|It depends (the universal answer to all questions). A time-of-listing, cash offer substantially over list price, sight unseen by well-heeled buyers sounds pretty good. And your experience will likely reinforce that opinion. But, I’m getting new cases that tell me “great offers” are not always so. Here are some observations, and the obvious fixes.
First off, let’s get the objective straight. Does the seller want to sell or get a great offer that fails (and maybe get to keep a hefty or not-so-hefty deposit)? Why is the seller selling and is timing critical? Next, is the cash offer really cash or is the buyer in need of financing; what is the source of buyer’s funds?
And don’t overlook human nature. Buyers are panicky. They’ve made several offers that have failed. They’ve come to accept that their offer must be over list and made quickly after the listing goes live. Maybe they will forgo a look and assume that the lovely pictures bode well as for its condition. They will have seen a seller disclosure statement, so they know what they’re getting anyway. So how bad can it be?
It is a human trait to second guess. If my offer was accepted, then something must be wrong. I should have gone inside the house or had an inspection. When I told my friends about my purchase they wished me luck, or worse, they told me I was crazy! How much money is down? What if I walk before making that second deposit or the one due five days from signing?
Buyers are walking away. Again, I don’t want to suggest that it happens often, but it does and for reasons you might not have anticipated. I think of the buyers who made an offer on the home of their dreams. The offer was rejected because a “better” offer was submitted. When that “better” deal failed the listing agent reached out to the rejected buyer’s agent to say that if the buyers were still interested it was theirs under the terms of their previous offer. By this time these buyers were four days into an executed contract to buy an “ok” house and their initial deposit check, due by day five, was about to be delivered to the listing office. Guess what didn’t get delivered! And since the liquidated damage box was checked, what did the breaching buyers have to lose?
In the example discussed above the “better” offer, the one first accepted, failed because of that human nature thing I mentioned. The buyers who were never in the home and who were “over paying” got cold feet and were willing to walk away from a relatively modest deposit. When the deal you’ve called a “great” one goes south, you too will be second-guessed. In this climate of finger-pointing and scapegoating, the sellers just might blame you, the listing agent. The good news is that the property will likely sell again, and quickly so hopefully there’s no damage, but not necessarily and the bad taste may linger.
What to do? Stop with the superlatives, the “greats” and the “bests” or at least qualify them. The best offer is only best if it sails smoothly to closing. Deals fail for all kinds of reasons, and you have no crystal ball by which you can predict the future. Who’d have guessed that you could lose an executed deal because another home the buyers wanted suddenly became available? Spoon feed a little dose of reality: “any deal can fail, and these are the few concerns to consider……” Talk about buyer remorse if there is nothing else.
And stop with the five-day thing, that time you give the buyer to deliver the deposit! What secures the seller if a buyer decides to walk for no permitted reason? The deposit!! Why not have seller accept the offer when the deposit is in hand! And of course, get a good deposit. If buyers are willing to pay tens of thousands over list, they’d be willing to put down a hefty deposit. Make it tough to walk away. Take advantage of the market while it lasts. Clearly explain how your sellers are not secured until the deposit has cleared. While we’re on it, why not require certified funds for the deposit?
Realtors counsel. When we predict, we offer our insights based on our experiences. Our predictions cannot be guaranteed, so be sure to say so. Your clients will understand your reservations and will appreciate your concerns, however remote they may be. Treat your clients with the respect they deserve. They are the ones who bear the risk if that “great” deal fails.
Mr. Goldsmith is an attorney with Mette, Evans & Woodside and serves as outside legal counsel to PAR. A substantial portion of his practice is dedicated to providing advice and counsel to real estate licensees. He and his firm represent and defend real estate salespersons and brokers in civil lawsuits and licensing claims across the Commonwealth. Jim also defends Realtors® in disciplinary hearings conducted by the Real Estate Commission. Jim was one of the voices of the PAR Legal Hotline for the first 27 years following its inception in 1992.