risk mitigation for buyers and sellers

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Mitigating Risk (in real estate)

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The action a Realtor takes behind the scenes to protect the buyer or seller

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Some consider real estate agents the 'keykeepers' and otherwise do a lot of nothing when working with our clients, but that is where we let our clients tread into dangerous territory. If your Realtor is doing their job, they should be anticipating problems and heading them off before you even know they were a problem - RISK MITIGATION!

A lot of this effort is thankless, and many times the client doesn't know it was done, unless it is needed at some point in the process in order to put out a fire - we have been using that term a lot lately. Instead of thinking of Realtors as fire-fighters, for a second, think of us as the smoke alarm that goes off before the fire starts. Let's jump into the practical, real-world application of this as it pertains to real estate.

Pre-Inspection

For a seller, you can hire a licensed inspector to do a pre-inspection, a cheaper-than-regular-inspection to determine if there are any problems with the future listing. Then, as the seller, you can take care of those problems so they don't come up at inspection. If your Realtor is experienced they can do the same through their knowledge of homes. See next comment ---->

For a buyer, as you walk through a home that you like, your Realtor should be using their experience and know-how to recognize potential problems. This knowledge should have been accumulated through all the inspections they have been on - heading these off off before placing an offer, can save time and frustration when negotiating. 

Municipal/City/Title Searches

For both buyers and sellers, the target home will have these searches done at some point in the process by the attorney at the cost of the buyer (usually towards the end). Instead, in either case, if you address problems with permits, septic, title, mortgage, or otherwise, you can head off deal-killers that aren't discovered until weeks before closing, after contracts, appraisals, etc. Your Realtor should also check the mortgage amount to determine if the amount owed is higher than the sales price, as well as whether there are any liens on the property (town clerk's office). Your Realtor can also determine actual taxes at tax assessor in case there is a disparity between taxes and the tax card/listing.

Judicial Searches

For both buyers and sellers, the same as the above point. The judicial site is something that should be checked before placing an offer or listing a home to determine if the home is under and litigation by the bank or other entities (by the Realtor OR seller). 

True Story: Even after checking this site when placing an offer, the seller was served foreclosure notice around the time of inspection negotiations. They didn't disclose this information until after appraisal and contracts were signed, causing the buyer to lose money. Sometimes, even with diligence, dishonesty/unlucky-timing can prevail.

Working with the Right People - NOT Unresponsive Mortgage Brokers and Attorneys

For both buyers and sellers - if our buyers and sellers work with someone we have recommended, for attorney, inspection, insurance, mortgage, it inherently protects them down the line. Many times that is out of our hands, but if given the choice between someone we know who will get the job done and be responsive, and someone we have not worked with before, it's a no-brainer. 

Note to Buyers and Sellers: Just because they are your cousin, brother, mother, whatever, does not mean they are good at their jobs. Make sure they are experienced specifically with real estate.

Managing Expectations at Every Turn

For both buyers and sellers, if your Realtor anticipates and discloses as you go, they will make sure the transaction is more pleasant and transparent. Realtors, many times, when something bad comes up, it might not be mentioned for fear of losing the deal. That's the wrong move. Disclose it, even if it is minor and work to get past it. The last thing you want is the issue to come up later, or worse, after is closes.

Flood Insurance, Wetlands, and Encumbrances

For both buyers and sellers, whether you are buying the home or selling it, knowing about wetlands, flood insurance, and encumbrances (rights to parts of the property by other entities) will head off potential issues at the 11th hour. You can ask your go-to insurance agent (or your Realtor's, or mine) to do a flood survey for the property to see if it requires flood insurance (just because the seller doesn't have flood insurance, or their rate is low, doesn't mean they don't need it or it won't be higher). 

For a seller, you might even disclose in the listing that the property requires flood insurance and provide the quote so buyers get an idea of the cost of that insurance.

Condominium Bylaws, Finances, and just asking the right questions

For a buyer, if you are buying a condominium, you should request details about the condo association such as budget information, money in reserves, owner occupancy ratio, insurance information (Master Policy), and most importantly, expected future assessments for the condo. This information comes up for you later when you receive the resale documents (and other pertinent information), but if the seller has any insight, you might save time, money and frustration and get out of the deal now. Your Realtor should know to do this, but now you know.

For a seller, getting this information ahead of time can help mitigate any potential issues that may arise when buyers get that resale package down the line. This information affects whether a potential buyer can get a mortgage on your property, so it's in your best interest.

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There is additional practicable knowledge for mitigating risk, but for many of the smaller things, experience and know-how trump all - it would be too difficult to list every single problem that might arise. As always, the tips here are to be used as a guide for Realtors, and for buyers and sellers to help mitigate their own risk if the Realtor doesn't seem to be doing their job. 

We are here to answer all of your questions if you have any!