Seller Mistakes to Avoid When A House Is Under Contract

Selling a home can be a complex and emotional process, especially when the house is already under contract. As a seller, it's crucial to navigate this phase carefully to ensure a smooth and successful transaction. In this blog post, we'll explore common pitfalls sellers should avoid when their house is under contract and provide expert advice on choosing the right real estate agent to guide you through the process.

Understanding the Under Contract Phase in North Carolina

What Does "Under Contract" Mean in North Carolina?

In North Carolina, when your house goes under contract, it enters a distinct phase with specific implications. Unlike some states, we have a due diligence period that affects how we categorize a property's status.

The Due Diligence Period Explained

The due diligence period is a negotiated timeframe, typically lasting 2-4 weeks, during which:

• The buyer can investigate the property thoroughly
• The seller receives a non-refundable due diligence fee
• The property is marked as "Contingent" in the MLS

This period is unique to North Carolina and offers both protections and obligations for sellers and buyers.

From "Contingent" to "Pending"

After the due diligence period expires:

• If the buyer chooses to proceed, the status changes to "Pending"
• The buyer's earnest money deposit becomes non-refundable (with some exceptions)
• The sale is more likely to close, but it's not guaranteed until funds are transferred

It's crucial to note that in deals without a due diligence period (like many new construction contracts), the status may go directly to "Pending" when the contract is signed.

The Importance of the Due Diligence Period for Sellers

This period is a double-edged sword for sellers. While you receive a non-refundable fee, you're also in a state of limbo.

Benefits for Sellers

• You receive the due diligence fee regardless of whether the sale closes
• You have a committed buyer for a set period
• You can negotiate repairs or price adjustments if issues arise

Risks for Sellers

• The buyer can walk away for any reason during this period
• Your property is off the market, potentially missing other buyers
• You may need to make repairs or adjustments based on the buyer's findings

Understanding the Under Contract Phase

When your home goes under contract, it means a buyer has made an offer that you've accepted. But don't pop the champagne just yet! This is just the beginning of a complex process.

A real estate contract is a legally binding agreement. Once signed, both parties are obligated to fulfill their end of the bargain. This means you can't simply change your mind without potential legal consequences.

It's crucial to understand that "under contract" doesn't mean "sold". There's still a ways to go before you hand over the keys. During this period, various conditions need to be met, and either party could potentially back out under certain circumstances.

This phase is critical for both buyers and sellers. It's when the rubber meets the road in a real estate transaction. The buyer will be busy during this time. They'll likely schedule home inspections, get an appraisal, and finalize their mortgage details. This is their chance to make sure they're making a sound investment.

As a seller, you're not off the hook. You need to maintain the property, accommodate inspections, and be ready to negotiate if issues arise. It's a delicate balance of being proactive while not overstepping.

Common Seller Mistakes During the Under Contract Phase

Misunderstanding the "Contingent" Status

Many sellers breathe a sigh of relief when their home goes under contract, but in North Carolina, it's not time to celebrate yet.

The risks of assuming the sale is final

• Turning away potential backup offers
• Neglecting property maintenance
• Making premature moving plans

Best practices during the "Contingent" phase

• Keep the property in show-ready condition
• Consider backup offers (within the terms of your contract)
• Wait until the due diligence period ends before making major moving plans

Neglecting Property Maintenance

Even though your home is under contract, it's crucial to maintain its condition throughout the due diligence period and beyond.

Why maintenance matters during due diligence

• The buyer will likely conduct inspections during this time
• Issues found could lead to renegotiations or contract termination
• The final walk-through will compare the home's condition to when the offer was made

Maintaining your property until closing

• Continue regular lawn care and cleaning
• Address any new repairs promptly
• Keep all systems and appliances in working order

Failing to Disclose Known Issues

North Carolina law requires sellers to disclose known defects. Failing to do so can have serious consequences.

Legal obligations for disclosure in North Carolina

• Complete the Residential Property and Owners' Association Disclosure Statement honestly
• Update the disclosure if new issues arise after the initial statement

Consequences of non-disclosure

• Legal action from the buyer
• Potential nullification of the sale
• Damage to your reputation in the real estate market

Mishandling the Due Diligence Fee

The due diligence fee is a unique aspect of North Carolina real estate transactions.

Understanding the due diligence fee

• It's paid directly to the seller and is non-refundable
• It's separate from the earnest money deposit
• The amount is negotiable and can range from a few hundred to several thousand dollars

Common mistakes with the due diligence fee

• Failing to negotiate a reasonable fee
• Not understanding that it's credited to the buyer at closing
• Spending the fee before closing (it's wise to set it aside in case of unforeseen issues)

Ignoring Contingencies and Deadlines

North Carolina's due diligence period has specific deadlines that must be adhered to.

Key deadlines in the due diligence period

• The end of the due diligence period itself
• Repair negotiation deadlines
• Loan application and approval deadlines

The importance of meeting contractual deadlines

• Missing deadlines can give the buyer grounds to terminate the contract
• It can delay closing or create unnecessary tension
• Some deadlines, if missed, can automatically extend the due diligence period

Navigating Appraisal and Inspection Hurdles

When a house is under contract, appraisal and inspection processes can present additional challenges for sellers. It's crucial to cooperate fully with these procedures to avoid delays and ensure a smooth transaction.

Allowing Appraiser and Inspector Access

Sellers must allow appraisers and inspectors timely access to the property to assess its value and condition. Denying or delaying access can significantly impact the negotiation timeline and potentially jeopardize the sale. If repairs are needed, sellers should work with their agent to reach a written agreement with the buyer on how to handle them before the due diligence deadline passes.

Dealing with Appraisal Shortfalls

In a strong seller's market, appraisal values may struggle to keep pace with rising demand. If an appraisal falls short of the purchase price, sellers may need to reduce the price or risk the buyer walking away. FHA and VA buyers are entitled to a full refund of earnest money and due diligence if the home fails to appraise, so sellers should be prepared for this possibility.

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Sellers need to make sure they do not remove more property than is expected from the property they're selling.

Financial Missteps to Avoid

Mismanaging Existing Mortgages and Liens

Ensuring a clear title is crucial in North Carolina transactions.

Preparing for a smooth closing

• Order a preliminary title search early in the process
• Address any title issues promptly
• Obtain an accurate payoff statement for your mortgage

Handling payoff and lien issues

• Coordinate payoff timing with your closing attorney
• Ensure all liens are addressed before the due diligence period ends

Overlooking Closing Costs and Fees

Understanding all costs associated with selling is crucial for North Carolina sellers.

Common closing costs for sellers in North Carolina

• Real estate commissions
• Prorated property taxes
• Revenue stamps (a form of transfer tax in NC)
• Attorney fees (NC requires an attorney for closings)

Budgeting for closing expenses

• Review the Closing Disclosure carefully
• Discuss potential costs with your agent early in the process
• Consider negotiating some costs with the buye

Communication and Cooperation Errors

Clear communication is key to a smooth transaction. Keep the lines of communication open. If the buyer's agent reaches out, respond promptly, even if it's just to acknowledge you've received their message. In the fast-paced Triangle real estate market, delays in communication can cause unnecessary stress and potentially jeopardize the sale.

Being too rigid can sour a deal quickly. While you don't have to acquiesce to every buyer demand, be open to reasonable requests. If they ask to measure for furniture or bring in a contractor for estimates, try to accommodate them. Use your judgment (or better yet, your agent's advice) on when to be flexible and when to stand your ground. Remember, the goal is to close the sale.

Home inspections can make or break a deal. Inspections are a crucial part of the buyer's due diligence. They're looking for any issues that might affect their decision to purchase. Make sure all areas of your home are accessible, including the attic, crawl space, and any outbuildings. Fix any minor issues you're aware of before the inspection.

Removing Property Believed to Be Included

Sellers must be careful not to remove more property than expected from the premises. Buyers expect the home to be in the same or better condition as it was during the showing, so removing items they believed were included can cause friction and potentially lead to a terminated sale.

Failing to Clear Liens and Encumbrances

It is the seller's responsibility to clear any liens or encumbrances on the property before closing. Failure to do so means the seller doesn't have "marketable title," which is considered a breach of contract. In such cases, the buyer is entitled to a full refund of earnest money, due diligence, and reimbursement of all expenses associated with the purchase process.

Failing to Complete Agreed-Upon Repairs

If the seller agrees to make repairs requested by the buyer during the due diligence period, they must follow through on this commitment. The signed due diligence repair request form becomes an addendum to the purchase contract, and failure to complete the repairs constitutes a clear breach of the agreement.

Providing Inaccurate Information

Sellers must provide accurate information about the home and neighborhood to the buyer through the property disclosure form. Any omissions or misrepresentations, whether intentional or negligent, can lead to liability for the seller and their agent. If hidden or unknown defects are subsequently discovered, the buyer may feel cheated and elect to terminate the sale.

Any missed information will be to the liability of the listing agent. Buyers must carefully review the known possible defects and discuss with their agent before going under contract. The real estate agent could be in big trouble if they omitted a material fact, willfully misrepresented a material fact or neglectfully misrepresented a material fact. If the seller and the agent does not disclose all hidden or unknown defects and they are subsequently discovered, The buyer may feel cheated and would elect to terminate.

Builder Miscalculates Completion Date Of New Home

If you are purchasing to build, this applies to you. Many builders have their own purchase contracts. It is critically important to use a real estate agent when negotiating with a builder. Builder contracts tend to be vague and arbitrary. Needless to say, having a buyer’s agent to assist is free of charge because the builder always pays the commission. And a builder purchase contract, they will always have provisions to protect them in the event of a completion miscalculation. If the builder misses any deadline dates, there is usually language that offers very little concession to the buyer for the inconvenience. At that point, it’s up to the buyer if they wish to continue with the purchase.

Legal and Contractual Mistakes

The devil is in the details when it comes to real estate contracts. Read every word of your contract. Understand what you're agreeing to before you sign. If there's anything you don't understand, don't hesitate to seek legal advice. It's better to be safe than sorry.

Real estate transactions are full of crucial deadlines. From the due diligence period to the closing date, there are numerous deadlines to keep track of. Missing these can have serious consequences. A missed deadline could give the buyer an opportunity to back out of the deal or renegotiate terms. Stay on top of all dates and obligations.

Proper documentation is crucial for a smooth closing. You'll need various documents for closing, including deed, title insurance, and tax records. Start gathering these early. Keep all your paperwork organized and easily accessible. This will make the closing process much smoother.

Emotional Pitfalls for Sellers

Becoming Too Attached During Due Diligence

The due diligence period can be emotionally challenging for sellers in North Carolina. Understand that the sale isn't final until after this period and be prepared for the possibility of renegotiations or the buyer walking away. Try to focus on your reasons for selling and view repair requests and negotiations objectively.

Reacting Impulsively to Inspection Results

Inspections are a key part of the due diligence period in North Carolina. They often reveal issues the seller wasn't aware of. Stay calm and consult with your agent before responding to inspection findings. Be prepared to negotiate on reasonable repair requests and consider offering closing cost credits instead of making repairs yourself.

Choosing the Right Real Estate Agent

Having the right agent can make all the difference. An experienced agent like myself has seen it all. We can anticipate problems before they arise and guide you through complex situations. Look for an agent with a proven track record in your area. Ask about their experience with properties similar to yours.

Your agent should be someone you can work well with. Choose an agent who listens to your goals and concerns. They should be able to explain complex concepts in terms you understand. Your agent should keep you informed throughout the process. At the Tim M. Clarke Team, we pride ourselves on our clear, consistent communication.

Local expertise is invaluable in real estate. An agent with deep knowledge of the Triangle area can provide insights on pricing, negotiation strategies, and local regulations that out-of-town agents might miss. Ask potential agents about recent sales in your neighborhood, local market trends, and their experience with properties similar to yours.

Expert Advice from Tim Clarke

As the founder of the Tim M. Clarke Team, one of the top real estate teams in the Raleigh-Durham market, I've guided countless sellers through the under contract phase. Our specialization in custom home building gives us unique insights into property values and potential issues that might arise during inspections.

The key to a smooth transaction lies in preparation, communication, and attention to detail. I always advise my clients to maintain their property in the same condition as when the offer was accepted, be transparent about any issues, and respond promptly to buyer requests or concerns.

It's crucial to work with an agent who not only understands the local market but also has a proven track record of successfully closing deals. Your agent should be your advocate, guiding you through potential pitfalls and ensuring all contractual obligations are met. Remember, the under contract period is not the time to become complacent – stay engaged in the process and lean on your agent's expertise.

To maximize your experience, I recommend staying flexible and solution-oriented. If issues arise during inspections or appraisals, approach them calmly and be open to reasonable negotiations. By avoiding the common mistakes we've discussed and maintaining a professional demeanor throughout the process, you'll greatly increase your chances of a successful and stress-free closing.

Trust in the process, rely on your chosen professional, and soon you'll be handing over the keys to your property's new owners. The Triangle real estate market is dynamic and exciting, and with the right guidance, selling your home can be a rewarding experience.

If you're considering selling your home in the Raleigh-Durham area, don't leave it to chance. Reach out to the Tim M. Clarke Team today. We'll put our years of experience and local expertise to work for you, ensuring a smooth, successful sale from contract to closing. Let's make your real estate goals a reality – contact us now and take the first step towards a stress-free home sale.

Frequently Asked Questions about Seller Mistakes to Avoid

What are the most common mistakes sellers make once their home is under contract?

The most common mistakes are stopping marketing and promotions, taking the buyer's inspection personally, and making large purchases that affect their financial status.

How can sellers avoid sabotaging their own home sale?

Sellers can avoid sabotaging their sale by continuing to market the home to get backup offers, understanding that the buyer's inspection will likely find defects and require renegotiation, and avoiding large purchases until after closing.

Why is it important for sellers to keep marketing a home that is under contract?

Marketing a home under contract can create leverage with backup offers to help push along an existing contract. It also provides a safety net if the current contract falls through.

What should sellers do if the buyer's inspection uncovers defects?

Sellers should expect that the buyer's professional inspection will likely find defects that require some renegotiation. It's important not to take this personally as it is standard procedure.

How can sellers manage their expectations regarding home inspections?

Sellers can manage expectations by realizing that renegotiations after a home inspection are common and do not necessarily reflect on the condition of the home. A real estate professional can help provide perspective.

Why should sellers avoid large purchases before closing?

Large purchases can negatively affect a seller's financial status, which can cause issues with the buyer's financing and potentially jeopardize or delay the sale.

What is the benefit of working with an experienced real estate agent?

An experienced real estate agent can provide expertise to simplify transactions, guide sellers through common pitfalls, and protect the seller's interests throughout the entire selling process.

How can an agent make the selling process smoother?

Agents can make the process smoother by managing paperwork, disclosures, and negotiations, marketing the home, screening buyers, and providing insight on pricing, terms, and timelines based on market conditions.

What should sellers look for in selecting a real estate agent?

Sellers should look for an agent with extensive experience, a proven track record of success, strong local market knowledge, and exemplary client service and communication skills.

Vetting reviews is also recommended.

Why is it advantageous to work with a real estate team versus a solo agent?

A real estate team can provide sellers with more comprehensive service, broader expertise, and added assurances that their sale will be handled efficiently even if an individual agent is unavailable.