Call me crazy, but a residential purchase is not an all cash transaction if the buyer is (i) borrowing from a hard money lender, (ii) using a gift from dad, (iii) drawing funds from a trust or (iv) using the proceeds from a line of credit or 401k. All of these financing options are contingent and the failure to disclose that fact is likely actionable (meaning that the seller might get the earnest money).
The transaction is contingent on the buyer closing on sale of his/her own home. Of course, the seller gets a better, higher offer a couple of weeks out and the listing agent uses the proper form to notify the selling agent. The selling agent emails the listing agent proof that the buyer’s home sale will close in three days. It is caught in the listing agent’s spam or junk folder. She doesn’t see it. She nags the selling agent. The selling agent thinks the listing agent is being a jerk. He does not pick up the phone to discuss the proof he had sent. Instead, sends a, shall we say somewhat worthless reply. I get hired. (I always like that part.) I spend time for which I usually get paid. The attorney for the buyer sends me the same info that went into the listing agent’s spam/junk folder. Oops. How much better to send important documents by email with a ‘read receipt’. Then if you can see that the other side has not ‘read’, you can follow up.
One of my broker clients received this email from another broker: Unbelievable, I have done tons of transactions and never once had any problem with another broker until you. Your first email states [one thing] then your second email [states another]. You are a piece of work!
The sending broker accomplished nothing by sending this unprofessional email except to generate ill will. Fortunately, my client was professional. His response was: “I am sorry you feel that way.” I probably would have responded: “Thank you for your kind courtesy” but, of course, my undergraduate degree is in sarcasm. 🙂
One of my recent clients wanted to sell her home. The buyer was unrepresented. The property had oil heat and the buyer wanted the tank removed. The listing agent wrote up an addendum addressing the decommissioning of the tank and stating “buyer removes the home inspection contingency.” The offer (also drafted by the listing agent) stated “buyer’s earnest money will be nonrefundable and released to seller after removal of buyer’s home inspection contingency.”
‘Professional Inspections’ was checked in the contract. The buyer refused to sign the addendum. The inspection period ran out and the buyer did not unconditionally disapprove. The buyer now wants the earnest money.
Here’s the kicker: there is no ‘buyer’s home inspection contingency’. The OREF Residential Sale agreement provides: “Unless a written and signed modification is reached, at any time during the Inspection Period, Buyer may notify Seller or Listing Licensee, in writing, of Buyer’s unconditional disapproval of the Property based on any inspection report(s), in which case all earnest money deposits shall be promptly refunded and this transaction shall be terminated.”
The good news is I will likely fix it so the seller gets to keep the earnest money. However, how much better it would have been had the listing agent written in the offer: “Unless Buyer unconditionally disapproves of the Property based on Buyer’s inspection prior to the end of the inspection period, the earnest money will be nonrefundable to buyer and buyer will cause escrow to promptly release the money to seller.” Of course, then I wouldn’t be as close to retirement. 🙂
How do you handle those pesky multiple offers. (Did you think a couple of years ago, you would be asking that question so soon?) Here are some thoughts:
- Ask your seller what he/she wants.
- If you have an idea that the house will go quick, state in the private remarks that the seller will hold all offers received until a certain day/time, and will then respond to all.
- If you don’t expect multiples, but get them, send an addendum to all offers giving them an opportunity to make their highest and best offers by a certain date, follow up with every broker who brought someone by (letting them know about the opportunity to submit) and hold all offers until the date designated.
Distinguishing Your Offer!
In this multiple offer environment, how do you make your client’s offer stand out? Here are some thoughts:
a. Make the earnest money nonrefundable and release some or all of it early. You can even do stages, i.e., nonrefundable and release 1/3 at acceptance; 1/3 at inspection and balance after appraisal.
b. If your client has a vacation home or a time share, offer a week’s use of it in exchange for the seller’s commitment to counter the client’s offer on terms the seller finds acceptable, even if your client isn’t the highest right out of the gate.
c. Offer a gift certificate for a weekend at a hotel or a fancy dinner.
d. If your client has a skill, offer free wedding planning, a catered dinner or a tune up.
e. If your client has access to goods, offer an LCD TV, a flower arrangement every month for a year or a case of wine.
You all know that sellers tend to be emotional about their homes, so it isn’t always about the proceeds. Even if the gift offered doesn’t increase your offer to the top of the offer pile, a seller who sees the sincerity of the offer and who appreciates creativity might jump. I know that I would kill, er, consider a lower price in exchange for a personal chef twice a week for a month.