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Sellers Won’t Fund Future Home Improvement Projects for Buyers
Sacramento buyers are crazy to ask sellers to fund future home improvement projects.
Every few weeks or so, I run across a Request for Repair from a buyer asking the seller to fund future home improvement projects. This sort of practice is so wild and crazy. It makes me nuts. I can only imagine how the poor buyer’s agent feels when that agent is forced into a corner by the buyer to draw up such an insane document. Well, I can, actually, because I saw one of those documents last week. It was evident to me that the buyer’s agent just threw her hands up in the air and told the buyer to create their own request. Which ended up several pages long. She was obviously at her wit’s end with the buyer.
It’s a terrible spot to be in. On the one hand, the buyer’s agent does not want to alienate her buyer. She does not want her buyer to think, even for one lousy second, that the agent doesn’t care about what the buyers want. Because the buyer’s agent does care. Very much. She just doesn’t know what to make of a buyer who has gone off the deep end. It’s not uncommon. Take a normal person, put her into a real estate transaction and odds are two-to-one, she’ll flip out. Sacramento real estate makes otherwise normal people bonkers enough to believe sellers will fund future home improvement projects.
Or, as the way buyers put it:
It doesn’t hurt to ask.
Sorry, wrong, it hurts to ask. Big time.
It hurts the sellers. Makes them angry, and sometimes a little bit frightened that they are selling a precious home like theirs to such a basket case. It hurts the buyers, too. How does it do that, you might ask? It hurts them after escrow closes. When the buyer might need information or assistance or something else from the seller. Sellers have long memories. All the work I have done to maintain peace and harmony between the parties blows up.
Especially if the buyer has promised to purchase the home AS IS. Sending a Request for Repair to a seller to fund future home improvement projects makes a seller feel duped. Nobody wants to be duped. Or, lied to. Doesn’t matter how a buyer tries to rationalize the request. It still boils down to the buyer wants the seller to fund future home improvement projects. It’s not gonna happen. Any feeling of good will from the seller flies out the window.
Most sellers are reasonable. They want the buyers to enjoy their home and make it theirs. Just not at the seller’s expense. If buyers don’t like the kitchen counters or flooring or appliances, they will need to make their own arrangements. After escrow closes. Geez, Louise.
When a Sacramento Buyer Cancels Escrow it Opens the Door
Another door can open when a Sacramento buyer cancels escrow.
When a Sacramento buyer cancels escrow, it can be hard on everybody all around. I’ve recently had to resell three homes due to buyers who ultimately did not perform. In one case, the buyer had wanted to buy a different home but the seller of that home had chosen a better offer, so the buyer lost out. When that seller lost her buyer, her agent notified our buyer, and enticed that buyer to cancel and buy the home the buyer wanted in the first place.
It worked out for that particular buyer but my poor sellers, living in a mobile home in the middle of South Dakota and praying for a closing, are distressed. That listing is back on the market. Buyers don’t care much about the ramifications of the hurricane they leave behind.
In another escrow, the buyer decided the sales price was too high halfway through. We had several appraisals, one of which exceeded the sales price, but the buyer refused to close. The buyer’s agent was so certain it was closing, we thought it was OK to remove the home staging. We had to re-stage. Fortunately, we found another buyer who liked the home enough to step up to the table. But it delayed closing for another 30 days.
The escrow that just closed yesterday was a shining example of what happens when a Sacramento buyer cancels escrow. The buyer’s agent had stopped all communication. Both my TC and I emailed, called and sent text messages almost daily, and the agent simply ignored all communication attempts. Finally, after dragging it out, sending a Demand to Close escrow, the agent finally called to say her buyer can’t get the loan.
My seller was furious. After he calmed down, he offered to pay me extra to get him a higher sales price. That in itself would be called a net listing. It means if a seller wants, say, $300,000 and I bring him an offer of $350,000, I make $50,000. Which is ridiculous. I get paid enough. It’s called a commission. I rejected the seller’s offer and simply found him another buyer.
We had an FHA appraisal at our sales price. The buyer’s agent knew this, and his buyer was FHA, still he wrote the offer for more than the sales price. It won’t appraise for more. An FHA appraisal is assigned a case number and the next buyer will get the same appraisal. Instead, I suggested the seller counter with the buyer paying the difference in hard cold cash, in addition to making the sale strictly AS IS.
The buyer sent a request for repair and we countered with Notice to Buyer to Perform to remove inspection contingencies. The buyer realized the error of his ways and backed off. We closed yesterday.
When I called the seller to confirm our recording, he was ecstatic. All of a sudden, having gone through two escrows was no big deal. Hey, I sold the house twice and was paid only once. But that comes with the territory. When a Sacramento buyer cancels escrow, it means we don’t abandon our sellers because of it and they should not abandon their listing agent either. It’s a two-way street.
In the end, my buyer received another $3,000 for his property for waiting another 30 days to close. Although he was unhappy at the time with the buyer who could not close, the next buyer paid even more. As long as he is happy, I am happy.
How a Request for Repair Can Result in a Canceled Contact
Buyers who upset sellers with a Request for Repair might not buy a home.
Sacramento home buyers can forget all about a promise to purchase a home in its AS IS condition, which is how we end up so often with a Request for Repair in the sellers’ laps. They find a defect or some problem, and either their agents suggest they ask for a credit or repair or they find it somewhere online. When you call them on it and say, hey, what did you not understand about no repairs, no credits, they will say but we didn’t know about this, that or the other thing or they rationalize why they think it’s OK to try to renegotiate.
Their buyer’s agents say, oh, just go with the plan and let them down gently. Because the buyer’s agents do not want to be the bad guy. I get it. Completely. They want to be the buyer’s friend. A nice person. Not the person who tells them to read the contract. Not the person who shares what happens to buyers who upset the apple cart by asking for repairs. Not the person who explains how a request like that can dampen any enthusiasm or gratitude the sellers may have harbored toward the buyers.
If they press too hard, the buyers will say whoa, who are you representing? Me or the seller? You’re my agent, you’re supposed to do what I want. Even if it’s a stupid thing. I don’ want to be educated. I want what I want. So the agents back down and, if we’re honest, they hope to god their buyers are told no. I see this play out over and over in Sacramento real estate.
In fact, I just closed a home in Citrus Heights. I had to sell that home twice, but that’s OK. The first buyers were VA. We took their offer because I know how hard it is for a VA buyer to buy a home. Few listing agents want to deal with their type of loan. They get the short end of the stick. On top of this, the VA buyer was also a contractor, so he could make repairs if they were needed. Instead, he shot himself in the foot by asking for a Request for Repair. The answer was no. He could cancel. This might have been his only chance to buy a home this summer, and he blew it.
But he did provide us with a bunch of free inspections the seller didn’t have to pay for.
We’re in a hot seller’s market. VA buyers have a super tough time. Along came buyer #2 about a week later. We had several offers, IIRC, and we selected the same sales price, which was higher than our list, which was already higher than what the seller thought we could get. Not only did that home appraise, but a lovely family who really needed a 4 bedroom in Citrus Heights bought this home with an FHA loan. They assumed all responsibility for the pest work. No repairs. Closed the day before the 4th of July!
Sacramento Home Sellers Can Reject a Request for Repair
There are solid reasons some sellers in Sacramento might reject a Request for Repair.
I am not afraid to admit that as a top listing agent in Sacramento, I am sometimes regarded as being very hard on buyer’s agents when it comes to negotiating a Request for Repair. In part, it’s probably because those agents are used to dealing with listing agents who just want to close the transaction and get paid. They call those kinds of agents “easy to work with.” Getting paid is nice but it’s not my focus. If the sellers do not care if the transaction cancels, neither do I. Because I want what my sellers want. That’s my success formula. Not every seller will reject a request for repair, either. However, a seller is absolutely under zero obligation to accept.
The California Residential Purchase Agreement states the sale is sold AS IS. There is nothing in the purchase contract that says a seller must renegotiate the price, make any repairs or out of extreme generosity agree to hand the buyer cash at closing toward closing costs. Buyers are allowed to do inspections and perform due diligence for the buyer’s edification only. A home inspection report is not a license to ask for repairs.
One such buyer recently asked for 4 pages of repairs. Four pages! She listed nearly every item in the home inspection report and asked the seller to fix it, which was absolutely crazy insane. You never know what a buyer might demand during escrow. Buyers are just as likely to be mentally unbalanced as they are reasonable; they need guidance, which is why their agent is so important to the transaction. Yet, some agents are either unable or uncomfortable educating their buyers. Some buyers don’t listen to professional advice, either. They will listen to a co-worker or uncle who sold a home a while back and did things this way or that way, which means nothing, but they won’t accept advice from an agent who has sold hundreds of homes. Go figure.
Some buyers can also be unethical. They might make a full-price offer thinking once they have been in escrow for a few weeks, the seller will agree to a Request for Repair because the sellers do not want the buyer to cancel. Sellers resent this strategy. Especially when the buyer asks for things that were readily viewable during the initial showing. Sellers feel deceived. Like the buyers are trying to hold them hostage. But buyers don’t think about that. They tend to think about what they want, and what they want is not carrying a lot of weight in today’s Sacramento seller’s market.
It’s not uncommon for a Request for Repair to cause bitter feelings. Buyers might think, oh what’s the harm in asking, the seller might say yes, but that’s because they do not see the pettiness nor annoyance. They live in their own world. They would be wise to consider ramifications. For example, when I bought our house in Hawaii earlier this year, the living room vault was cracked at the seam. A previous earthquake had rattled the structure. We asked the sellers to repair it upfront as part of our purchase offer. The sellers appreciated that approach and we worked it out.
Later, when the home inspection revealed a few minor things, I asked the sellers to fix those things but I didn’t do it in a formal Request for Repair. I wanted to enlist the sellers’ cooperation, and let them know they didn’t have to do anything but since they were in Hawaii and we live in Sacramento, we would be grateful if they would. It was just an email to the listing agent. Very low key. The sellers fixed the stuff. Goodwill goes a long way.
But don’t be astonished if you send a Request for Repair and the seller says no.
If you would like to hire a top producer listing agent in Sacramento with 40+ years of experience, call Elizabeth Weintraub at 916.233.6759.
The Upside When FHA Buyers Cancel the Escrow
FHA buyers who cancel escrow pave the way for the next FHA buyer.
It’s doubtful that most potential home buyers start out the home buying process by thinking they will become one of those freaked out FHA buyers who might cancel the escrow, but it can happen even in markets of tight inventory more often than you would imagine. There are many reasons, none particularly substantial from an experienced listing agent’s point of view. The reasons tend to range the gamut, from unsophisticated to twisted to incorrect analyzations, but whatever the reasons the decision is right for them. Buyer’s agents do their best to manage these events; however, they are not always successful.
You can’t change the mindset of stubbornness in some people. It’s a fine walk for buyer’s agents. On the one hand, they may instinctively realize the buyer is unreasonable but, if they agree, they lose the buyer. Sometimes they are afraid to point out: No, the seller will not rip off the two-year-old brown roof and replace it with your favorite color of black. In that instance, the buyer would probably feel alienated and jump ship. They often feel there is not enough real estate business to allow them the luxury of choosing their buyers, so they stick with whomever they get.
The thing is you can’t blame the buyer’s agents when FHA buyers cancel the escrow. Their agents are doing the best they can. You also really can’t blame the buyers, especially when they are first-time home buyers. It probably hasn’t sunk in that all homes have defects, nor that they might not buy a home now, especially if they try to force the seller to meet demands the next buyer won’t make. Or, that it could take them another year to find a home. We have such reduced inventory in the Sacramento area, so little for sale, and almost every cute home will receive more than one offer for it. With every rejected contract, though, they learn more about the market in Sacramento and what it will take to buy a home.
Meanwhile, back at the ranch, the sellers might be wary that the next buyer will cancel the escrow. But that is unlikely. The odds are most buyers who go into escrow manage to close escrow. Sometimes, sellers want to take an offer from a conventional buyer over that from an FHA buyer — OK, most of the time, they do. But in a situation where it was an FHA buyer who elected to cancel the escrow, the seller is actually in luck. Because FHA appraisals are assigned a case number, and when the home immediately resells to another FHA buyer, that same case number will be pulled.
I sold a home in Natomas last year this way. We did not want a conventional offer but accepted FHA for that reason. Agents could not understand, what? No conventional offers?
An FHA buyer who cancels escrow means there are no appraisal concerns for the next FHA buyer. The seller simply lost a couple of weeks of marketing time, but there are dozens of excited buyers right around the corner who would love to buy that home this spring. All the reports have been completed, too, so the seller is able to supply full disclosure prior to an offer. When an FHA buyer cancels the escrow, it’s a slight setback but odds are the next buyer will be stronger, better informed and more deserving in the seller’s eyes, especially when there are no concerns of a low appraisal.
Better yet, the market has gone up. If you’re thinking about selling a home in the Sacramento area, call Elizabeth Weintraub, 916.233.6759. Put 40 years of experience to work for you.
