Seven Common Mistakes People Make in Buying or Selling a House

20 Feb

Seven Common Mistakes People Make in Buying or Selling a House

homeowner with new key after smooth legal home sale

By Attorney Attorney Isaiah M. Richie, Schloemer Law Firm, S.C.

Spring is almost here! And as the temperatures start to rise outside, the temperature of the housing market starts to rise with it. Each year there is a substantial increase in real estate activity, both buying and selling. If you are thinking of buying a new home or listing your current residence, here are some common mistakes to look out for.

One – Going at it alone.

Make no mistake, people buy and sell homes without representation all the time. But whether drafting an offer to purchase or listing a home for-sale-by-owner, an experienced attorney can help you navigate some of the pitfalls we will be discussing.

If you are trying to avoid paying commission fees, you can usually find an attorney willing to review the documents for a reasonable fee. An experienced real estate attorney can bring value to the table, especially in helping you navigate to a timely and successful closing and avoiding costly setbacks and litigation if a deal goes south.

Two – Accepting an offer you don’t fully understand.

The Wisconsin Residential Offer to Purchase (WB-11) form is ten pages long and contains a considerable amount of “legalese”. This number doesn’t even include the possible addendums and attachments that are frequently added to an offer. Many buyers trying to get an offer in quickly will fill in the sections they know and essentially ignore the rest. Conversely, many sellers will just see the dollar amount on the top page and not stop to consider how the rest of the document may affect their rights or remedies if the deal falls through.

The unfortunate reality is that we often get calls asking for help with an offer that has already been signed and submitted to the other party. In those cases, we can sometimes review the offer to see if there are issues that, going forward, can be addressed. However, many times the client is locked into the contract which may have some unfavorable terms that we could have addressed prior to signing. If you don’t understand the terms and phrases presented to you, it’s important to have an attorney knowledgeable in this field.

Three – Listing your home before you are ready to sell.

You accepted an offer on your house, great! But now you realize that you don’t have a new residence secured! As the selling season heats up, it is tempting to throw your house on the market so you don’t miss the rush. But selling your house before you are prepared can lead to a host of problems.

Right off the bat, if an offer comes in and you accept it, you generally have 30-45 days to find a new home. If you don’t already have a new house or apartment secured, you could find yourself in limbo or at the mercy of the market and the buyer. While it is sometimes possible to rent back your home from the new buyer, you are creating a new landlord/tenant relationship which may not be ideal.

Similarly, if you are submitting an Offer and the seller asks to stay for a prolonged time, you may want to consider whether you are willing to risk damage to the property or even going into eviction proceedings if the old owner overstays the term.

Four – Failing to get a price comparison.

If you have been watching the market over the past year and a half and you have seen a number of similar homes sold, you may have a decent idea of what you want to list a home at, or what a home you are considering may be worth. Otherwise, it is very important to have someone provide you with local comparable sales figures (also referred to as a “comp”), which can show you what the pricing should be. If you are trying to list your home without a real estate agent, there may still be agents around who are willing to provide you with a comp for a nominal fee. While there are other sources of the fair market value (for example, your tax ticket should have an assessed value and a market value), those sources are usually outdated and not a true reflection of the home value.

On the flip side, failing to get comps when you are considering making an offer can also lead to one of two things. Either you can write an offer for much more than the house is worth, or you can severely underprice the house and lose out to a higher offer. For many mid-range houses, most buyers go into an offer with a “$10,000 under” mentality. Whatever the house is listed at, the buyer will offer $10,000 less. This may or may not be a fair price. A comparison on the house and the market will give prospective buyers a fair range to make an offer.

Five – Failing to get a timely inspection.

More than anything, an inspection should be vital in any offer to purchase. Many TV Real Estate shows encourage buyers to place an offer without an inspection contingency. While there is truth to the point that it makes the offer more attractive, you have to be supremely confident that the house is in complete working order, or that an entire gut job is needed anyway. An inspection will provide assurances that major repairs are not necessary off that bat, or it may give you some leverage to request a reduction in the price.

Six – Failing to provide proper disclosures

From the perspective of selling a house, an often-overlooked step is preparing a real estate condition report. This is a standard form drafted by the State of Wisconsin and must be provided to a buyer within ten days of the offer, if not before. If you are preparing to list your house, you should download a copy of this form and provide it to prospective buyers so they can include it in the offer. Failure to do so can result in a buyer cancelling an offer—or even worse—a lawsuit after closing for failure to make proper disclosures.

If you are selling a condominium, there are additional disclosures that must be provided with the real estate condition report and related to the condominium documents.

If your house was built before 1978, you must also provide lead paint disclosures. Failure to do so is a violation of federal law and can lead to costly litigation.

Seven – Finding a realistic budget.

It is important to get pre-approved before you start looking for a home, but the pre-approval may not accurately assess what you can afford. If you have ever gone through a pre-approval, or if you have filled out an estimator online, you will find that you can probably qualify for a much higher price than is probably wise. You should work with a financial planner to determine what you can afford and how much you should put down on a property. Then you should get pre-approved for the amount that you can afford so you can’t be persuaded to putting an offer on a home that is out of your price range.

If you are a seller, keep in mind that you probably have a higher price in mind than what you are likely to get, particularly if you have lived in the home for some time and you have made many improvements. Remember that buyers rarely value your house the same way you do. It is very likely that you will receive offers for less than what you believe a fair price is. Keep in mind that prices can always be negotiated.

Conclusion

Buying or selling a house is a huge commitment. If you have never been through the process (or if it has been a few years), it can be overwhelming. Our experienced attorneys can guide you through the entire process, from negotiating an offer, to making amendments, to reviewing the title commitment and closing documents. If you have any questions or are interested in making an offer on a house or listing your house for sale by owner, please contact the author Attorney Isaiah M. Richie at [email protected] or 262-334-3471 or one of our Real Estate Attorneys.

Originally published: February 19, 2020.