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Updated over 2 years ago, 08/16/2022
Need some input from other sellers
I am an investor who listed a house on sale with a realtor. We received several offers and I selected a loan offer. The contract had a special stipulation indicating that buyer is willing to pay $5k over appraisal if appraisal is less than offer price. After appraisal, although appraisal came higher than list price, it came less than offer price. With the $5k added, it still did not meet my lowest limit I was hoping to get. The buyer was unwilling to go up any higher. So, I asked my realtor to terminate the contract and move forward with a backup offer. However, buyer threatened to sue due to non-performance. After talking to attorney on my side, the listing realtor and broker have clearly said that seller does not have to accept the lesser offer. So, a notification was sent to the buyer than unless they immediately terminate the contract we expect them to close as scheduled. Closing is less than a week away. However, since the seller was unwilling to even come up to a mid-point previously, I highly suspect they will do the offer price. I have tried to follow up multiple times with my realtor and broker and they said they are still waiting for the other side to respond. It's been 4 days. Given that a) closing is coming up next week and b) I am unable to move forward with the back up offer, what do I need to do now other than indefinitely wait. When I follow up, I keep getting the message that they are still waiting for buyer side to respond.
Quote from @Charlie MacPherson:
The buyer met your listing price and offered up to an additional $5,000 to cover any appraisal gap, bringing the offer even further over the asking price.
If I'm reading you right, you accepted the buyer's offer, but hoped to squeeze even more money out of them based on the appraisal. That's pretty crappy business on your part.
IANAL, but if you did accept the offer and EMD changed hands, the three basic elements of the contract have been satisfied. Those are:
1. Offer (the buyer made an offer to purchase)
2. Acceptance of the offer. (You must have accepted it as you plan to close next week)
3. Consideration (something of value changes hands - normally that's EMD /deposit).
Unless you had some weird language specifying otherwise, it looks to me that the buyer has a case, because a contract has been formed.
This, it seems to me, is all on you. You listed at a price lower than you wanted and somebody bought it.
I get that in the red hot seller's market, one strategy is to list low and get a bidding war going. But it sounds like you accepted the offer and formed a contract when you did so.
If I'm reading this correctly, this is a serious mistake on your part and you could be sued for specific performance, meaning that a court will force you to honor the terms of the contract. This is Contract Law 101 and I'll bet your attorney will agree. The only way out is if the buyer fails to meet any of the other terms of the contract.
BTW, put yourself in the buyer's shoes for a moment. The asking price was $1.00, but you really hoped for $2.00. He offered $1.10 and the appraisal came in for $1.15, which he agreed to pay. Now you want him to pay $2.00 for a house that just appraised for $1.15.
Why should he pay more than the actual value of the house? Just because you want more?
Good luck. Honor the contract you signed and close on the sale. Take your lumps, learn a lesson and move on to the next deal.
Let me clarify as I don't think you are reading correctly.
lets say list price is $100
lets say offer price is $120 with a special stipulation that buyer will pay $5 over appraisal if it under appraises
Buyers are saying they will pay only $107
follow?
There is some missing info here, is the Buyer in default of the Agreement? Were they suppose to sign off on some contingencies by a certain date and haven't yet, or some other default (proof of loan approval, etc)? If not, then you just need to wait till the closing date and see if they come up with what is needed to close. But, I suspect there are some actions the Buyer has not done, but were supposed to be, per Agreement (Purchase Agreement).
Basically, if they are in default of the Agreement, out here (in CA), we would send them a Notice to Buyer to Perform, giving them a specific deadline for them to perform certain task/s (sign off contingencies, close escrow, etc). This is a unilateral notice letting the Buyer know the Seller may cancel the Agreement if the specified contractual actions are not taken. If no action is taken on part of the Buyer, technically, you are free to get into an Agreement to sell to another Buyer.
But, practically speaking, the current Buyer can drag the process on, by refusing to cancel the original Agreement. I suppose it can go as far as ending up in court, etc, possibly causing closing delays with another Buyer, but I would think the Original Buyer may be held responsible for any damages their delay may have caused the Seller. Out here, we use Escrow, so I would ask the Escrow Officer if they would be able to close with a new Buyer, since a Notice was sent to them, or if something further would be needed. Or, if you use Attorneys or another Closing Agent, where you are, I'd ask them what the proper procedure is.
Quote from @Abdul Azeez:
Quote from @Charlie MacPherson:
The buyer met your listing price and offered up to an additional $5,000 to cover any appraisal gap, bringing the offer even further over the asking price.
If I'm reading you right, you accepted the buyer's offer, but hoped to squeeze even more money out of them based on the appraisal. That's pretty crappy business on your part.
IANAL, but if you did accept the offer and EMD changed hands, the three basic elements of the contract have been satisfied. Those are:
1. Offer (the buyer made an offer to purchase)
2. Acceptance of the offer. (You must have accepted it as you plan to close next week)
3. Consideration (something of value changes hands - normally that's EMD /deposit).
Unless you had some weird language specifying otherwise, it looks to me that the buyer has a case, because a contract has been formed.
This, it seems to me, is all on you. You listed at a price lower than you wanted and somebody bought it.
I get that in the red hot seller's market, one strategy is to list low and get a bidding war going. But it sounds like you accepted the offer and formed a contract when you did so.
If I'm reading this correctly, this is a serious mistake on your part and you could be sued for specific performance, meaning that a court will force you to honor the terms of the contract. This is Contract Law 101 and I'll bet your attorney will agree. The only way out is if the buyer fails to meet any of the other terms of the contract.
BTW, put yourself in the buyer's shoes for a moment. The asking price was $1.00, but you really hoped for $2.00. He offered $1.10 and the appraisal came in for $1.15, which he agreed to pay. Now you want him to pay $2.00 for a house that just appraised for $1.15.
Why should he pay more than the actual value of the house? Just because you want more?
Good luck. Honor the contract you signed and close on the sale. Take your lumps, learn a lesson and move on to the next deal.
Let me clarify as I don't think you are reading correctly.
lets say list price is $100
lets say offer price is $120 with a special stipulation that buyer will pay $5 over appraisal if it under appraises
Buyers are saying they will pay only $107
follow?
Thanks for the clarification. The buyer is reducing their offer to less than the original offer because it appraised low. They are paying $5,000 above the appraisal but less than the original offer. Do I have that right?
If that's the case, you should be thankful that the buyer is paying more than the appraised price.
Still, it appears that they are meeting the terms of their offer and I think you might be looking at a binding contract.
@Abdul Azeez - The market is softening. It is possible that your next / backup offer will be lower than if you adjust your price a little and close now. Also factor in your holding costs and time value of money. (Probably $3-5k/mo).
It’s not your agent’s fault that the appraisal came in low. I think you should consider him or her a good listing agent for getting more than you were asking (and probably multiple offers), and being so proactive on your behalf. If you listed for below the amount you were willing to accept, that seems strange. In normal markets, average homes sell for about 92% of original list price.
Since you only have a week to wait, I would see if they close or not. You will know if the buyer is responding to title communications and/or signing the 3 day alta / loan disclosures and you can have your agent prepare to launch another open house the following weekend and/or do another “highest and best”. You can adjust your list price to be the offer you hope to get. However, it’s possible to price your property so high that agents don’t show it because their clients aren’t asking about it. You just need one real offer to sell a house.
I wish you good luck. It seems you are stressed out by the buyer’s lack of communication. Usually a lack of communication is an indication that the deal is going south and likely to be cancelled. But the buyer may also be trying to come up with the extra money to close as planned.
Let us know how it goes
#3 Multi-Family and Apartment Investing Contributor
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#3 Multi-Family and Apartment Investing Contributor
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Quote from @Abdul Azeez:
Quote from @Sergey A. Petrov:
Don’t have a black and white answer without being privy to the entire transaction. The best suggestion I have is wait it out. It’ll either play itself out and close or you’ll have a mess of an earnest money refund to deal with (again based on the limited info you shared I don’t think you’ll get to keep it). If you’d rather have the answer now, call your agent’s managing broker - they’ll review the transaction.
If they don't close on time and given that we have notice I expect they will forfeit the earnest deposit.
Unlikely. The negotiated contract has an appraisal contingency and an appraisal gap. The gap was exceeded. The buyer is not required to exceed their stated gap. The seller is not required to take less than negotiated price. The contract is not fulfilled as written, but both parties performed to the contract.
As other post have pointed out, the buyer is agreeing to pay $5k more than appraisal values the property. The appraisal is a knowledgeable 3rd party valuation of the property. If this was 6 months ago, I would think that with the hot market there could likely be a buyer willing to pay even more over its value. In most areas the market has cooled significantly. I suspect you will be challenged to get another offer over its appraised value. Then add holding costs, etc. basically it is my belief that it benefits you more to come down in price than it benefits the buyer to offer any more than the $5k over the appraised value. $5k over value could be best offer you will get any time soon.
Good luck
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I am puzzled by your post: You have signed a contract; honor it!
What makes you think you are entitled to asking for more?
You are lucky the appraisal came in over list, you are lucky the buyer is willing to pay you 5k more than the property is worth. If you were hoping to get more you should not have signed the contract. The point of a contract is to do what you agreed to and not change your mind when it suits you. How can you expect the buyer to pay more than you agreed to?
On a practical note, going back to market never get's you more money. Now you are damaged goods, you will get less. And you run the risk of a lower appraisal as well.
Your reputation and your integrity is everything in this biz.
Once people know you break contracts, nobody is going to trust you.
- Marcus Auerbach
- [email protected]
- 262 671 6868
Quote from @Marcus Auerbach:
I am puzzled by your post: You have signed a contract; honor it!
What makes you think you are entitled to asking for more?
You are lucky the appraisal came in over list, you are lucky the buyer is willing to pay you 5k more than the property is worth. If you were hoping to get more you should not have signed the contract. The point of a contract is to do what you agreed to and not change your mind when it suits you. How can you expect the buyer to pay more than you agreed to?
On a practical note, going back to market never get's you more money. Now you are damaged goods, you will get less. And you run the risk of a lower appraisal as well.
Your reputation and your integrity is everything in this biz.
Once people know you break contracts, nobody is going to trust you.
@Abdul Azeez. I don’t believe you are able to require them to close at the contract price is you both signed the appraisal waiver for b) a dollar figure over the appraisal.
What is the actual difference between the “new” offer price ( appraisal +$5K) vs the original contract price?
Also do you believe the appraisal price is accurate? If not did both agents discuss and provide information to the lender for a second evaluation?
@Abdul Azeez, I believe you need a better agent. Your agent and the senior broker at her office should have already handled all of this for you after asking you how you want to proceed.
Quote from @Matt Bishop:
@Abdul Azeez, I believe you need a better agent. Your agent and the senior broker at her office should have already handled all of this for you after asking you how you want to proceed.
They are not even returning my calls now. As a client who has listed a property with them do I not have an ability to find out if my property is selling as planned?
If you cannot reach the agent that you hired, you should be able to reach the broker that they work for. The broker, which may have different titles depending on the market or state that you are in, is the one that is ultimately responsible for your transaction, and for the actions or inactions of the agents that work them. If you have tried to reach them, left voicemails, but have not had any response, you might be able to see if you can speak to them in person at their office, or ask the receptionist if they have a cell phone that they can connect you to. If you've tried to reach them, and your agent, and neither are responsive at all, you may want to contact the local Realtor Association or state licensing/regulations department that issues, renews and oversees real estate licenses. They will usually try to assist in resolving a matter like this without having to have you file formal complaints. If you have the cell phone number for the broker, you may also want to try sending a text message to the agent and broker together, on the same message, and just ask for a conference call regarding the transaction. It's a little harder to avoid you when they are both on the message thread, and it's in writing, and you are making a reasonable request. Don't get into any of the details and expressing anger over the matter via text message, just ask for a brief conference call when they are both available to discuss the status of the closing, and possible next steps.
I'd encourage you to "stay in your lane" as much as possible, and not overstep traditional boundaries within the transaction, such as trying to contact the buyer, buyer's agent, or buyer's lender directly. The lender will not provide you with any information since the buyer's loan, details of their loan application, outstanding conditions, etc is all confidential information, and not even shared with their own agent. When transactions aren't going smoothly right before closing, it is easy for one or more of the people involved to become emotionally charged and react in ways that either anger or embarrass one or more of the others involved and can be inappropriate or unprofessional. Transactions can unravel right before closing, as a result, and the damage from losing a sale like that can be costly. If you are uncomfortable about any advice you receive from your agent or the broker, as far as getting out of this sale and into another, or replacing the agent, or what options you have, you may want to contact an experienced real estate attorney in the area where the property is located.
If your sales contract or purchase agreement, which you and the buyer both signed, is similar to many different states, there will be a series of deadlines within the agreement. Each of the deadlines will have to do with a condition of the sale, which must be satisfied, waived, or resolved, in order for the sale to continue moving towards closing. The contract is structured to protect the buyer from the seller, not the seller from the buyer in nearly every aspect of the contract. The exceptions being odd situations where the buyer simply fails to show up to closing, or blatantly ignores deadlines, or changes their type of loan to one that delays closing and/or adds to the seller's expenses. Most contracts allow the buyer to do their due diligence prior to closing on the property, including conduct inspections, review disclosure documents and public records, receive title work showing clear & marketable title, have the property appraised, secure financing, obtain homeowner's insurance, make sure the property is in the same condition at closing as when the offer was accepted, and a variety of others. Each condition must be satisfied by a certain date, or # of days into the sale. Conditions are usually deemed to be satisfied when any issues that come up are resolved between the 2 parties, both having signed off on whatever the resolution was. If a buyer is satisfied with something, they normally do not need to take action, and when the deadline passes, the condition is considered resolved. If, for example, one of the conditions is a termite inspection with a final deadline of 8/15. The report is delivered to the buyer, and house does not have any termites. They do not need to do anything, and once 8/15 has passed, the sale is no longer conditioned upon the termite inspection. On the other hand, let's say that the report came back, and the inspector found termites, and recommended termite treatment. The buyer sent a request to the seller, asking them to have the house treated before closing. On 8/13, 2 days before the deadline, the seller rejected the buyer's request and said they weren't paying for any treatments. If the buyer didn't want to proceed with the purchase based on that, it would be their responsibility to notify the seller in writing by the end of the day on 8/15. An unresolved request does not automatically terminate the transaction. The buyer could also ask for more time, and if the seller agreed, both parties would sign an extension before the end of 8/15. If the buyer received the seller's rejection in response to their request, didn't get an extension on the deadline, then decided they wanted to cancel the purchase and get out of the sale on 8/20, 5 days after the deadline, they may be in default on the agreement and jeopardize some or all of their deposit, or be on the hook for other expenses. Final loan approval must usually be received several days or more before the closing date, and if your contract has a clause like this in it, it is usually towards the end. Even if it does not have a specific deadline for final loan approval, the lender and escrow officer must balance the closing statement (ALTA), a few days before closing, and buyer has to approve their "Closing Disclosure" (verifying that fees charged by the lender are the same as what was quoted) 3 business days before they sign their closing documents. In order for the title company/escrow to prepare the ALTA Settlement Statement, which you will sign at closing, they will have to have received the closing instructions from the buyer's lender. If the buyer was not planning on closing, most likely the instructions would have never been sent to the lender and the title company would not be able to prepare a final ALTA statement for your closing. If you are within a few days of closing, or even 4, 5 or 6 days, you may want to call the escrow officer handling the closing and ask them if you can schedule your closing appointment, review a copy of the ALTA Statement, and if they are aware of any delays or issues with your closing. You are a customer of the escrow company, as is the buyer, so there is nothing wrong with you contacting the escrow officer and finding out where they are at with the file or closing.
Quote from @Robert Carmody:
If you cannot reach the agent that you hired, you should be able to reach the broker that they work for. The broker, which may have different titles depending on the market or state that you are in, is the one that is ultimately responsible for your transaction, and for the actions or inactions of the agents that work them. If you have tried to reach them, left voicemails, but have not had any response, you might be able to see if you can speak to them in person at their office, or ask the receptionist if they have a cell phone that they can connect you to. If you've tried to reach them, and your agent, and neither are responsive at all, you may want to contact the local Realtor Association or state licensing/regulations department that issues, renews and oversees real estate licenses. They will usually try to assist in resolving a matter like this without having to have you file formal complaints. If you have the cell phone number for the broker, you may also want to try sending a text message to the agent and broker together, on the same message, and just ask for a conference call regarding the transaction. It's a little harder to avoid you when they are both on the message thread, and it's in writing, and you are making a reasonable request. Don't get into any of the details and expressing anger over the matter via text message, just ask for a brief conference call when they are both available to discuss the status of the closing, and possible next steps.
I'd encourage you to "stay in your lane" as much as possible, and not overstep traditional boundaries within the transaction, such as trying to contact the buyer, buyer's agent, or buyer's lender directly. The lender will not provide you with any information since the buyer's loan, details of their loan application, outstanding conditions, etc is all confidential information, and not even shared with their own agent. When transactions aren't going smoothly right before closing, it is easy for one or more of the people involved to become emotionally charged and react in ways that either anger or embarrass one or more of the others involved and can be inappropriate or unprofessional. Transactions can unravel right before closing, as a result, and the damage from losing a sale like that can be costly. If you are uncomfortable about any advice you receive from your agent or the broker, as far as getting out of this sale and into another, or replacing the agent, or what options you have, you may want to contact an experienced real estate attorney in the area where the property is located.
If your sales contract or purchase agreement, which you and the buyer both signed, is similar to many different states, there will be a series of deadlines within the agreement. Each of the deadlines will have to do with a condition of the sale, which must be satisfied, waived, or resolved, in order for the sale to continue moving towards closing. The contract is structured to protect the buyer from the seller, not the seller from the buyer in nearly every aspect of the contract. The exceptions being odd situations where the buyer simply fails to show up to closing, or blatantly ignores deadlines, or changes their type of loan to one that delays closing and/or adds to the seller's expenses. Most contracts allow the buyer to do their due diligence prior to closing on the property, including conduct inspections, review disclosure documents and public records, receive title work showing clear & marketable title, have the property appraised, secure financing, obtain homeowner's insurance, make sure the property is in the same condition at closing as when the offer was accepted, and a variety of others. Each condition must be satisfied by a certain date, or # of days into the sale. Conditions are usually deemed to be satisfied when any issues that come up are resolved between the 2 parties, both having signed off on whatever the resolution was. If a buyer is satisfied with something, they normally do not need to take action, and when the deadline passes, the condition is considered resolved. If, for example, one of the conditions is a termite inspection with a final deadline of 8/15. The report is delivered to the buyer, and house does not have any termites. They do not need to do anything, and once 8/15 has passed, the sale is no longer conditioned upon the termite inspection. On the other hand, let's say that the report came back, and the inspector found termites, and recommended termite treatment. The buyer sent a request to the seller, asking them to have the house treated before closing. On 8/13, 2 days before the deadline, the seller rejected the buyer's request and said they weren't paying for any treatments. If the buyer didn't want to proceed with the purchase based on that, it would be their responsibility to notify the seller in writing by the end of the day on 8/15. An unresolved request does not automatically terminate the transaction. The buyer could also ask for more time, and if the seller agreed, both parties would sign an extension before the end of 8/15. If the buyer received the seller's rejection in response to their request, didn't get an extension on the deadline, then decided they wanted to cancel the purchase and get out of the sale on 8/20, 5 days after the deadline, they may be in default on the agreement and jeopardize some or all of their deposit, or be on the hook for other expenses. Final loan approval must usually be received several days or more before the closing date, and if your contract has a clause like this in it, it is usually towards the end. Even if it does not have a specific deadline for final loan approval, the lender and escrow officer must balance the closing statement (ALTA), a few days before closing, and buyer has to approve their "Closing Disclosure" (verifying that fees charged by the lender are the same as what was quoted) 3 business days before they sign their closing documents. In order for the title company/escrow to prepare the ALTA Settlement Statement, which you will sign at closing, they will have to have received the closing instructions from the buyer's lender. If the buyer was not planning on closing, most likely the instructions would have never been sent to the lender and the title company would not be able to prepare a final ALTA statement for your closing. If you are within a few days of closing, or even 4, 5 or 6 days, you may want to call the escrow officer handling the closing and ask them if you can schedule your closing appointment, review a copy of the ALTA Statement, and if they are aware of any delays or issues with your closing. You are a customer of the escrow company, as is the buyer, so there is nothing wrong with you contacting the escrow officer and finding out where they are at with the file or closing.
Thank you. I think my only option is to wait until Monday to see if the transaction closed. My broker told my realtor yesterday that the other side will be sending an amendment contract. We still don't have it three days before closing. My suspicion is they are not going to close and therefore lose the earnest deposit. Let's see. They are not responding to any requests.
By the way no response from either my realtor or broker either. With only three days to closing I don't know if anyone else is in the same situation. Should I try calling the buyers agent if I can't get an update from my side?
@Abdul Azeez - as I mentioned 2 days ago, bookmark my “at the eleventh hour” comment above and let me know what happens at close of business this coming Friday
Is your agent with a larger company, possibly with multiple offices in your area, or region? If so, you may want to contact one of the other locations and ask to speak to the broker of that office, or the owner of the franchise if it is a franchised office, like a Re/Max or Berkshire Hathaway or Century 21. If the brokerage has more than one location, you might be able to get help if you explain the situation and that you've tried to reach the other broker and agent, and neither are communicating with you. If not, and it's just a small office with one broker and no other leadership, you might have to step above them to the local Realtor association or state licensing department. If you are going to reach out to the buyer's agent directly, you might want to send your agent and their broker an email, so it's in writing, and tell them that you are doing that because neither has responded to your calls. Maybe that will get their attention.
So here is the latest.
My broker spoke with me today. He said he called up the buyers broker again and reemphasized the need to submit an offer for a revised price if they need it. They seem to agree on the phone but do nothing after it. Now come Monday if it doesn't close I will need to keep the Earnest deposit. However I am in a bit of a pickle due to the following.
I do not know if closing is happening and as seller I would need to sign closing documents. Now I am out of state. So I will need to use a mobile notary. So am I to hire a mobile notary and sign all documents and incur the cost and let it be throwaway if buyer does not close?
Quote from @Robert Carmody:
Is your agent with a larger company, possibly with multiple offices in your area, or region? If so, you may want to contact one of the other locations and ask to speak to the broker of that office, or the owner of the franchise if it is a franchised office, like a Re/Max or Berkshire Hathaway or Century 21. If the brokerage has more than one location, you might be able to get help if you explain the situation and that you've tried to reach the other broker and agent, and neither are communicating with you. If not, and it's just a small office with one broker and no other leadership, you might have to step above them to the local Realtor association or state licensing department. If you are going to reach out to the buyer's agent directly, you might want to send your agent and their broker an email, so it's in writing, and tell them that you are doing that because neither has responded to your calls. Maybe that will get their attention.
I have updated the post. Their frustration is that if they have information they will give me. They feel they have done what they can and it's up to the opposite party now.
Quote from @Sergey A. Petrov:
@Abdul Azeez - as I mentioned 2 days ago, bookmark my “at the eleventh hour” comment above and let me know what happens at close of business this coming Friday
Closing is not happening on Monday.
So the transaction did not close as planned and we have moved forward now with the second offer. Hopefully this closes as I have now lost time and patience.
But they (the original buyer) still haven’t requested the earnest money refund?
Quote from @Abdul Azeez:
So the transaction did not close as planned and we have moved forward now with the second offer. Hopefully this closes as I have now lost time and patience.
I am surprised that you can cancel the contract. Maybe it is in NJ, but if you are in AZ, the buyer technically does not have to cancel and the seller has to accept the price less than asking because you went under contract agreeing the maximum price that the buyer offered. You shouldn't go under contract with an offer that is less than "expected priced" (I assume it is more than list price), You are very lucky in this case that the previous buyer agreed to cancel the contract.
- Long Le
- [email protected]
- 480-480-7948
Quote from @Sergey A. Petrov:
But they (the original buyer) still haven’t requested the earnest money refund?
We are making the claim against earnest deposit for buyer failing to close.
No. The buyer defaulted.