An Unsettling Pattern
There is an unsettling pattern developing in the world of San Carlos real estate. That pattern involves some buyers trying to renegotiate a sales price after it has already been agreed upon. It is probably safe to argue that this pattern is a result of a frantic sellers’ market in San Carlos over the last few months. This market has yielded multiple offer after multiple offer and too many frustrated buyers to count. Some buyers who have become fed up with the process are going in with high offers, and every intention of negotiating the price down after the home goes into contract.
How They Are Doing It
The big day finally arrives. A home has been properly exposed to the market. Brokers’ Tour, open houses and private showings, all have been completed. Solid interest dictates that an offer date should be set. That day arrives and the offers are submitted. Buyers who have been through this once or twice know that they will have to be near the top on price and terms. Unfortunately, it appears that some buyers have been submitting offers that they have absolutely no intention of actually sticking to, price-wise. They know, what most good agents know, and that is once a home is taken of the market it is very hard to get the momentum back. If it is hard to get the momentum back, some of buyers are using that to their advantage to have some of the purchase price shaved off and blaming it on relatively insignificant issues falling under their property inspection contingency. It’s dirty pool and certainly falls outside of the good faith and fair dealing clause that is implied in all California contracts. The problem is that the prospective seller would have to prove intent on behalf of the buyer, which is nearly impossible.
It’s Becoming More Common
Most agents doing a good amount of business in San Carlos right now have dealt with this sort of behavior. On one of my properties of a few weeks ago, I had one agent tell me outright that their client was looking to negotiate the price down further if we accepted their offer…..not sure this was a wise move as we clearly did not give their offer much consideration after hearing that.
How to Protect Against It
While it is not entirely preventable, there are things that can be done to help significantly improve a seller’s vulnerability to this type of situation.
First, have very thorough property inspections. The more thorough of a property inspection you have, the more difficult it will be for the buyer or their inspector to come back at you with anything that is materially different in the reports. As a side note, it does not do any good to have a “loose” seller’s inspection report. Believe me, the buyer will have a thorough one and they will be completely justified at then coming back at you for credits.
Second, compile all disclosures ahead of time and have the potential buyers acknowledge all disclosures ahead of reviewing their offer. By having potential buyers acknowledge the disclosures ahead of time, it help prevent them from coming back and asking for a credit for a condition that was already disclosed to them. If you have comprehensive disclosures, you will greatly reduce the buyer’s ability to renegotiate the contract price.
Third, question each buyer’s realtor. Have these buyers been in contract before? If yes, why did they fall out of escrow? Ask many questions and trust your instinct on the answers and body language.
Understanding The Difference
Sometimes homes are sold and during the property inspection contingency period legitimate issues that were not previously disclosed, arise. At that point, buyers should come back to the sellers and ask for some type of mutually agreeable solution. The difference in the scenario above is that these particular buyers are going into the contract already set on lowering the price whether there are material differences discovered or not. That is a perfect example of bad faith, and these types of strategies demand that sellers put up the best possible defense.
Wow Bob excellent article.
I didn’t know this was going on. When you say “intent” do you mean that the seller would have to prove that the buyer intended to do this before the offer was accepted?