Real Estate Round-Up: Integrity is important for sellers and buyers

Integrity is a noun that means the quality of being honest and having strong moral principles and moral uprightness, such as “he is known to be a man of integrity.”

It’s synonyms include honesty, uprightness, probity, rectitude, honor, honorableness, upstandingness, good character, principles, ethics, morals, righteousness, morality, nobility, high-mindedness, right-mindedness, noble-mindedness, virtue, decency, fairness, scrupulousness, sincerity, truthfulness and trustworthiness.

Previously I put down my thoughts on motivation and attitude and how those two subjects are the basis behind how sellers and buyers proceed during a real estate transaction. Motivation is the mover behind why we do what we do. Attitude feeds how we respond based on our life’s body of experiences and the values we have learned.

Nothing, however, compares with integrity. Integrity challenges us every day. Is it easier to tell part of the truth, rather than the whole truth? Is it easier to allow integrity to be a little gray, or is it consistent and steadfast? A real estate transaction intersects many points that test the integrity of people.

Let’s start with buyers. I’m not picking on buyers, it’s just that “B” comes before “S,” so buyers get to go first. One of the first things that a buyer needs to do before shopping for a new home is to get pre-qualified with a lender. That step generally begins with a phone call to the loan officer, where the officer asks the buyer a lot of questions about their income, their assets, their employment, their taxes and their credit.

Many loan officers will provide a pre-qualification based on that phone conversation. The loan officer needs to know the good, the bad and the ugly to determine what kind of a loan program will work best for the buyer. If the integrity of the information provided is not accurate, then the executed purchase contract will be supported by a pre-qualification letter that is not worth the paper it is written on.

Loan officers have many different loan programs based on the strengths or weaknesses of a buyer’s credit. Start with the truth and then let the loan officer fit you with the right program.

The Residential Purchase Agreement and Joint Escrow Instructions is a timeline of events that the buyers and sellers agree to abide by.

For example, the default date that the buyer is to remove the contingencies for inspections, reports, disclosures, appraisal and insurance is Day 17. It means that by that date, the buyer should have completed all the inspections they want to do, have read and understood the seller’s disclosures and provided reports, like pest and septic if applicable, reviewed the preliminary title report with plotted easements and CCRs, procured insurance and resolved any request for repairs, so the buyer can execute a Contingency Removal form for those items.

Integrity means working toward meeting that date and abiding by the executed RPA.

The next date, which sometimes is more challenging, is Day 21. On or before that date, the buyer is to remove their loan contingency. This one is tricky, because any lender would tell you that a loan is never fully approved until the loan funds.

However, Day 21 is generally seven days before the loan funds. Despite this incompatibility, by removing the loan contingency, the buyer is assuming the risk. Abiding by the timelines in the RPA, is the essence of maintaining the integrity of the process.

Let’s examine the challenging places for sellers, starting with determining the selling price of their home. When Realtors meet with sellers, they review the current comparable actives, pendings and solds. They discuss the benefits and detriments of their home. They come up with a sales price that utilizes that information. Next, they write it in the Residential Listing Agreement.

The agreed selling price is not necessarily the list price. Generally, it is not. But it is important that it is written in the RLA, so when multiple offers are made on the property that previously agreed on selling price is the benchmark. If the property can sell for more, because multiple offers push the price higher, that’s great, but if that original benchmark is reached, a seller with integrity will honor that number.

Another challenge for sellers is in completing disclosures. Sellers disclosures are designed for the seller to tell the buyer everything they know about the property. The disclosures go through a series of questions for the seller to answer.

Sometimes there are things about our homes a seller would rather not share with the buyer. Perhaps, the military helicopters flying over the home every day at 4 p.m. is not something they’d like to share, but trust me, a seller should absolutely want to share it, less the buyers discover it the day they are moving in. Or what about that pipe that burst, a few years back, which caused a flood to the entire main floor? Yes, you must tell them. It will be discovered when the buyer looks for insurance, because the insurance companies have a CLUE report that lists all insurance claims for the past five to seven years.

We had a doozy some time ago. We sold a home, where the seller had committed suicide in the home. It was a gruesome suicide, and all the neighbors knew. Not disclosing this horrific fact was not an option.

A trustee was selling the home, so the required disclosures are minimal, but even on that abbreviated disclosure, it asked the question “did anyone die on the property in the last three years?” The trustee answered it honestly, and we disclosed it to the buyer’s Realtor immediately when they called us to set up an appointment to see the property.

If that was a deal breaker for someone, then better to know it immediately than open escrow and then disclose it. Integrity means, tell the good, the bad and the ugly, all of it. Tell it early and don’t sugar coat it.

There are many other places where the integrity of a buyer or a seller is challenged. Working with a professional, experienced Realtor, who is your fiduciary, can help you identify the pitfalls that could present a challenge.

Remember, motivation and attitude are elevated by integrity. Whether you are disclosing issues about your credit to your loan officer, or disclosing past or current pertinent information on your property, if the question comes to your mind, “should I?” then the answer is always “yes.”

Kim Murphy can be reached at [email protected] or 760-415-9292 or at 130 N. Main Ave., in Fallbrook. Her broker license is #01229921, and she is on the board of directors for the California Association of Realtors.