8 Common Mistakes Real Estate Agents Make
When buying a home, you will sign the California real estate purchase agreement. Mistakes made on this contract by your realtor can cost you tens of thousands of dollars. I'm going to show you how to avoid them. I am not an attorney, but I am a real estate broker and I have trained hundreds of real estate agents over the past 20 years. I have negotiated this contract thousands of times. This is my advice on how to avoid the eight mistakes that realtors can make.
#8 The number 8 mistake that real estate agents make that can cost you tens of thousands of dollars is not paying attention to the close of escrow day. This is in paragraph 1C. When you get your offer, it might say something like “30-day escrow.” That sounds great because you want to move. Well, if that 30 days ends on a Saturday, then the contract says it will get pushed back to the next business day. And if Monday is a holiday, guess what? Contractually, you're set to close on Tuesday. Now, that may not be a big deal, but if you're buying and selling and days really matter, it could be a really big deal. So be super clear. You must understand when the close of escrow is for your transaction.
#7 The number 7 mistake that agents make is allowing the buyer to have too long of an inspection contingency. You will find that in paragraph 14B1. The inspection contingency is the number 1 reason why houses fall out of escrow. So you want to keep those as short as possible. The default in that contract is 17 days. That's too long. I recommend shortening that period to 10 or even 7 days. You can always give the buyer a few more days if they need it. But if you give them 17, you can't shorten that.
#6 The number 6 mistake that agents make that you need to avoid is: not paying attention to paragraph 8B, which is items included in the sale of your home. Now, you might know that light fixtures and things that are attached are included, but if they mark a couple of boxes in this paragraph, you could be selling your stove, your refrigerator, and your washer and dryer. And be aware that there are a few other things that are included, like the fireplace screen and inserts and all window coverings.
#5 The number 5 mistake that you want to avoid is allowing for an unusually low-interest rate in paragraph 3D. The contract is going to tell you the terms of the buyer’s loan. One of those terms says that the buyer is to obtain a loan that won’t exceed a certain interest rate. Well, if the buyer's agent writes an unrealistically low number on that item, it could make the loan contingency unenforceable. So we suggest making sure that the interest rate stated is a little above the going rate or, pro-tip, write that the buyer will accept prevailing interest rate, and make sure that your home doesn't fall out of escrow because they can't get some dreamy interest rate.
#4 The number 4 mistake that your agent can make is allowing you to sell your home vacant. And this is in paragraph 9D. The mistake here is simple. The contract reads that the house shall be delivered vacant at the close of escrow. Some homes have an ADU or a guest unit. And if you have a tenant in one of those units, they may have rights and you may not be able to vacate their unit in order to sell it. Make sure you understand tenants’ rights. Make sure you have open communication with any tenants that might be on your property and make sure you're not guaranteeing something you can't deliver.
#3 The number 3 mistake that you want to avoid is not checking paragraph 6: other terms. This is 5 blank lines that the buyer's agent can put anything they want in. And if you miss it, you may be agreeing to something objectionable. Be really careful that you understand everything that they put in paragraph 6.
#2 The number 2 mistake that agents make that cost their clients is in paragraph 7A. This is called allocation of costs, and it's very tricky because it's at the very bottom of the page and is easy to miss. The checking of a box can obligate the seller to pay for things like termite clearance or a sewer septic certification, for example. These are the kinds of things you want to avoid. You don't want to write a blank check just to open up escrow. So make sure you understand what is in allocation of costs.
#1 The number 1 mistake that agents make that can cost you tens of thousands of dollars is allowing you to accept less than a three percent deposit to open up escrow. The deposit amount is not a law. You could accept, for example, a 1000 dollar deposit from the buyer. After all contingencies are removed, they could decide that they want to cancel the sale. The only thing that you may have recourse with is that one thousand dollars, which is just not enough to keep them from walking from your escrow.
Those are the eight mistakes that agents make that can cost you tens of thousands of dollars. Now, you might be asking, how can you avoid them? Here's my number one suggestion: read the contract. Ask for a printed copy or a PDF so that you can read it thoroughly. Make sure you read every word of it and make sure your realtor won’t make these mistakes. When you're interviewing a realtor, make sure they are experts in both marketing and contracts. A simple question you can ask them is: “what happens if the escrow is supposed to close on a Saturday?” The only answer you should accept is, “we'd like to avoid that, because if the escrow closes on a Saturday, the contract says it gets pushed back to the next business day. So we're going to go ahead and avoid that happening to begin with.” That's the only answer that works. Any other answer might mean they don’t understand the contract as well as they should.
Those are my 8 tips to make sure that you are protecting your rights. If you have any questions about this, feel free to reach out. We're here to help.