandon your property and lose their deposit for what they believe is a better property.  It's almost as if they obtained an option to buy your property without letting you know that's what they were doing.  Also, do your buyers have children who need to be enrolled by a certain deadline?  If yes, you have motivated buyers.

Third: Credit history is very important.  However, when your buyer presents a preapproval letter from a lender with this offer, don't be impressed.  They are as valuable as the paper their written on.  Good credit means assets, a positive FICO score, good income and employment history.  For a buyer who is self employed, ask if he will be applying for a mortgage with a "stated income" or better.  Lenders are starting to shy away from "no asset, no income" verification loans.  In a nutshell, ask as many intrusive questions about your buyers as possible. 

Remember, anyone can sell a piece of property.  Getting it to close and close on time is another matter.

Got Questions? Call or write: 860/666-1776 or BenAncona@QClosings.com

Respectfully,

Benjamin Ancona Jr., Esq.