Whether you’re buying a house or selling a house, signing the contract is only the beginning of what can be a long, and sometimes arduous, journey to the settlement table.
In most cases, it all goes off without a hitch, and the deed can be done in less than a month. But there are other times when the unexpected can pop up and threaten to derail even the best laid plans and preparation.
For example, let’s say you had an earthquake one day, not a catastrophic one, maybe a 5.8, just big enough to put a few fault lines in your foundation. And then, only a couple of days later, a Category 1 hurricane comes ripping through, tossing the trees around and dumping enough water on your patio to create a steady flow through those fresh cracks in your basement walls.
I know this is a somewhat far-fetched scenario, but just for fun, let’s go with it to see what might happen to your settlement, especially when the lights then flicker off 10 minutes before everyone’s ready to sit down and start signing.
We all of course know, that as wild as that sounds, it’s exactly what happened for a lot of folks just this last week. Compounding the problem was the fact that it all took place at the end of the month, a time when most property settlements occur.
So, along with the inability to find D cell batteries, or get a table at Denny’s for the all you can eat pancake special, a bunch of people were caught off-guard, trying to figure out what to do with the disrupted process of buying and selling a house.
When mother-nature asserts herself, there are a lot of things that can put a settlement on hold. The property might be damaged, and in our electronic world, the loss of electricity makes it difficult to do much of anything.
In the dark, you can’t do a walk-through, to make sure all the appliances work. With all the computers down, your title company might not be able to shuffle all the necessary documents needed for settlement. And, the money might not show up from the bank, if it’s not possible to wire funds. Plus, the glow of an old Coleman lantern isn’t the best light for reading through the pile of papers everybody will need to sign to consummate the deal.
So, what’s a person to do when it all starts to unravel? The first thing is to step back, take a deep breath, and remember that just about anything can be fixed.
If you’re a buyer, all excited about that spiffy new split foyer, the last thing you want to do is drive by and see a big oak tree lying all over the roof. And if you’re a seller who’s gone through four price reductions, 68 showings, and nine months trying to sell that darn old split foyer, the last thing you want to hear is some big oak tree out back collapsing on your roof.
Once everyone gets over the initial shock, and it’s determined there’s no loss of life or limb, call your real estate agent. They are best positioned to coordinate everyone necessary to help you recover and make a plan of action going forward. A couple of experienced agents, with cool heads, can map out all the options and substantially mitigate the pain and inconvenience.
Whenever problems like this come up, the first step is to go back and see what it says in your sales contract. These contracts can be 50 or 60 pages long, so they’re chock full of all kinds of direction to deal with difficulties.
If that big oak tree flattens the house you were about to buy or sell, you might want to take a look at paragraph 27, “seller responsibility.” In there, it says, “If, prior to the time legal title has passed or possession has been given to Buyer, whichever shall occur first, all or a substantial part of the Property is destroyed or damaged, without fault of Buyer, then this Contract, at the option of Buyer, upon written notice to Seller, shall be null and void and of no further effect.”
In short, even if the Seller’s insurance will restore the house to its previous condition, the Buyer isn’t compelled to buy.
And what if the damage isn’t all that severe? Then, Paragraph 21, the “possession clause,” might also give the buyer an out, since it says that the property must be “in substantially the same condition as existed on the date of contract acceptance.”
However, this all presumes the buyer is looking for a way to terminate the contract, and that might not necessarily be the case. Even though a few shingles blew off and the power is down, everyone may still be interested in moving forward. This is where some patience, trust, understanding and creative thinking will get you through.
For instance, you might not be able to fire up the Frigidaire before settlement, because the BGE truck has yet to visit your block. One possible fix is to escrow some money at settlement, equal to the value of appliances. Then you’re covered if something doesn’t operate when Mr. Sparky turns the lights back on.
Workarounds like that are pretty easy, but there are other important issues that you should be aware of, if a weather event, like a hurricane, could potentially delay your settlement. Most of these concerns revolve around insurance and lending.
Here’s a scenario that can cause a problem: The bank isn’t going to make a loan if the house doesn’t have insurance, and once a hurricane makes landfall, the insurance companies will stop writing insurance. Consequently, if you’re a buyer, with a settlement coming up, and there’s a big low pressure system swirling around out there in the Atlantic, you’d better get the insurance on your new house put in place as soon as possible. Plus, the seller should also make sure he’s got the coverage necessary to cope with claims that could prevent the sale.
There are obviously a vast number of other problems that can crop up when buying or selling a house, especially during a week like the one we just had.
Real estate agents, title and insurance companies, lawyers and lenders can all help to work it out. But, the real key to getting through it all is maintaining a high level of cooperation and trust between the buyer and seller.
Remember, controversy takes your participation. If both sides keep a sense of humor and make every effort to help each other, even earthquakes, hurricanes or whatever else might come our way, won’t prevent a successful sale, one where both buyers and sellers can leave the settlement table feeling like everyone was treated fair and square.
Bob and Donna McWilliams are practicing real estate agents in Maryland with more than 25 years of combined experience. Their email address is McWilliams@BobDonna.com.