Recap of “Governing Addendum” strategy

 

• A high number of homes are entering foreclosure. Holding costs – such as property taxes, insurance, sewer bills, maintenance and other expenses – severely add to the costs of lenders trying to recover as much value as possible from a distressed property. In addition, many so-called investors who are seeking to purchase properties are simply not qualified to do so. These two factors have come together to create serious risks for home sellers. Specifically, sellers with nonperforming buyers lose prime selling exposure and waste time with buyers who have a small likelihood of completing the transaction. The proliferation of mortgage companies has added to confusion: supposedly “preapproved” buyers may actually be “preapproved” by a nondirect lender with little influence or ability to assure a seller that a closing is likely to occur.
• Being aggressive salespeople and highly enthusiastic about real estate does not mean abdicating our responsibilities as a seller’s representative! Therefore, we work very hard to make sure buyers are qualified and able to complete a transaction.
• We suggest the use of our ‘Governing Addendum’ when marketing homes to investors or cash buyers. As long as properties are priced to sell, Specific conditions that we recommend include:
  • Earnest money that is nonrefundable if a transaction does not close by a certain date. A “mutual release” is signed along with purchase documents, so that, in the event a transaction is not completed, there is no further need to obtain signed documents.
  • We include specific language allowing the listing agent the right to review the Buyer’s credit report, proof of income and proof of funds. We can save time initially by informing unqualified buyers that they will need locate a co-borrower to buy our property.
  • It is simply not possible for an investor to acquire a property with “no money down” unless they have a line of credit. Therefore, we require proof of a down payment as well as verification of a lender’s preapproval. The serious buyer will not mind these questions and will be pleased to build a relationship with us! And our experience in the business can save you time and grief!
  • Preapprovals from “nondirect” lenders are not acceptable unless the mortgage broker is of excellent reputation or can provide references.
  • We suggest keeping your property “active” and not “pending” in the Multiple Listing Service until a sale is completed. The Buyer is asked to acknowledge this policy in our addendum.