Selling Your Home? 3 Red Flags You Need To Know
Posted by Lauren Schneider on Monday, February 17th, 2020 at 7:19am.
Buyers are constantly on the lookout for red flags to make sure they aren’t buying a home that could turn into a bad investment. However, advice for homeowners is sparse when it comes to pointing out red flags when considering buyers. Not all buyers are the same, and some may slow down the process or try to back out of a deal at a moment’s notice. This is why homeowners need to be familiar with the warning signs. Here are some of the red flags all sellers should know when considering an offer on their East Colorado Springs home.
The Offer Has a Lot of Contingencies
When a buyer makes an offer, it will likely contain three contingencies: the financing contingency, the appraisal contingency, and the inspection contingency. However, contingencies can be made for just about anything. They’re used by the buyer to give them an out from having to buy the home in case something is terribly wrong with it. Contingencies are to be expected, but if the buyer has put an excessive number and seems to be trying to provide an out in case of any sort of inconvenience, that’s a big red flag. Having a lot of contingencies can mean the buyer isn’t very committed to the home and are trying to keep their options as open as possible by relying on contingencies.
The Earnest Money Payment is Low
An earnest money payment is a cash payment a buyer makes upon their offer being accepted that the seller will be allowed to keep, should the buyer back out of the deal without a contingency to protect them. Because of this, if a buyer thinks they may want to back out, they may try to offer a low or no earnest money payment to minimize their losses. Homeowners should keep in mind that buyers who have nothing to lose by pulling out have nothing keeping them in a deal, should something better come along. A high earnest money payment is a good sign because it shows the seller that the buyer is serious about purchasing the home and have a low chance of pulling out.
The Buyer Isn’t Preapproved for the Loan
As part of an offer, buyers will often include written proof that they’re approved to borrow money from a lender in order to purchase a home. Proof of preapproval is great as part of an offer because it shows the seller that the buyer is doing their part and knows what they need to do to buy a home. Getting preapproval is also the first step to getting approved for a loan normally.
However, the problem is when a buyer isn’t preapproved, but instead prequalified. Prequalification and preapproval seem like they may be the same thing, but they’re not. Prequalification is the step that comes before preapproval, but it’s much easier to get prequalified than it is to get preapproved. Preapproval requires an in-depth credit check among other things. Prequalification, on the other hand, relies solely on user-submitted information that may not be accurate.
Just like buyers, sellers also need to be on the lookout for red flags in order to protect themselves. Understanding the warning signs and red flags of seemingly benign actions can help protect sellers from making a deal that could potentially fall apart later, helping them save a lot of time in the long run.