buyers who cancel escrow
No Sacramento Realtor in her right mind sets out to sell the same home seven times. Especially not over the course of the last 5 years. But that’s exactly what happened with this particular home in Sacramento. Yup, I had to sell the same home seven times. The first escrow happened in 2012, and it was a short sale at that time. The roof leaked terribly, lots of dry rot and it was difficult to find a buyer. That was basically the last year in Sacramento for short sales. People were turning to buying homes with equity by then.
Naturally, this meant I had to weed through 3 different sets of buyers, three different escrows, just to get to closing. You get the first buyer just to put the bank on notice that you’re doing a short sale. The second buyer replaces the first when the first buyer runs off to buy something else because they can’t wait. Then the second buyer waits long enough for the bank to respond before that buyer bites the dust. Finally, the third buyer piggybacks off the previous work, and that buyer closes escrow. That buyer was a flipper.
You’d think I would be done with this house, right? The flipper is gonna hire his own agent to sell when the work is finished. But no, along comes a buyer who calls and was dying to see the house. By now, the roof had been replaced, and an addition jumped the square footage from 1,400 or so to over 2,000. We warned the buyers not to buy a flipper, but they did anyway. The sellers had to tent the house prior to closing. So this is how I sold the house 4 times so far. Three more to go.
Fast forward to last fall when the buyers called and needed a larger home for their family. We sold them a home in El Dorado Hills, IIRC. We came on the market in November and went pending almost immediately, within one day. The buyers were madly in love with the house, and everything was going really smoothly. You did not think I would have to sell the same home seven times, but these 5th buyers, alas, were not our buyers. In the end, they couldn’t qualify for a loan.
Back on market again. I pulled a new MLS number to reset the days on market and make the listing more appealing to eager buyers. Because it was close to Christmas, this next go-around took a week to sell to the 6th buyer. We had 2 offers, one from the agent from hell. Fortunately, I don’t work with very many agents from hell, but this one, let’s just say there wasn’t any disappointment when we sent the Withdrawal of Counter Offer because the second offer was better. A well known colleague in my office represented the 6th buyer. What could go wrong?
Plenty, it seems. We never found out really what the buyers’ problems were or why they canceled. After a couple of weeks in escrow, they seemed to have developed cold feet. I rarely point the fickle finger of fate at the buyer’s agent when this happens because I doubt the agent was thrilled with the change of events.
My sellers were simply devastated. I felt their pain, and it made me pretty sad, too. I want my clients happy and excited, not depressed and desperate. I cheered them up the best I could and tried to paint a rosier picture of the future. I assured them, absolutely without doubt, I would sell it again, and it would close the third time. They know I don’t make promises I can’t keep. We pulled a new MLS number to reset the days on market again. Keeping up my sellers’ spirits when the unexpected happens is a huge part of my job. It’s emotional management. Not every agent is good at it.
Sure enough, within 24 hours, back in escrow. The 7th set of buyers, thank goodness, were represented by a strong Team in Sacramento. There were plenty of issues such as why we couldn’t find a building permit. Why the shower floor needed to be torn up. Why several of the pest reports contained conflicting information. But I was able to explain everything in such a way that the buyers accepted the home in its AS IS condition and still agreed to pay list price.
This home closed escrow last week. It’s how I ended up having to sell the same home seven times. I made no money on the first sale because it involved 6 months of work and it was a short sale. I didn’t make much on the second sale because my buyer’s agent got the biggest cut. But I finally got paid on the third sale after 2 failed escrows. This is how an agent can sell the same home seven times and not really make any money. Now that I reflect on it. LOL.
There are many listing agents in Sacramento who do not subscribe to the theory that there is always another buyer for that Sacramento home. That’s OK, that’s their practice. We’re all different. Those who do not believe that premise tend to be the agents who will do just about anything to make a sale, including, at times, throwing their seller under the bus. That’s my opinion, btw. Of course, if you ask those agents, they will disagree. But the truth is I close so many escrows, my life is not tied up in any ONE sale. I’m not gonna miss a mortgage payment or starve my cats to death if we have to find another buyer. There is always another buyer for that Sacramento home.
It’s a fact, Jack. Especially in this seller’s market. Often, agents plead with me to make the deal work. Code for push the seller into a detrimental situation. Not gonna do it. First, it is not a deal. It is a sale involving collective memories and emotional attachments created in a home, often in which a seller has lived for years, if not decades. Second, this is a financial transaction involving a willing seller and a willing buyer. Until the buyer turns not so willing.
The bad part about the practice of Sacramento real estate, and most everywhere else as well, is the fact the listing agent is not allowed to talk to the buyer. Can’t negotiate with the buyer nor directly influence. Their agent bears that responsibility. Further, we have many different types of buyer’s agents in Sacramento. Plus, no telling from where the buyer originated. Could have walked into an open house, an office or stumbled across the agent in Facebook. Not necessarily a person the agent even knows. Personally, I think many buyer’s agents do a bad job of explaining to their buyers the agent’s role. They are so worried about offending or risking the buyer’s loyalty that they often say nothing.
Unfortunately, those types of buyer’s agents are door openers. Paper pushers. Taxi drivers. People pleasers. Ineffective non-communicators.
Which means we get uninformed buyers — buyers without any kind of professional relationship with their agent — those are the ones you never know if they will close escrow. They will sign a purchase contract, but it can be meaningless to them. Agents? If the buyer asks you how she can cancel, that’s a red flag.
One thing I know for certain. If a buyer wants to cancel, the buyer will do it. Oh, the buyer might claim the home inspection revealed too many defects, but what home inspection doesn’t? Most homes have stuff wrong. Wait until the next one, buddy, I think. You think this home inspection is awful, just hang tight. Your next home might be worse. And all of the things the buyer freaked out over? Fairly certain our next buyer isn’t gonna give a damn.
Because there is always another buyer for that Sacramento home. Sometimes, buyers with cold feet drop out of buying a home all together. They quit. They remain renters. On the other hand, the sellers I represent will sell and close.
Dealing with flakey buyers that result in back on market listings is always a pain. It’s extremely painful for the sellers who were blindsided. One day the sellers are counting on closing by the end of the week, and the next day, wham, the buyer is canceling. Fortunately, it doesn’t happen very often, but when it does, the listing agent’s duty is to resell the home. No listing agents I know want to sell a home twice and get paid once, but we do it when it comes with the territory. Because we have no control over the buyers. That’s the buyer’s agent’s job, and it’s tough for them to be a buddy and an agent. So they choose buddy.
This is one of the reasons I am happy that I made the decision years ago to work solely with sellers. I care deeply about my sellers and do everything in my power to ensure a smooth transaction, but I am not in the position of having to choose between being a buddy or an agent. Some of my sellers end up close friends, but my primary function is to reach their goal, which is a closed escrow. A buyer’s agent goal is not always to close escrow. If they cause a back on market listing, they’ll just go out with their buyers to find something else.
Except in the case of a property where we were all the way down to the wire and that’s when underwriting noticed this first-time home buyer’s payroll stub. Apparently, nobody else looked at it. Not the mortgage loan officer, not the processor. The name of the company on the payroll stub was a temporary agency and not the name of the company where the buyer worked. The company where she worked refused to write a letter addressing her permanency. That resulted in no approval and no home for this buyer. This buyer might never buy a home now.
Then, to add insult to injury, the seller had elected to paint the eaves on a day the temperatures were over 100. The underwriter called for the painting as a loan condition, even though everybody else thought it looked fine. Paint the eaves and we will close, we were promised. We decided it was better for him to tackle the job to make sure it was done correctly and to clear loan conditions, although it was really the buyer’s responsibility due to the AS IS clause. After all of that hard work and sweat, closing was a no-go. The buyer’s agent had developed her own personal problems and pretty much vanished the day we went into escrow, which was also part of the on-going issues.
Back on market listings can be a source of joy for a buyer who has lost out on offer after offer. First go-around we had 8 offers. We have a solid appraisal from FHA with no conditions. All we need is an FHA buyer who can close escrow. After gravitating toward conventional offers for so long, now we have an FHA approved property and no FHA buyer. Well, we’ll just shake it off and go forward. It’s not the first and it won’t be the last.
You know, I can write about trying to avoid an annoying escrow cancellation until I am blue in the face, and it doesn’t change anything in Sacramento real estate. Part of the problem is we’ve got such a huge number of Realtors in Sacramento who do very little business, so they don’t always fully counsel their buyers. When I tell consumers that about 90% of the agents sell 3 or 4 homes a year, they are flabbergasted. How effective can an agent be when she closes so few sales?
I’m not knocking agents who don’t want to be top producers, btw. Not everybody chases the business nor finds challenges exciting and rewarding. Lots of real estate agents lead normal lives. But not me. And I have been trying to figure out how to avoid an escrow cancellation ever since they started happening in such huge proportions. When I have to resell what seems like half of my listings a second time, there is something seriously wrong.
Our limited inventory drives buyers and their agents nuts, I get it. They don’t like multiple offers and feel like they will always lose out, even when that is silly. There are tons of ways to beat that issue and win. Sometimes buyers get fed up so they write many offers on many homes when they can’t buy them all. Agents who encourage this crap should be strung up by their toes, dipped in honey and left to rot in a tree of wild bees.
Now when my sellers and I review offers, we’re looking for the offer we want to close, and we’re also looking for the buyer we would like to place in a backup offer. Rather than sell the home twice after the first offer sends an escrow cancellation, we’re taking out an insurance policy. I’ve been filling out the back-up offer addendum along with a counter and sending it to the buyer we would like to sell to if it wasn’t for the somewhat better offer we accepted.
I make it easy for the buyer to say OK. Sure, I’ll go into backup.
Sometimes the differences between those two offers are really slight. They could even be the same sales price. Why just the other day, in that very situation, the original set of buyers delivered an escrow cancellation the first day into escrow. That listing never went back on the market. The backup buyers moved into primary position and replaced the first buyers.
If you’re hoping to sell a home in Sacramento, call Elizabeth Weintraub at 916.233.6759. Why not put 40 years of experience to work for you? I’m always working to find ways to improve my client’s experiences.
On which hill is a buyer in Elk Grove willing to die upon? We all pick our battles, but the hill on which we choose to die is special. That’s a question I ask myself when I see an offer arrive for one of my sellers. Most home buyers and their agents are fairly agreeable upfront, but down the road once we’re in escrow things can change. If agents and buyers start out on the wrong foot, though, odds are that they will continue on that same path. This is what I warn sellers about. I tend to share pertinent stuff that happens.
I just closed an escrow yesterday in which we had previously lost a few buyers on the short sale due to no fault of the seller or my advice. Our short sale market in Sacramento has pretty much fallen flat, thank goodness, and it’s odd for me now to close a short sale versus the hundreds I used to list and sell. The first buyer was in contract for about 48 hours before that buyer freaked out and canceled. The next buyer canceled when Fannie Mae asked for another $5,000 in sales price. Finally, we secured a third buyer who was willing to pay the extra $5,000 and wait for approval. This was a smart buyer because by the time we received the approval letter, the property was worth more than that $5,000 increase.
That second buyer had decided to die over $5,000. Now, there is nothing available in that complex anywhere near the price that buyer could have paid to own a property. The sales prices are higher.
In another escrow, we received a full price offer from an Elk Grove buyer who wanted to use her own title and escrow company, even though she wasn’t paying for those services. We pointed that out and sent her a counter. This buyer demanded her own title and escrow, regardless, most likely at the suggestion of her agent and argued ad nauseam over the issue. That was the hill on which that buyer chose to die.
It’s good the sellers passed on that buyer because the thing is a few days later another set of buyers much more willing to work with the sellers came along and wrote a spectacular offer that the sellers could not refuse. This is exactly what I shared with my sellers would happen. Nobody says you have to take an offer that makes you uncomfortable, and a REALTOR needs to look out for the best interests of the seller. Sometimes, that means saying no to an offer and letting the Elk Grove buyer die on that hill.