Most of my writings come directly from experience and I use a story narrative, closing it with some practical advice. After 24 years in real estate and over hundreds of transactions, you can probably imagine that I could write an entire book, entitled, "Adventures in Real Estate".... or something similar.
This latest "adventure" involves selling a home that has been significantly renovated. In 1903, a Manteo family built their home in what is now the Historic Manteo Waterfront. 115 years later after multiple owners, each who have had a hand in making updates to the home over the years, the current owner has put the home up for sale, received a contract, and is scheduled to close in days.
The current owner's have had the home for about 12 years and have by far completed the most extensive renovations to the home. In 2007, they purchased this historic home at foreclosure, and had no records of any past updates or knowledge of much of the home's renovation history. They just longed for a vintage home in the heart of Manteo. They expected to put some work into this home and ended up replacing the entire back wall two stories high, rebuilding it with cedar siding and new windows, tearing out the front part of the home and converting it to a double-decker front porch. Extensive updates to the interior were made as well, including some floor plan re-configurations, new fireplaces, and a chef's kitchen. A beautiful restoration that also included hand milled plank wood floors, bead board, period fixtures, and plumbing and electrical updates where needed.
Enter the new purchaser, we went to contract under the premise of an as-is cash purchase, furnished, with a 30 day closing, and a 30 day due diligence time frame. Sounds perfect doesn't it? Well, not quite. I will dissect some of the issues to help save you from the challenges that we endured.
The first challenge was the furnishings and contents. The seller had indicated that they would sell the home furnished with an acceptable offer. When they accepted the offer they also stated that some of the decor and pictures would need to be swapped out because they had family sentimental value and some pieces of art were very expensive, and the seller would replace anything that was removed with something that would be nice, and appropriate for the home. There were to be no "holes" or vacant areas in the home - the home would still be turn-key - and no furniture would be removed. Just some art work and some decor items. This is reasonable, and definitely not out of the ordinary, especially for a home like this where the sellers accumulated a lot of personal items in their historic home.
At time of contract, the seller could not identify specifically which items because they were not here to list them. Given a short 24-hour deadline from the buyer, the seller had to drive down the next morning; with my help because of their health issues, remove the items they wanted, shop for and replace with new items, re-photo the house, and submit to other agent. Then the buyer requested a re-inspection the following day to assure that the seller didn't "take" anything else and make sure the home looked as good as it did when it went to contract. We passed this first hurdle. Tension was beginning to build on both sides.
As per the normal course of a transaction, the buyer has a home inspection. The inspection report revealed a number of items that needed repair. Of course it did, the home is 115 years old. The "as-is" clause in the contract went out the window. Buyer asked for thousands of dollars in concessions which we had to negotiate. We had asked for copies of the buyers repair estimates and were told; "My buyers are Class A building contractors and their subcontractors confirmed their low quotes for repairs." Oh... ok..... no proof but that didn't matter, because if we couldn't agree, the buyer could terminate the contract under the due diligence clause. The Seller made concessions to keep the deal together. Tensions are rising.
Ten days before closing I get a call from an appraiser asking to get in the home the next morning for a bank appraisal. I asked, "this is a cash deal, why the appraisal?" Because the buyer decided to get a loan? "Oh... ok.... you have enough time to complete the appraisal, we are closing in 10 days?" ... "And there are guests in the home... means I am going to have to get their permission and inconvenience them for this appraisal?" Result - I was able to get this set up and the appraiser did get their report completed next day with about 16 hours notice. Tensions continued to build.
Then the buyer's agent stated that the buyer could not get an affordable insurance policy due to the age of the home. They needed documentation of the improvements to assure there was a roof, working heat and air, electrical and plumbing. I wondered why the insurance agent couldn't just visit the home and take pictures and get their own visual - proving that the home had been updated as stated, or use the home inspection which clearly stated that the electrical and the plumbing were not original and were in working order?
So, the seller had to return to their home in Virginia, and dig through 12 years worth of files and records to try and get the requested information. The seller produced a detailed binder with photos, receipts, invoices, a permit, survey, past appraisal, etc. and because the seller has some health issues, I drove half way to Virginia to get the binder and then drove an hour to the agents office to hand deliver it to her - because we were given a deadline to produce this info "or else".... Tensions are peaking.
I called two other insurance agents and was told that this was not even necessary - all that was needed were approximate dates for when updates occurred - and that would be enough to write a policy. But regardless, now the buyer was bent on obtaining all this information, and by a 48-hour deadline ... "or else". And since the due diligence date runs right up and until the closing date, we had to do our best to comply to all the demands for fear of the buyer walking away. Tensions continue to build.
We are just a day away from closing, and I asked for the binder to be returned - they could make a copy of it if they wanted- but the seller would like to have it back because many of the photographs were personal - family members were in pictures - and it represented a 5 year project that she would just like to have as a keepsake. Well, this didn't go well and apparently the other agent thought I was joking. Again the threats of the buyer walking and a few personal attacks against my credibility. Wow. Tensions are through the roof right now!
The end of this story has not yet come to fruition.... but if the buyer isn't satisfied with the what the seller could provide, then the deal would be terminated. If the insurance premium is higher than the buyer is comfortable with, the deal could be terminated. If the home doesn't appraise; the deal could be terminated. Basically, the deal could be terminated for any reason or no reason, right up until closing day!
1. NEVER let the due diligence date run right up and until the closing date. Typically, a buyer needs about 30 days to get a loan, do their inspections, negotiate repairs, complete the appraisal, survey, termite inspection, and title search. So, on the surface - for this contract- 30 days was fairly "normal" and not unreasonable. However, the closing date was also set for 30 days. In the State of NC, the "due diligence clause" allows a buyer to terminate the contract for any reason or no reason as long as it is within the due diligence time frame - without losing their earnest money deposit. The seller has to wait on the edge of their seat during this time period because the contract is not really a solid contract until the due diligence period is over. In this case - it was a cash deal - at least that is what the contract terms stated - so the due diligence period could have and should have been shortened by a few weeks - allowing some space between the end of the due diligence period and the closing date.
2. If you are renovating your home and ever think that you are going to sell. Make sure you keep good records. Retain copies of contractor estimates, invoices, and ask for a copy of any permits that the contractor obtained for the work, and any subsequent inspections of their completed work. Keep the records in a cool, dry, safe place, and keep them accessible. Scan them on your computer and keep a copy on a thumb drive as well. You never know when you may be asked to reproduce them. Apparently, there is such a thing called "book lice" that can infect your paper records depending on storage conditions, causing the paper to have to be destroyed; i.e. burned; yielding no more records.
3. Keep all your insurance records, including information used to obtain your insurance; your appraisal and elevation certificate. Also, the name of your agent and contact information.
4. If you plan on selling your home and including all the contents - or if you think that this might be a possibility, then at the time you list the home - either make a list of the exclusions or better; just remove those items from the home and replace them at that time. That way when the buyer does see the home - they see what comes with it right at that time and there are no re-negotiations.
5. As-Is - doesn't necessarily mean As-Is - as long as the buyer can walk away at any point during the due diligence period - a bad home inspection can completely wipe away that as-is clause. If the buyer is not comfortable - the buyer can terminate for any reason - despite what they agreed to when stating they would accept the home as is. I suggest collecting a non-refundable due diligence fee with the offer.
6. For older homes - consider getting your own home inspection at the time of listing or before, so that you will see what the buyer will see when they order their inspection - and possibly repair the items that could be deal breakers or cause extensive repair requests BEFORE they become problems.
I have been doing this for 24 years, and every transaction is different and creates it's own set of issues. I am constantly learning and using these lessons to help the next person, buyer or seller. Many of the issues in the "story" above could have been avoided by some solid record keeping and regular maintenance. The buyer getting a loan after contracting for a cash deal and the extended due diligence period didn't help the situation. The other agent also plays a part in this, they can either help the situation by being skillful at explaining both sides of the situation and allowing for reasonable solutions or they can stand in the way by imposing unrealistic deadlines, termination threats, or making inflammatory remarks against the other parties.