Lew Sichelman
A few years ago, Nicole Doty of Zion Realty in Gilbert, Arizona, thought she had a client’s house rented at full price. The tenant had sent in his deposit, enrolled his kids in the neighborhood school, paid the movers and had his old place in New York halfway packed.
Then the deal went south. Way south.
The tenant was moving to Arizona to start a new business. But when the person who was supposed to take over his business in New York backed out, the tenant had no choice but to back out of his deal, too.
The story, which Doty posted on the ActiveRain real estate site, involved a rental. But last-minute cancellations happen in sales, too. According to the National Association of Realtors’ latest count, roughly 6 percent of all signed contracts never make it to the closing table.
Sacramento broker Elizabeth Weintraub can attest to that. So can Praful Thakkar of Andover, Massachusetts. Weintraub once “sold” the same place three times before it closed. And several years ago, Thakkar had buyers flake on six consecutive transactions in one month.
Once in a blue moon, a cancellation works out to the seller’s advantage. Years ago, at a time when house prices were marching upward, I received a full-price offer on a townhouse I’d decided to sell. The deal fell through, so I put the house back on the market – for $30,000 more.
A second full-price contract also died, so I upped the price another $30,000. When the house eventually sold, I pocketed $60,000 more than I had originally asked.
What Went Wrong?
For the most part, though, sellers have no choice but to grin and bear it. The first step is to determine what went wrong. Then you can figure out how to fix it.
In some cases, there’s nothing you can do – for example, if the buyer just has a change of heart. In those cases, the best you can hope for is to keep their earnest money and move on. Likewise, if the buyer’s financing falls through, it’s their problem, not yours. But when the next offer comes your way, make sure it comes with a preapproval letter from a lender. That’s no guarantee, but it’s the best you can do, unless the buyer plans to pay cash.
There’s also not much you can do if the buyer has been unable to sell their current place. If they won’t consider a bridge loan – financing that bridges the gap between the purchase of your house and the sale of theirs – they might be a lost cause, so move on.
You can’t do much about an appraisal that comes in too low, except perhaps appeal or request a second valuation. This takes time, though. Don’t cut your price because of a low valuation, at least not right away. Wait until a second low appraisal comes in. Only then is it time to adjust the price. Maybe you can meet your new buyer halfway.
The ball’s in your court, though, if there’s a problem with the title to your property. It could be any number of things: Perhaps your home equity lender placed a lien on the house or there’s an issue with a previous owner’s undisclosed heirs.
If it’s a lien, find out why it’s there and either pay it off or get it dismissed. Maybe you paid off a second mortgage years ago, but the lender never removed it. If it’s a glitch in the title, alert the company from which you purchased title insurance at closing. Ask them to find out what’s wrong and correct it.
Title issues pop up now and then, but more frequently, the home inspection identifies problems no one knew were there – problems the buyer won’t want to deal with. That leaves you.
When to Push Back
If the buyer is complaining about cosmetic or trivial things, like the dark blue wall in the main bathroom or the leaky kitchen faucet, think twice about acquiescing. After all, they saw those issues before inking the contract, so they shouldn’t prevent the deal from moving forward. At the same time, you may decide it’s worth paying a few bucks to make some fixes and hold the deal together.
But if the inspection uncovers serious problems – roofing issues, faulty wiring or other big-ticket items – you probably have no choice but to make the necessary repairs. For one thing, the buyer will walk if you don’t. For another, now that you’re aware of these problems, the law requires you to disclose them to all future buyers. So, you may as well bite the bullet now and prevent the hassle later.
After you’ve added the new roof or removed the antiquated plumbing, perhaps you can adjust your price accordingly. And maybe you’ll be able to write off the costs as selling expenses.
While you’re at all this, it’s a good idea to review your listing. Make sure it’s up to date and spells out any recent improvements you’ve made. And you might want to adjust your price, depending on which way the winds are blowing. If prices have been rising, then by all means, go with the flow like I did.
Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at lsichelman@aol.com.
