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When Buyers in Sacramento Refuse to Close Escrow
Keeping up the spirits when buyers refuse to close escrow is an art form in itself. Not only do I need to keep myself pumped and ecstatic to move forward, but my primary focus as a real estate agent is to help my sellers move past the disappointment and crushed feelings. Sellers aren’t just unhappy when a buyer cancels, they are often furious. They would like to stomp on the heads of those buyers and drop the assholes into the river in cement shoes.
Me? I just lost a commission and money is replaceable. Another buyer will eventually show up. But the seller has lost a lot more. Sellers lose hope. Whatever plans a seller has had in the works for after the closing are put on hold or, worse, permanently canceled after a buyer walks out the door. It can be a life-changing event.
During escrow, it’s common for sellers to put their emotional attachments and any unwelcome baggage associated with the home into the past, but when a buyer cancels it all comes rushing back at them. It’s as though they failed in their mission. It’s heartbreaking, and buyer’s agents don’t ever see this side of the business. They skip merrily on their way to buy another home with their buyers and don’t look back.
After the feelings settle down a little bit, the sellers often want to sue the buyer. I understand that sentiment. Unfortunately, buyers in Sacramento have 15 ways from Sunday to cancel a contract while in the contingency contract period. If they cancel during that time period, they get their earnest money back.
Isn’t there some way to get that good faith deposit when buyers refuse to close? Not really. Not if there are contingencies in force. Unfortunately, no matter how well a seller qualifies a buyer, there is never an assurance that a buyer won’t refuse to close escrow. In squirrelly markets, cancellations can happen more often than not. Rely on your Sacramento real estate agent to help guide and navigate. I am here for my clients, especially if it gets rough.
If You’re Tired of Your Sacramento Agent
It seems like lately I’ve been contacted by sellers and friends of sellers who want to cancel their existing listings and list with me. For whatever reasons, they are unhappy or they feel like they are not getting the service they expected. Sometimes, this is the fault of the listing agent and sometimes it is not. I won’t know until I actually talk with the sellers and hear the story. However, there are always two sides to a story.
Like yesterday, a seller contacted me to say she wanted to buy a home in East Sacramento. Apparently, she is selling a home in Natomas and has decided that she and her husband should try to buy a short sale in East Sacramento, a home priced around $300,000 to $400,000 that would actually be worth $500,000 to $600,000. Yes, I know what you are thinking right now, dear reader. You are thinking that I should have hung up the phone or not corresponded with this particular person, but President Obama says we should be nice to people who have mental deficiencies. That a mental disease is not a reason to shun people or pick on them or discriminate against them.
I wanted to make sure I heard this person correctly and to double check if she had indeed put her home on the market in Natomas. So I queried as to whether she was asking me to list her home in Natomas and buy a new home East Sacramento. She replied that her home was already listed by an agent but her agent was too busy to help her buy a home in East Sacramento.
That didn’t make sense. Agents are rarely “too busy” to help a client. It’s what we do for a living. We sell real estate. Even if an agent was otherwise occupied, perhaps taking a vacation, for example, an agent would refer the client to another agent who had time. There must be something else going on. So, I asked the person to give me her agent’s name and phone number.
That was the last I heard from her.
Generally, I will call other agents before accepting a listing. Just to hear the other side of the story and to assure the agent that I am not in the business of soliciting other agent’s clients. That’s not how I do business. I don’t swipe somebody else’s clients. Most of the time what I discover is there is a lack of communication. Sometimes, the relationship terminated due to agent ineptness or carelessness or inexperience. But rarely is it malicious as people sometimes suspect.
If I spot a listing that is on the market for a few days and then canceled, generally, that’s not a listing I want to take. It’s a clear signal there is something wrong, and let’s just say it’s not the agent.
Should a Sacramento Home Buyer Cancel Escrow?
A home buyer called yesterday to ask if she could cancel her escrow, dump her buyer’s agent and become a client with the Elizabeth Weintraub Team. She was very unhappy with her present real estate agent’s performance, but I suspect that unhappiness was due more to miscommunication than inability or inexperience or monkey business. And, like many first-time home buyers in Sacramento, her escrow was a short sale. See, unless you’re a listing agent who sells hundreds of short sales — and there aren’t very many of us in Sacramento — an agent probably won’t have the answer to every single piece of drama that can pop up in a short sale. No answers = client confusion.
This buyer was concerned because HSBC had twice increased the sales price. Is this normal, you might wonder? Yes, it is. There are many reasons for a price increase during short sale negotiations. There could be several BPOs. The servicer might establish a market value that is different from the price point determined by the investor. Not to mention, prices are inching upwards in Sacramento. I closed a Roseville short sale last week that had 3 price increases during processing, and the last adjustment exceeded 10%. A short sale condo in Rancho Cordova was bumped more than 20% when a buyer balked and walked and a new buyer stepped in.
Her suspicions were aroused because the price increases were not presented to her in a formal manner — via a worksheet or letter from the bank. Instead, the listing agent had called the buyer’s agent to provide the verbal communication. The buyer felt this procedure was unprofessional. Yet, that is the procedure for most short sales. I don’t blame a buyer for being wary. I wouldn’t like it if I was simply informed that I needed to pay $10,000 more without proof from the bank nor an appraisal to justify, but that’s how short sales work.
The thing is if a buyer doesn’t want to pay it, another buyer will pay it. That’s what the bank is banking on. And the bank doesn’t care. You might think the bank cares that the home needs paint, new carpeting, the roof leaks, but I’m telling ya, the bank doesn’t give a crap.
In this particular instance, the buyer disclosed she was FHA and applying for the CHDAP program. Holy toledo, the only thing more problematic than that would be a VA buyer and, even then, it would be a tight race. In fact, a VA buyer might have an edge over a CHDAP. The basic way to close a CHDAP in a short sale is to get a short sale extension. A short sale extension is not always possible.
My advice to this buyer — after telling her I can’t give her advice because she’s in contract and under agency with another agent? My solicited advice was to stay in escrow. For heaven’s sakes, don’t cancel. She does not realize how lucky she is to be in escrow and be buying a home in Sacramento. For every buyer who wants to buy an entry-level home in Sacramento, there are 9 more who won’t be able to buy. They will get beat time and time again by cash investors or conventional buyers. Buyers would give up their eye teeth to trade places.
Welcome to our Sacramento housing market in the spring of 2013. If you’re in escrow, stay put and don’t whine.
