Real Estate Investing

Happy 2009!  It’s a fresh start to a brand new year and I’m trying to bury 2008 - closing old files, taking care of unfinished business.  I’m ready to call it a wrap! 

So as I shuffle through my end-of-the-year paperwork, I found an invoice for a termite inspection.  I had a lovely little home listed in the fall that fell victim to a scared market.  It was priced at an incredible $128,000 and had almost 1900 square feet, hardwood floors, fenced back yard, mature trees, and more.  The down side - besides the market making the big slurping noise - it only had one bathroom.

At one point we had an outstanding contract, but two weeks before closing the buyer turned yellow-belly on us and ran from the deal.  My sellers were great about it - they didn’t want to get tangled in a long, useless court battle to force the closing so they let the buyer go.  Since then, the listing has expired and the sellers are now renting the home to someone else. 

Meanwhile, the termite letter fell to the wayside until I got the friendly reminder by mail.  I was going to simply write a check to pay for it, but I noticed a check place with words in big bold letters, “Deal fell through.”  Oh.  I picked up the phone and called the termite company and those sweet, sweet, kind people waived the charge.  (If you’re in middle Tennessee and need a termite company, please feel welcome to look at the name of the company and phone number on the photo and give them a call!).

This whole situation made me wonder, though, about who pays for services when a closing falls through?  Usually I don’t like to be the one to call and order a termite letter or other services, but if I *am* the one who makes the call, I feel obligated to pay.  If the seller or the buyer makes the call, then it’s their obligation. 

When a home is inspected, that inspector is paid at inspection for the services he or she is performing there.  It is not the seller’s obligation to pay for an inspection done fo the buyer.  The inspector is working for the buyer so the buyer pays.  UNLESS…. Sometimes I’ll take listings for a higher commission rate and in those cases I will have the home pre-inspected to avoid unhappy surprises when it comes time to close - then that inspection fee is my responsibility.  I have heard of agents taking smaller commissions, but also asking their sellers to then pay in advance for any advertising that’s done on their behalf.  Ultimately, the agent will pay the advertising bill but they’ve collected through their company in advance for the cost.

The appraisal is also an expense that certain lenders require in advance.  Other lenders will place the fee in with closing costs.  If a buyer walks away without paying for the appraisal, the lender has every right to sue for that service provided by a third party vendor.  But again, I know of many times when the lender just has to eat that expense.

The cost of doing business is a cost we must all bear.  But I hope in 2009 that we are able to better educate our sellers and buyers in advance about their contractual and monetary obligations for when they do buy or sell - we’ll try to keep the costs down on their behalf, but sometimes they will need to pay.  You get what you pay for, afterall.