1. Never allow your clients to store a few things?’
The buyers just want to store a few things in the empty garage. Sounds harmless at first, but the “few” things turn into an entire house full of stuff. Still, it’s only the garage and the house is empty.
A hurricane comes and rips off the garage door, destroying everything in the garage. The seller’s insurance company will cover the house but not someone else’s contents. (This is why we tell renters to get renters insurance.)
The financial hardship for the buyers is significant. Of course the buyers feel the seller should pay but it is not their responsibility.
2. Never make repairs?’
The buyers just wanted to make a few repairs before closing, so they hired what they thought was a licensed and insured company. One of the workers fell and was seriously injured. The accident victim had no insurance for his injuries and went after the seller and the seller’s insurance company.
3. Oops, we thought we were approved.’
The buyer has been pre-approved for a mortgage. The buyer’s husband works for the bank where they are getting their loan. It is a sure thing. The buyers move in early. The wife goes out and buys furniture.
The buyers no longer qualify for the loan, they beg the sellers to rent to them. The sellers say no because they want to sell. The buyers refuse to move, forcing the sellers to go through an eviction.
After the eviction, the sellers gets the house back, but these angry buyers have done considerable damage, and there is not enough money to cover all of the damages.
4. We repaired a foreclosed property that is insured — and lost our money!’
The buyers know that a foreclosure is empty so they start working on it figuring no one will know. They replace vanities, flooring and spend a considerable amount of money on a home that they do not own.
Unbeknownst to these buyers, the foreclosure company is covered by mortgage insurance. In fine print on the REO (real estate owned aka foreclosure) addendum, it says that should the mortgage company disapprove the sale, the seller is released from the contract with these buyers.
The mortgage insurance inspector goes to the house prior to closing to approve the sale. The inspector feels the house sold too low, which of course it did based on the upgraded condition. The inspector advises the mortgage company not to approve the sale but instead take back this home.
The buyers get their escrow money back, but they lost all the money they spent on the upgrades.
Would you want to be an agent on either end of these six scenarios? I bet that after each one, you probably thought to yourself “I’m glad I’m not that agent.”
Fortunately, I have not had to live through all of these scenarios, but I hear of things like this happening every single day. My recommendation, regardless of whether you represent the buyer or the seller, is just don’t let anyone move in early.
These are only a few scenarios that could happen either way if you allow your buyers to move in before closing you could get sued.