Sunday, 05/15/05

You've spent the last four weekends looking at dozens of homes and have fallen in love with this wonderful two-story home on an acre of land only to find out through an inspection that the basement leaks and mold is everywhere.

Or you're the seller and you've kept your home spotless for the endless showings until you finally get a contract on the home only to learn that the potential buyers don't have their financing in order.

These are deal breakers.

Every buyer or seller has a personal perspective on what constitutes a deal breaker. Some buyers might be deterred by major issues, such as foundation cracks, while others will run from seemingly routine disclosures. Some will expect the seller to repair every tiny flaw while others are willing to buy ''as is.''

We turned to a handful of local real estate agents/brokers to find out what the common deal breakers are and how to avoid them.

The panel included Steve Condurelis of Keller Williams, Christie Wilson of The Wilson Group and Tammi Turner of McArthur Sanders.

Appraisals

If a home doesn't appraise for the price the seller is asking, the deal can fall through because the lender won't lend the money, says Christie Wilson, managing broker for The Wilson Group and president-elect of the Greater Nashville Association of Realtors.

This could happen in a hot neighborhood where there are multiple offers for a home. A bidding war can price the house above what is normal for the market. For example, if the house is appraised for $300,000 and the price is now $325,000, the potential buyer might have to come up with that additional $25,000, says Wilson, because the lender only will make a loan up to the appraised figure.

Wilson will try to mitigate that situation by seeing if the appraiser will adjust the appraisal because of the appreciating market value of the neighborhood or ask for a second appraisal. She also will bring her own statistical data to the appraiser showing comparable sales in the area.

Financing

''One of the biggest deal breakers for buyers is when they don't pay attention to their credit rating. They're dead before they start. With a poor credit score, you're doomed. You'll be dealing with either a high interest rate loan or a lender who won't consider you at all because you're a risk,'' says Condurelis.

Realtors recommend that buyers get ''pre-approved'' before starting the shopping process. And this is different from ''pre-qualifying.''

Getting pre-qualified means a loan officer has interviewed you and determines the dollar value of a loan, but it is not a commitment to lend.

Pre-approval is one step up, and involves verifying your credit, down payment and employment history. Your loan application is submitted to an underwriter and a decision is made.

If your loan is pre-approved, you are then issued a certificate. A pre-approval can help you negotiate a better price, since being pre-approved is very close to having cash in the bank to pay for the house.

But once you're pre-approved, there can be another hurdle and that is not having the money to close, says Turner, an affiliate broker with McArthur Sanders Real Estate.

''Many times, buyers will have the income and the required credit scores, but do not have money saved for a down payment. And first-time home buyers will not have equity in a current home to roll into their new purchase,'' says Turner.

She helps her clients by getting them in touch with a reputable mortgage banker with access to a number of buyer assist programs that can help with down payments and closing costs.

Inspections

When a home inspection reveals problems with a house, it can spook a potential buyer and kill the deal, says Wilson.

So she tries to explain the differences between major problems and minor problems. Even perceived major problems don't have to kill a deal, says Wilson, who will call in experts for second opinions.

''With termites, we want to know if there is activity and structural damage and then we try to mitigate by having the seller responsible for having the home treated and repair any damages,'' she says.

Turner helps her clients go through the list of ''questionable items'' raised from the inspection and decide which ones must be repaired to make the purchase.

''If you ask for everything noted in the inspection, the seller will likely not oblige, but it doesn't hurt to ask for those items important to you,'' she says.

Regarding the presence of mold, which has become the asbestos of the 21st century, Wilson also will call in experts.

''The mainstream media has made mold such a huge issue. Most houses have mold. But is it toxic mold or is it just mildew mold that can be treated?'' says Wilson.

Lack of market knowledge

In a seller's market, buyers can kill a deal by putting in a low-ball offer or writing too many strict contingencies on the contract, says Condurelis.

In a buyer's market, sellers can lose by not pricing the house according to the market, adds Condurelis. ''It's all about price. Price can overcome all weaknesses in a property.''

Third-party opinions

''Buyers, especially first-time buyers, don't buy by themselves. They bring other people to the house for advice,'' adds Condurelis.

Wilson concurs. ''Parents of first-time home buyers will pick a house apart and kill a deal by being too overprotective.'' That's when Wilson reminds parents about their first home.

''And chances are they had a similar home when they were first starting out,'' adds Wilson.

Avoiding deal killers

How much a Realtor will negotiate depends on how bad the homeowner wants the house or how bad the seller wants to sell, says Condurelis.

''And that's OK if a deal falls apart. . . .Usually the buyer is much happier on the next house,'' adds Wilson. The key is to get your property in selling shape.

''If people would spend the time preparing their home to be on the market there would be fewer things that can go wrong and less chance of deal killers,'' adds Turner.