Subscribe to Answers
In California during the inspection/investigation period of the purchase agreement, a buyer can back out of the contract without providing a reason. Shortened time periods can be helpful but the contingency remains. As I remind sellers -- it's not over, until it's over.
Walnut Creek, CA
I don't think it's a good idea to make anything more difficult. I wouldn't want any buyer to make such a huge financial decision unless they were 100% for doing so. Yes, it's unfortunate for a seller, and everyone that wastes their time, but it's a house, not a pack of gum. If a buyer doesn't want it, they shouldn't buy it, IMO.
Troy Erickson AZ Realt...
First, most contracts with contingencies are easy to back out of, just get a lender to do a denial letter. However, in some cases you can take non-refundable deposits. I would recommend that you do earnest money along side of it because real estate commissions often rule in favor of the buyer on deposits. Check with an attorney qualified to do real estate who can word this properly. This is something builders often do.
With compete agreement from the seller, stipulate the FOR SALE status of the home is not changed until contingencies removed.
EXACTLY like banks and auctions require the seller to complete due diligence FIRST.
Ivory tower brokerages may PROHIBIT such strategies.
exactly... i have not gone into escrow, and removed from market until.1. qualified by our lender or a known lender. 2. recd a normal and fair deposit 3. make sure money is not just recd but is deposited (wire) in title/escrow. ..but i hate the feeling that you describe
Both sides would need to agree on a contract that would make it more difficult for the buyer to backout.
NCAR gave us a due diligence period making it easy for buyers to walk away for any reason for almost the entire length of the contract. I had to alter our contracts to help protect the seller.
I rarely have a buyer back out, when they do, it's usually an unexpected reason we didn't see coming. But, in CA, there's nothing we can do during contingencies to stop them; it's part of the contract. I have only had one buyer lose a deposit, kind of voluntarily, to get out of a deal due to a failed loan and a bone head lender (not one of mine). I think it's like when we lose a client, the more leads & prospects we have, the less of an event it is.
You can make the earnest money 'hard' from the get-go. And yes, we have done that before.
David - I am with John Meussner on this one. I really don't want to force a buyer to make a purchase they really don't want. We typically don't have buyers back out of a contract here, but sounds like in your market you do.
I would ask why so many buyers make an offer on a home in your market and then decide they don't want to buy. Why did they make the offer in the first place? Were they coerced into making the offer? Perhaps the buyers need to be qualified better up front.
I know it is a burden on the seller(s), but you can always accept backup offers in case the first offer falls through for whatever reason.
If buyers are changing their minds so much, I don't think losing their earnest money will make any difference. I would rather lose a couple thousand dollars than buy a home I didn't want.
A big earnest money deposit and a short inspection period. It depends on your laws though.
Write custom clauses into the contract that minimize the most common "Buyers Remorse" reasons. They can always cancel - but depending on what the contract says - they may not leave with their Earnest Money Case in point - Short Sale War Story.
We don't find our seller is damaged simply because the buyer terminates during the inspection period. Often the reason has nothing to do with the conditionof the property.
As long as they are under the due diligence time frames of the Contract, there is probably nothing you can do.
If they change their minds during inspection period they have an out. If it is after this is resolved then a very hefty earnest money deposit might keep them true to the contract.
Dig up some dirt on the buyer and use it against him if backs out. Check to see if this is traditionally done in your area, I know it has been used in Chicago.
larger amount of earnest money
Work with an attorney to make the contract tighter, thus harder for the buyer to back out without a legitimate reason and without losing his deposit.
In Virginia, one of the few outs for a buyer is the home inspection. In my experience, if a buyer really wants out, they will find a way. Fortunately I haven't seen it happen very often. I'm really sorry your seller had this experience.
The contract terms need to be fair for all of the parties.
The home inspection contingency is usually the easy way for home buyers to opt out.
David Barr A hefty Ernest Money Deposit.
Really can't. Both parties can back out for any reason up to certain points in the escrow. Some reasons may put their deposit on the line, but you know that when you sign the contract.
It would be hard to prove "financially damaged by the preception..." in a court of law. In CA if they back out because they changed their mind (and stated that as the reason), they would almost certainly loose their deposit.
In Florida, this issue could be mitigated by using a standard contract as opposed to the 'As-Is' contract.
One thing is tighten up the inspection process, where it has to be a "real" defect that will allow it to be canceled.
Not sure we should. That is the buyers right to cancel, and if done during the inspection period earnest money returned. Talk to an attorney and they can tell you, very hard to "make" a buyer sell but can go to court if a seller changes their minds.
Larger earnest money and don't push them into a sale, make them tell you that they want the home. Don't try and talk them into liking the home
Include a liquidated damages clause into your contract specifying that your seller keeps any escrow/deposit if the buyer decides not to buy after all of the contingencies of the contract have been removed. Better than nothing.
Since you are in a 2nd home and retirement market, I think it will always be a factor to deal with. Maybe a form that the buyer signs that they are backing out for their own reasons and through no fault of the seller or because of details about the house.
Unfortunately not much. Law suit for specific performance very costly and probably not worth it.
I have had my buyers write their own letter of reason for backing out at the 11th hour.
It's been my experience that buyers do not back out lightly. There is usually some issue - often something that is wrong with the house that the seller tried to cover up.
A house is a huge purcahse, and I think it should be possible for a buyer to back out during the early part of the transaction - like the 5 or so day home inspection contingency. If they back out a few days before settlement, then their earnest money deposit better be substantial!
I'd shorten the contingency period so if the buyer is going to back out, they'll do it more quickly.
I like the idea of some or all of the deposit to be non-refundable after inspections and inspections should be done within five days of acceptance, but I think the non-refundable deposit part isn't legal.
If the inspection rpts say otherwise. You need to ask specfics. Sometimes it is bias or just a person difficult to work with.