Homesellers: How to protect your contract to purchase from falling apart

If your house is on the market, there are some things to consider when you receive an offer from a homebuyer.   

I spoke with two Connect2Agent members and asked them, "What can a homeseller do to protect themselves from a homebuyer backing out of a contract to purchase?"  Each member provided tips to help homesellers in the closing process:

Albert Baeza of Kirkland Washington

• Get a pre-approval letter upfront from the buyer's lender- This needs to be provided to the Seller by the buyer's real estate agent when they make an offer to purchase.
• Limit the time on the home inspection- Baeza recommends that buyer's are given no more than 10 days to have the house inspected by a licensed professional. 

• Consider having a 4-5 point "mini" home inspection performed- Before you list your house have the electrical, cooling, heating and structural items inspected by a licensed professional.  You can disclose the repairs or make them prior to listing the house on the market.
• Shorten the amount of time for the buyer to get a loan- Baeza recommends that the buyer have no more than 21 days to get a mortgage. The first two weeks the homebuyer should be working with the lender to get them all the paperwork the lender needs.  The last week should be for underwriting approval.
• Collect the earnest money in two stages-  Baez recommends that the earnest money is collected in two stages.  For example, if you were selling $250,000 house, the first deposit could be in the amount of $2000.  The final deposit of $3000 would be collected for the homebuyer after the house inspection  period  (7 days).

Larry Sasse of Grand Ledge Michigan

• Get a pre-approval letter from the buyer- When you are presented with an offer, the buyer's real estate agent should present you with a written pre-approval from the homebuyer's mortgage company. It should only be conditional upon the appraisal of your house.
• Resolve the home inspection provision on the contract to purchase- The homebuyer should have a home inspection on the house and give notice of repair issues to the seller in the time allotted on the contract to purchase.  The seller needs to respond promptly to these repair requests and work to come to a mutual resolution with the buyer.
• Ask for 2% of the earnest money- This could even be provided by the homebuyer in the form of a personal check.  The check would be held in a trust account and is held to ensure good faith on the part of the homebuyer to follow through with the contract.

These are just a few considerations that a homeseller needs to keep in mind when accepting an offer to purchase.  Make sure to get the advice of a local real estate agent and the counsel of an attorney who specializes in real estate for any legal matters when dealing with a contract to purchase.

Posted by Rebecca D. Levinson