I was having a conversation with one of our buyer’s agents last week and, yes, we were doing a little venting. Finally, in exasperation over a particularly frustrating situation, she said, “What is wrong with people?” It wasn’t what she said but the way she said it which made me laugh out loud.
But, now that you mention it…
It happened again this week, and it is happening all too often lately. A buyer canceled escrow. This is not pandemic, but it is not big news. When escrow was notified, their only response was, “What’s going on? Everyone is canceling contract today.
Here is my frustration, which I will share in the form of a sincere plea to would-be buyers – Please be sure you are sure before committing to a purchase. Recently, Offers to Purchase have, too often, become recreation. Purchase agreements have become scratch paper, and I see too many buyers with the mind set that these doodles can easily be discarded when they are no longer amused or entertained by the activity. It is the return policy absent a restocking fee which I wrote about here, a policy about which pcguide.com had this to say: “I don’t expect anyone else to pay for my mistakes.”
As is so often the case for agents lately, our cancellation came a full week after the contract had been consummated. And, allow me to offer a refresher. Once you enter contract, you have essentially fired the gun at the starting blocks. A lengthy chain of events is initiated, and dozens of people spring in to action on your behalf. Disclosures are prepared, packaged and sent for signature. Natural Hazard Reports, Homeowners Association Documents, and CC&Rs are ordered and billed. Termite inspections and property inspections are scheduled and attended. Escrow officers send and prepare instructions and grant deeds, they request seller lender demands, and they order title reports. The buyer’s lender begins loan processing and orders appraisals. These playful distractions are just representative of the time and effort being spent by the agents, transaction coordinators, escrow and title officers. The seller is also and obviously involved and effected.
The seller, by virtue of accepting an offer, has now taken his home off the market. There will be missed opportunities to expose and ultimately sell his home to other interested buyers. He suddenly finds himself buried in an avalanche of documents. He is now amusing himself with finding replacement housing within time frames which you, the buyer, have prescribed in your agreement. He is scheduling repairs and fumigations and movers and utility transfers. A thirty-day escrow passes quickly, so time is of the essence.
The language of the Purchase Agreement generally favors the buyer. In California, the default terms allow for 17 days within which the buyer may perform his due diligence. If within that time, the buyer decides for whatever reason to change his mind, he is entitled to do so – to take his money and go home. The intent is discovery, discovery of material issues which may influence the decision to buy or not buy. These issues can be significant; if the inspector discovers burial remains in the bonus room, this might be of concern. Most often, however, issues are not so troubling and can be easily addressed.
What we see too often these days, unfortunately, is the buyer treating the “opening escrow” ritual as a casual event, an event marking the beginning of their decision-making process. By this, I mean decision-making in terms of “Do I really like this home very much?” Too many times in the past, I have heard a buyer remark that he would use the 17 days after acceptance to keep looking for another home, just in case he finds something he likes better. This is clearly not the intent of the contingency period, nor is it fair to the many people involved. It is an inappropriate mind set for such an important transaction.
So, to buyers, please remember that you are not buying a pair of shoes. When you are offering to purchase a home, you are offering to purchase someone’s home. The act of entering contract should not be taken lightly. The contract allows you time to discover facts not known at the time the offer was made. If you are simply unsure about the desirability of a property based on what you do know, however, you are not ready to purchase this particular home. To commit before you are committed is not fair to the seller, to the professionals who will be working on your behalf, or to yourself.
ABOUT THE AUTHOR Kris Berg is Co-Owner and Designated Broker of San Diego Castles Realty. If not-so static web sites are your thing, go here at once where you will find loads of real estate information including homes for sale, market trends, floor plans and more. Kris's hobbies include fencing and spot welding. She likes kittens. 
on 
on 
on 
on 
on 
on 
{ 13 comments… read them below or add one }
Great post Kris. I’m tiring of “window shopping” buyers just getting driven around and around myself. Actually thinking there is a Wal-Mart return policy on making offers is even worse though.
And Boomerangs… I had one as a kid. I only threw it once. It flew dramatically as the wind took it and landed hundreds of yards away in dense gorse.
Has this been happening measurably more recently?
It does seem true that buyers are a lot more relaxed about the buying process knowing they can get out during the 10 day period. Maybe we have over emphasized that inspection clause?
Jeff – It is not exactly rampant, but it is more measurable. And, every single escrow has become a nail biter from start to finish due to a (generally) more casual attitude on the part of the buyer. I am never sure anymore that they are sure about the home until the County Recorder stamps the grant deed.
Chris – Yes, maybe we have overemphasized or maybe we aren’t doing our jobs as buyer’s agents in making sure the buyer is 100% committed and in love with the home before negotiating the offer. If we spent as much time emphasizing the importance of a legally binding contract as we do talking about all of the ways one might change their mind during escrow without penalty, buyers might be more inclined to take the process more seriously.
Recently wrote an offer for a buyer … after I explained everything and asked if he had questions, all he wanted to know is if he could change his mind and get his money back during the inspection period. To the point that he asked me four times. Four times.
More fallout from the “Buyer Representation is Free” training we have given buyers. I am thinking a something like a $1000 retainer for buyer rep services and I double it when you close and fund. Buyer makes a quick grand for being honest. Thoughts?
Thomas (from Houston),
I kind of like that idea. Hmmm…. I am going to mull that one over.
By the way, I spent my formative years in Houston. I bet you are too young to remember “Foamer Nights” at the Astrodome, huh?
The light on the scoreboard went on intermittently. If the Astros hit a homer when the light was on, it meant free beer until the bottom of the seventh for everyone in attendance. It would look like a Hoover sucked the life out of the stadium when that happened. Ah, the good ol’ days! (Sorry, I digress.)
perhaps after the buyer signed the offer, suddenly there is a home down the street with a price cut and a price below the offer.
equity losses during the short 1 month of escrow is not unheard of in a down market, especially if the previous gains were based on loose lending and wide spread fraud.
Always good to get a visit from you, Jack!
Price cut down the street – Perhaps, but not in the cases I was referring to. And, as a point of clarification, it would not really be an equity loss. You can only balance the books once the property is being sold. A buyer today is presumably making the purchase with the intent of enjoying the property for some period of time. If I were to have counted my own “equity” every month over the past seven years I have lived in my current home, I would have long ago been relegated to the looney bin. What my home is worth today only matters if I am selling it today.
Buyers wanting a “home” (and not looking for a fast buck) should be extremely careful trying to find the virtual bottom because, as we have said, you only know the bottom through hindsight. If you plan on enjoying the property for years to come, missing the rock bottom by a month or a year or even more isn’t going to be catastrophic. In the long-run, you will have made a sound investment no matter the market. I don’t care how bearish you are – This can’t be argued.
Kris –
It can be easily argued that it’s better to wait for prices to continue dropping until they stabilize before buying. Another $50K-$250K price drop is a huge savings for most folks. That’s after tax earnings for the W-2 types out there. And it’s going to be a lot longer than a month from now.
The “if you’re in it for the long haul” slogan sounds a lot like “it’s a great time to buy”. It’s not. Next year, maybe. (sorry, I don’t mean to be negative on a RE blog, but that’s how I see it).
actually, bottom can be forecasted via inventory pattern, sales data, foreclosure trends, and most importantly the mortgage reset graph.
with the bulk of the subprime reset happening right now and early part of next year, and with inventory still at record level and the sales continuing to trend down, all indicators point to continued downward trending of the market.
remember too that NODs mature in 4 months and often not actually on the market for another couple of months after reverting to the bank, today’s NODs will not show up until 6 months later. (btw, October NODs was another record for SD).
while one may not be able to find THE BOTTOM, if all indicators point downward, buyers should not buy, period, especially if they are looking to stay in the home for a long time.
afterall, a $50k drop means $300 less per month in mortgage every month for the next 30 years and $500 less in property tax yearly for as long as you own the home.
Yikes! Past my bedtime, and I am in double coverage.
Smithers – Thank you for the softball comment. You were going easy on me.
Yet, I don’t believe I even came close to chanting the “it’s a great time to buy” mantra.
To both Jack and Smithers, and as always, I don’t perceive that we are seeing things so differently. It is more a matter of intent and need. If you are looking at a home purchase through a dollar bill, as strictly an investment vehicle, then waiting for positive indicators makes sense. If you are looking at a home purchase as a personal decision and as a long-term venture, then this is where we disagree.
>if all indicators point downward, buyers should not buy, period, especially if they are looking to stay in the home for a long time.
This makes no sense to me. Especially if a buyer is making a long-term commitment, the effects of market fluxuations will be less significant. Flipping? Probably not a good time to purchase. Investing? San Diego would be a questionable choice for many. Moving with a one or two-year exit plan? Not advisable. But, if I need or want a home and I plan on enjoying that home for 4 to 5 or more years, the story is much different.
The purchase of a home serves many purposes. Those of us who have bought in the past ten years or so have enjoyed our homes as an investment vehicle of sorts in that we have watched our equity grow, yet for many (myself included), I do not consider my primary residence as purely or even mostly a wealth-building vehicle. It is shelter and it is comfort. And, until I sell it, the paper value is funny money.
I completely understand your arguments, but I don’t completely agree. Everyone has different needs and goals, and not all are entirely dollar-driven. The fact remains that precise market timing is a calculated crap shoot and, in the context of the long-term and the larger picture, costs and benefits should be weighed. Your mileage may vary.
For the record, Jack, I agree with your reading on the continuing downward trending. And, if, as you say, the bottom can be accurately predicted, do tell! I have my hunch, but I would love to hear yours.
Bedtime for Bonzo, but I will check in in the morning.
Footnote to Smithers – You don’t have to apologize for the “negativity”. We always appreciate the divergent points of view here. And, for the record, most days I would love to be one of those W-2 folks that you alluded to, but please tell me you weren’t implying that I am out of touch with the annoyances of mortgages and other bills and cash flow concerns. You should know better.
Kris. Thanks for allowing my divergent point of view, for which I get not one, but two emotocons.
There are a lot of people out there who are in bad shape because they bought a home during the last coupel of years. Some of them even made down payments [resist urge to insert emotocon], and are in much worse shape than the no-money-down types.
By the way, I’m a K-1 person, but Mrs. Smithers is a W-2. It’s not all its cracked up to be.