There is nothing worse than counting on closing and then finding an unexpected pitfall that keeps you from selling your house! After going through the pain of preparing your home to be listed, suffering through the interruptions of several showings, negotiating the terms and conditions, and sitting through an inspection. You want to be done. In Tallahassee, one-third of the negotiated offers end up being terminated. Here are the most common reasons why buyers terminate. We also cover what you can do to keep it from happening to you.
Below you will find war stories and seller pitfalls for the home-selling process. You will find more in-depth information on other topics on the following pages.
We hope you find this information useful. If you have any questions, please reach out to us! If you are also buying, there are a lot more moving parts that need to be coordinated. Check out our Buyers Pages too, and please download a copy of our book for Tallahassee Home Buyers.
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Seller Pitfall Storytime: Johnson v Davis: The Case That Changed Real Estate In Florida
This is a complicated case. The story is a good illustration of many things that can go wrong when selling your Tallahassee home. This contract was signed in 1980, and the case was decided in 1985. The Davis couple offered to buy the Johnsons’ three-year-old house. The Davises offered $5,000 for an earnest money deposit, with another $26,000 to be paid within five days. The contract included a paragraph about the roof which becomes crucial to this story. The sellers agree to finance the buyers’ purchase of the house.
Paragraph F: The Roof Clause
The paragraph reads, “Prior to closing at Buyer’s expense, Buyer shall have the right to obtain a written report from a licensed roof stating that the roof is in a watertight condition. In the event repairs are required either to correct leaks or to replace damage to facia or soffit, seller shall pay for said repairs which shall be performed by a licensed roofing contractor.” This contract also states that the losing party would cover reasonable litigation costs of the prevailing party.
Before the Davises made their second deposit, Mrs. Davis asked Mr. Johnson about a window that had staining around it. She also noted that there were stains on the living room and kitchen ceilings. Mr. Johnson explained that the stains were from wallpaper glue. He said a moved ceiling beam had caused the stain. Mr. Johnson stated that a minor problem caused the window’s buckling and peeling plaster. A problem that had long since been corrected. Mr. Johnson may, or may not, have told Mrs. Davis that there had never been any problems with the roof or ceiling.
The Discovery and Expert Opinions
Satisfied, the Davises gave their second deposit to the closing agent. The Johnsons packed their things and moved out of the house. Several days later, following heavy rain, Mrs. Davis visits the home. She finds water ‘gushing’ into the house. She states that the water is coming in from around the light fixtures, the glass doors, the window frame, the ceiling of the living room, and above the stove in the kitchen.
The Davis’s hired three roofers for their professional opinion regarding the roof’s condition. These roofers agreed that the roof is inherently defective and ‘slipping.’ In their opinion, any repair to the roof would be temporary. A roof replacement was the only way to ensure it would remain watertight. The two roofers hired by Johnson’s broker said they could make the roof watertight with a repair for under $1,000. The sellers agree to the $1000 repair but will not replace the roof.
The Lawsuit
Buyers went to court to have their $31,000 returned to them. They said the sellers lied about the property’s condition and breached the contract. The sellers claimed the $31,000 as liquidated damages. The sellers claimed that they had not breached the contract. The buyers refused to accept the repair, and that breached the contract.
When both sides claim the earnest money deposit, the closing agent doesn’t decide who is entitled to it. The agent will use some of the deposit funds to file an interpleader case with the clerk of courts. An interpleader is a civil procedure to determine who can claim the money. In this case, Johnson and Davis proceeded to court and had a trial. Both sides testified that Mrs. Davis asked about the stains and roof.
The Outcome
The trial court decided that the Johnsons would retain $5,000 of the deposit. The Davises would receive $26,000, and both sides would pay their own costs and fees. Interestingly, the trial court did not record why they made this decision. During this time, the common law was ‘caveat emptor’ or ‘buyer beware.’ We can only assume that influenced their decision. It also allowed the seller to feel justified in not disclosing their previous issue with the roof.
Florida’s Supreme Court, and Third District Court of Appeal, disagreed with the trial court. They found that the seller had fraudulently misrepresented the condition of the property. The Supreme Court ruled the entire deposit belonged to the buyers. Furthermore, the Johnsons would pay the Davises for fees and costs associated with the lawsuit. During those five years of litigation, the Johnsons would not have been able to sell the home and move on with their lives.
In the words of Florida’s Supreme Court Justice Adkins, “One should not be able to stand behind the impervious shield of caveat emptor and take advantage of another’s ignorance.” You can read the case notes here.
The Seller Pitfall of Failing to Disclose.
During inspections, when the buyer finds something significant that was not disclosed, they lose trust in the seller.
It makes sense that some people are more conscientious than others and have more details about their house. It is also true that details can be innocently forgotten. However, the days of buyer beware are gone in Florida real estate. The seller is required to disclose all known material facts about the house.
When in doubt, disclose. It is better to lose a buyer than a court case. There is no requirement in Florida to disclose a homicide or suicide. In the case above, the seller tried to hide a significant flaw and then refused to correct the issue he knew existed. Don’t be a Johnson.
Pre-listing inspections
We once sold a house in Jefferson County owned by an elder who had been widowed many years earlier. She had attempted to maintain the house but had never crawled into the attic or crawlspace. The seller took my advice and ordered a pre-listing inspection. The inspector found a significant roof leak in the corner near the chimney. (It’s almost always the chimney that leaks first!)
The water intrusion had caused extensive damage down the wall and into the crawlspace. The seller was shocked. Then the inspector asked the seller several questions. It quickly became obvious that there had been signs of roof failure, but the seller had not recognized their significance. She thought the storms had blown the water down the chimney. She would not have disclosed what seemed obvious in hindsight.
Deferred Maintenance – Repairs – Insurance Requirements
Lots of small things can be worse than one big thing to repair. Another common seller pitfall is not addressing deferred maintenance.
Cosmetic conditions can often be ignored if the item works and performs as intended. When buyers pour over the details in the photos, they guess at the home’s condition. When they tour it, they will start deducting the things they want to correct from the listing price. Once they reach a certain percentage of that list price in repairs or renovations, they move on to the next house. You can improve your sales price by addressing deferred maintenance.
Sometimes sellers do not know the condition of their house. It is possible to have a major issue like a roof leak or foundation collapse and have very little warning. In our careers, we have seen both happen to unsuspecting sellers. How devastating (and embarrassing) it can be to find out from the buyer’s inspector. By then, the seller thinks they are heading to the closing table. This information can feel like a bomb on the seller’s proceeds.
Another inspection story
Working with a buyer, we found a sprawling house on a large lot in a quiet neighborhood. She did find it odd that the seller had only owned the property for about 18 months. When asked, the listing agent said the seller had bought the house for a friend. The friend had lived in the house for a while before they decided to live together. Since the seller did not live there, they did not complete a disclosure form. Pretty common, and we would call it a seller pitfall.
The buyer had the house inspected. She made some disturbing discoveries. There was an abandoned oil tank (not filled in) in the yard and a tree growing through the roof. There were also several smaller things like slow drains, missing screens, windows that would not stay open, etc. After several calls, we tracked down the inspection report from when the seller had purchased the property months earlier. These same conditions existed then and were disclosed. The buyer was furious that the seller had left so much deferred maintenance and still expected to profit more than $100,000 in less than two years. She refused to tour another home listed by that brokerage.
Related to the seller pitfall of deferred maintenance… If inspections reveal something significant, it MUST be disclosed to all future buyers.
Because of this, it is preferable to negotiate a repair than to go back to the market. In the case of Johnson v Davis above, the question about the battle of the contractors was not answered. Sellers do not have to accept the buyer’s inspector’s or contractor’s recommendations. The sellers can get their contractors to say what they want them to say. As you can see from above, this can lead to an expensive and drawn-out court battle.
Regarding repairs, agreeing to a credit or price reduction is better for sellers. It lets the buyer pick a contractor to make them happy. The seller can often fix it themselves for less, and they often want to do so. This is a major seller pitfall. Therefore, the contract requires licensed contractors to do the work. It is safer for the seller anyway and puts the burden of professionalism on the contractor.
Low Appraisal Pitfall or Other Lender Requirements
Are home appraisals public record?
No. Appraisals are not shared with anyone except the buyer who paid for the report. The buyer’s agent does not always see the appraisal. The only way anyone else could end up with access to the appraisal report is if it was completed for an FHA loan AND the report was uploaded to the loan system. In that case, the appraisal will stay with the property for six months.
Is home appraisal part of closing costs?
Yes, the appraisal is part of the buyer’s closing costs. However, it is usually a loan requirement, and most contracts require that the report be ordered within a week of the agreement being signed by both parties.
Is a home appraisal the same as an inspection?
No. Both the appraisal and inspections are ordered in the first week under contract. While the appraiser and inspector walk around the outside and inside of the house and take many pictures, that is where the similarity ends.
The appraiser is looking for the ‘fair market value’ of the home, and most appraisers will use the Uniform Residential Appraisal Report from Fannie Mae. The report requires the appraiser to describe the interior and exterior of the property, the neighborhood, and nearby sales of similar homes. The appraiser then provides an analysis and conclusions about the property’s value.
The inspector is looking for things that will impact maintenance and other costs while owning the home. They work for the buyer (the bank hires the appraiser). Their goal is to give the buyer a realistic and professional review of the conditions of the home. This report is shared if the buyer terminates the contract.
Can a home appraisal be challenged?
Yes, but they are rarely challenged successfully. The lender or appraiser provides the appeal process. It usually includes a form to be completed. A seller’s best chance is finding a comparable sale that is missing in the report. The other way is by challenging the geographical competence of the appraiser. Both are more common in rural settings than in Tallahassee city limits.
Can the lender require repairs?
The lender can require repairs for the loan to close. The seller is never obligated to make repairs unless they have agreed to do so in writing. For example, VA loans can require that there be a railing installed on a patio that is too far from the ground. Most contracts allow the seller or buyer to terminate in this case. If the seller agrees to repairs, it is a good idea to put a dollar amount to limit repair expenses.
What other repairs can be required?
Insurance in Florida is a mess. Many insurance companies have gone bankrupt insuring Florida in the past. Because of that, insurance has tightened up on their risks. Even if the seller has insurance does not mean that a new insurance policy can be written. For example, we sold a house this summer with 30-year shingles on a 19-year-old roof and no leaks. We called twelve insurance agents, and none could insure the house until the roof was replaced. We got it on there before Ian came through.
More Common Pitfalls Sellers Will Find: Buyer’s Cold Feet, Financing, and Personality Conflicts
Not a seller pitfall, but still common is fear. Some buyers get cold feet and want to terminate the contract.
This is more common with first-time home buyers. The process can feel complicated. Without the right guidance, the buyer may feel overwhelmed. Most of this is beyond the seller’s control, but sellers can do a few things to lower buyer anxiety.
The biggest thing the seller can do is disclose all the available information. Not just who your handyman and house cleaner are but also the neighbors’ names or the best place for local pizza nearby. Tell the story of your house in a note to the buyer. Tell the buyer about the lovely blooms in spring, gorgeous sunrises, awesome summer parties, and everything you will miss about your home and neighborhood. Help them feel as welcome as possible in their new home.
Storytime:
We once worked with buyers moving here to be close to coming grandchildren. They loved the trails around Lake Lafayette and decided they wanted to live in Piney Z. Since their children were close, we would often show them the house first. If mom and dad liked the video and pictures, they would drive the three hours to see it in person. During the summer, a gorgeous home on Eagle View hit the market. The inside was beautiful, and it was surrounded by the giant ancient live oaks that they loved. One of those oaks had limbs that rose over the house, over the roof, and almost back to the ground.
When we toured it, we took lots of photos and videos, especially of this oak tree. Mom and dad loved the house and were not scared of those oaks. They made an offer, and out of multiple offers, theirs was accepted. All was awesome until they saw the tree, and its soaring branches, in person. They terminated the contract. For sellers, the lesson here is not to accept an offer on a house the buyer has not seen.
Not a seller pitfall, but financing is a contingency. It is not as common now, but financing can still fall apart.
During the height of the market, buyers were waiving all contingencies to win the contract. That meant buyers would buy the house regardless of what the inspections showed and regardless of whether their loan was approved. That is a lot of risk for the buyers.
Fortunately, Tallahassee sellers had multiple offers, and buyers generally had solid financing plans. The seller, or the listing agent, can call the lender and ask how confident the lender feels about closing the loan. The loan officer cannot violate confidentiality, but they will give you a sense of how solid the financing is for the buyer.
“Enough is enough, I’m not giving it away.” What to do with personality conflicts.
We do not know Mr. Johnson from the story above. We wish we could ask him his thoughts when going to court. The Florida Supreme Court decided the case above, and Mr. Johnson was responsible for paying for the Davis’s fees and attorneys. That had to hurt his wallet. My gut tells me that this became personal for both sides. When that happened, they were both convinced they were right. Only a judge was going to be able to decide. That wasn’t enough for either side, though. After the trial, they both appealed the issue to the Third District Court of Appeals and then to Florida’s Supreme Court. All three courts found that Mr. Johnson had fraudulently misrepresented the house’s condition. The seller pitfall lesson here is that it becomes expensive when the lawyers get involved. Choose your war carefully.
We have seen many deals fall apart because one side becomes frustrated with the other side. It is not always possible to find a meeting of the minds. This is another reason to choose an experienced agent who has a good relationship with other local agents.
