Hot real estate markets can mean high home prices and
that's great for home sellers. But all sellers will not
benefit equally. Also, extreme markets can be risky.
Here's what to watch out for:
As tempting as it might be, don't automatically assume
that you're going to receive a huge price for your home.
The media tends to report the excesses in the marketplace.
You'll see a listing that sold with 35 offers, or one that
sold for hundreds of thousands of dollars over the asking
price. You're not likely to find reports about the
listings that sold with only one offer. Yet, many homes
sell this way.
Even if you do receive a flurry of fabulous offers, you
could end up selling for a much lower price. The number of
failed transactions usually climbs during a sizzling
For example, a home recently sold in the Oakland Hills
in Northern California for considerably over the list
price. The offer that was accepted was $100,000 higher
than the next best offer. Within a day that buyer backed
out. The seller's euphoria waned when $100,000 of profit
In frenzied markets, buyers feel pressured to push
their offer prices higher in order to be competitive. It's
not uncommon for buyers to break through their financial
comfort zone in the peak of a multiple offer contest.
After more sober consideration, a certain number of these
buyers realize they made a mistake and withdraw from the
Sellers in this situation wonder whether they're
entitled to keep the buyers' good faith deposit money.
You'd need to consult an attorney for the answer. If the
purchase contract includes an inspection contingency, the
buyers may be able to back out without penalty, depending
on how the contingency is written.
Before you count on the proceeds from your sale, make
sure that the buyers have removed their inspection
contingency. Buyers, who are particularly generous at the
offer stage, could end up settling the score a bit by
asking the sellers to repair defects found during their
HOME SELLER TIP: Beware of offers made without
contingencies. This may seem like a seller's dream.
However, no contingency offers can lead to trouble,
especially when the buyers don't understand what they're
getting themselves into at the time they make their offer.
For example, if the contract doesn't have an appraisal
contingency and the property appraises for less than the
purchase price, the lender might not be willing to give
the buyer enough money to close the sale. If the buyer has
enough cash to make up the difference between the purchase
price and the appraised value, and he's willing to do so,
the sale can close. But, if the buyer is short of cash,
you may have to reduce the purchase price to keep the deal
Letting a buyer purchase your home without the benefit
of an inspection contingency can be very risky,
particularly if there were no pre-sale inspection reports
for the buyer to review before making an offer. What
happens if the buyer finds significant defects in the
property soon after closing?
This is another legal question that requires an opinion
from a knowledgeable real estate attorney. The seller
could have liability, or face and unpleasant legal hassle
after closing. It's best to counter an offer that does not
include an inspection contingency to provide the buyer an
opportunity to inspect.
THE CLOSING: You can minimize your risk somewhat by
providing pre-sale inspection reports. But, these
shouldn't be a substitute for buyers having the
opportunity to perform any inspections they deem
Dian Hymer is author of "House Hunting, The Take-Along
Workbook for Home Buyers" and "Starting Out, The Complete
Home Buyer's Guide," Chronicle Books.
Copyright 2005 Dian Hymer