When Last-Minute Problem Threatens Sale

DIAN HYMER, Special to The Times

Imagine this. You've sold your home and all the contract contingencies are removed. The buyers' mortgage is approved and you're ready to close--almost.

When the buyers entered into contract to buy your home they loved your home, but they thought that the living room was dark. This wasn't a major obstacle, however, because the buyers were sure the problem could be corrected with skylights.

As is typical of most home purchases, buyers and sellers work first on satisfying major contract contingencies like financing, inspections or selling another home.

Then they turn their attention to issues relating to improvements they'd like to make to the new home.

In this case, what seemed like a workable situation turned into a nightmare the week before closing. Roofers who visited the property to give bids for skylight retrofitting said that the job could be done, but that the roof was at the end of its life.

The buyers had contracted to buy a home with a roof that would last for the foreseeable future. Without this guarantee, they weren't sure they wanted to buy the house at all.

First-Time Tip
At the first sign of a major deal-breaker problem, the buyers, the sellers and their agents should start working on a solution. This often means the agents have to drop whatever else they have on their agenda to free the time necessary to glue the deal back together.

If you find that your agent isn't bending over backward to work out a solution, ask to speak with his or her manager and explain your need for immediate assistance.

A positive attitude and a good working relationship between the agents involved will help a lot. Also, the more information you can obtain about remedies the better. You are usually dealing with two issues:

• The first is figuring out what options are available. Is the roof salvageable? If so, can skylights be satisfactorily installed?

• The second issue is money. How much will it cost to reach an amiable solution to the problem? If the only reasonable option is to install an entire new roof, an argument can be made that the buyer should share in some of this cost.

After all, the buyers didn't contract to buy a home with a brand-new roof. They will benefit from the new roof for years to come.

Both buyers and sellers need to evaluate the time, effort and money that will be involved if they are unable to reach a resolution to the dilemma. Money is usually spent on obtaining financing and inspecting the property. By the week before closing, moving plans have been made. To start all over again could be a costly proposition, particularly if there isn't another suitable house on the market.

There are certainly times when it's best to call it quits. One home buyer literally began losing sleep about several defects which were discovered in the home that he was about to buy.

Of particular concern was the asbestos underneath the linoleum. While the asbestos could be removed, the buyer's emotional concerns made it impossible for him to move forward with the deal.

Another buyer couldn't abide the fact that a rape had occurred on the property years ago.

In both of these cases, the buyers were better off moving on in their house hunts.

The Closing
Your best defense against a deal falling apart at the last minute is a tightly written purchase contract--one that anticipates and ties up as many loopholes as possible after full disclosure of any defects in the property.

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Where Your Agent's Commission Goes

Q: How do real estate agents get paid?
A: Most real estate agents work for a commission, most often a percentage of the sale price of the home being sold.

In a conventional home sale, the seller pays the commission. It is negotiable, but is usually in the range of 5%-7% of the sale price. The seller's agent typically shares the commission on a 50-50 basis with any other agent who finds a buyer for the property.

There is most often another commission-splitting arrangement that occurs between the agents involved and the brokers they work for.

For example, let's say you're selling a house for $300,000 and you have agreed to pay your agent 6% of the sale price as compensation for completing the sale. The commission in this case is $18,000.

If another broker is working with the buyer for your house, that broker will receive $9,000 at closing, leaving $9,000 for your broker.

Expenses are usually deducted from the commission to pay overhead costs before the agents are paid. Overhead includes such things as the cost of running the office and advertising properties.

So by the time your agent actually gets paid, it's likely not to be anywhere near the 6% you agreed to pay for his or her services.

Also, agents incur expenses as a cost of doing business. Typically these expenses include such things as a decent car, gasoline, a computer, access to the Multiple Listing Service, errors and omission insurance, to name a few.