By: Samuel Iden
Listing agents, make sure you’re getting an accurate idea of how much your sellers owe on their mortgage when listing. The idea that the payoff amount could warrant attention has been mostly an afterthought the last few years in an environment of seemingly endless value increases. “Of course there are enough proceeds to payoff the loan(s)!” That may no longer be a safe assumption in all cases.
The Wake County Register of Deeds recently released their February data. Over the course of last spring, their median sales price was hovering around $460k. Prices rose higher over the summer. The past few months their median data has been hovering down around $430k. For sellers who’ve owned their home a number of years or purchased with 20%+ down, payoffs should remain a non-issue. For sellers who have purchased within the last couple years using 95% to 100% financing, it can be a different story. After hearing little in 2022 and 2023, I’ve received calls from over a half dozen sellers and listing agents so far in 2024 regarding lack of equity in a listing, to the degree there isn’t enough money in the deal to pay the lien holder(s) in full at closing.
Watch out for how due diligence fees can also impact this dynamic. The amount of due diligence a buyer is refunded at closing is subtracted from the seller side. If it’s already tight on the payoff(s), this mechanism can create a scenario where the seller must bring out-of-pocket funds to closing. If the seller has already spent the due diligence funds, this could cause delay in settlement or worse.
Go through the step of confirming the amounts owed to the lien holder(s). If it’s close or in question, have the seller order the actual payoff(s). Taking these steps on the front end can save all parties headaches and delays on the back end. If you are involved in a transaction where there are insufficient seller proceeds to pay the lien holder(s) in full, please reach out to me and we’ll talk through potential solutions.
With this knowledge, now you can Rest Easy.
