Lessons We Can All Learn to Improve Our Business
Every week, I receive at least one real estate contract. Most weeks I see between 3 and 5. Truth is, rarely are they completed properly; most reveal weakness in the client and/or the buyer’s agent.
Lets all take a minute to review these errors, and make a commitment to never doing them again.
Most of the real estate contracts used are provided by your local association and have blanks that are meant to be completed (or filled in). ***Warning*** It is considered practicing law if you alter the contracts, and unless you are an attorney, just don’t do it. If your offer is going to be one where you feel you need to alter the contract, consult an attorney.
Here are 8 common mistakes and how to avoid them:
1. Leaving blanks in the contract uncompleted. Get in the practice of completing or filling out every blank space on the contract. If something does not apply, use a dash ( —— ) or N/A. Uncompleted areas of the contract create confusion and leave a greater chance for contract manipulation.
2. Not using the full legal name for the buyer(s). There are a lot of problems that are created when you do not use the full legal name of the buyer(s). Here are some common mistakes made:
- Using nick names such as Rick Hartian or Rich Hartian
- Not using the buyer’s middle initial
- Combining spouses into one name, Mark and Judy Buyers
- Not including all buyers’ names on the contract
Some of the most common issues that come out of not using the full legal name are:
- The lender will need a contract addendum to use the correct name
- Often times, if it is a bank REO or other distressed type sale, they will not permit a name change (or name to be added or removed). I have seen a contract canceled over this as the lender was unable to lend to the intended buyer, since their name was not on the contract
- Title work will need to be redone
- The appraisal will need to be amended
3. Not using the full or correct address of the property being purchased, along with the corresponding Property Index Number (PIN) or Permanent Real Estate Index Number. I was not part of the transaction, thankfully, but I witnessed a person buy a property, and all of the documents, including title and closing, were done on the wrong property.
The buyer had intended on purchasing 123 Home Ave, but the buyer’s agent used 123 Home St on the contract instead. Hard to believe, but no one caught this, and the transaction ended up getting to the closing table.
4. Relying on faxes and bad scanners. Contracts need to be legible. One of the most common errors I see is generally due to laziness or not taking the time to scan a contract properly. I’m sorta sorry if you do this and I’ve hurt your feelings.
This should be your rule of thumb. Once the contract is fully executed, it should be entirely readable without the aid of a magnifying class. It should be on the correct paper size and have no areas that are cut off. All pages should be included and be facing the same way.
If you don’t have the right equipment, you may have to get in your car and meet your client for signatures. Count it as an opportunity to be fully engaged in the transaction.
5. Using “Per Survey” instead of the actual lot dimensions. Lot dimensions are on most contracts for a reason; the buyer generally gets an understanding of the size of the property from the selling agent or seller. That understanding of the size or dimensions of the property is a significant factor in the expectations, use, and future sale of the property. It speaks directly to value. Using “per survey” automatically gives up the ability for your client to ensure the dimensions given are the dimensions received.
6. Incorrect or unreasonable closing and contingency dates. One of the best ways to protect your client is to have reasonable mortgage contingency dates and closing dates. I’ve seen a buyer lose a property because the agent gave a mortgage contingency of 3 weeks. The attorney and inspection review took over two weeks. When the buyer asked for an extension of the contingency date for financing the seller said no. The buyer had to either give up their mortgage contingency or cancel the contract.
By the way, make sure you use a calendar and use dates that are not the weekends or holidays. This happens so often, and does not reflect well on you as a real estate agent.
7. Not completing all of the contacts on the contract. Most real estate contracts I’ve seen have a spot for the buyer and seller, as well as the buyer’s agent, seller’s agent, buyer’s attorney, seller’s attorney, mortgage lender and condo association.
Two thoughts here. If you are submitting a contract, complete everything you know, including the listing agent’s information. If you are the selling agent, complete whatever was not done on the contract. The end goal is to have everything completed before the seller signs.
8. Making changes to the contract once the contract is executed. Be extra careful with this one. If the buyer and seller have signed the contract, you have a legally binding contract – your job is done, contract-wise. If any changes or amendments need to be done, let the attorney do it.
Here is a bonus thought on low ball offers.
Lets be honest…no one wants to receive a low ball offer. Last week I received an offer of $47,000 for a property I have listed at $164,900. I own this property and have owned it for multiple years. I’ve made the decision to sell a good portion of my inventory, and I’m not desperate to sell. Guess what my feelings are to the buyer’s agent who submitted this colossal waste of time without seeing the property. Enough said right?
If you are going to submit low ball offers, let’s all agree as professionals that you know what the value is first, and at a minimum, view the property. I would suggest that you mention to your client that it would make sense to speak to the listing agent first and see if their seller is interested in such an offer. In todays environment, low ball offers just make you look bad.
If you make an effort to not make the mistakes above, you are really doing well for yourself (and your client)! Leave a comment below and share with your peers.
Best of success to you…