photo credit: The Consumerist
I have a little something I have to get off my chest. Maybe it’s just that my deck has been stacked this month, or just maybe the things I am seeing are in fact signaling a pandemic.
When did the purchase agreement stop being seen as a legally binding contract? Where did all that good faith go?
I wrote about the whole fear of commitment thing awhile back – I think I’ve written on just about everything “awhile back”– but the practice of buyers using the purchase agreement as a place holder until they decide if they really want to buy the house is spreading faster than the swine flu.
While you may be contractually within your rights to cancel on day 16, 21 or 29 of your 30-day contract (alas, the contract tends to like buyers biggest), you will likely be putting many other folks through the proverbial wringer. Lost market time, packed moving boxes, and a previously staged home which is now a shell of its former glory are just some of the side effects for the seller. Enormous time and effort – from the principals to a vast supporting cast of agents, escrow and title officers, and other professionals – are down the old toilet. Yes, you can take your money and go home. Just know that you will be leaving a path of destruction in your wake.
Perhaps you discovered something about the home while under contract that changed your decision to buy. I get that, but not all “discoveries” are created equal. There are good arguments for bailing from an agreement, and there are bad. Let’s look at some examples:
Good: Home is situated on a previously unmapped active volcano.
Bad: Home is situated on a foundation.
Good: Home was built entirely with duct tape and Lego bricks.
Bad: Home was built.
The problem for the seller is that there is no reasonableness test for cancelling contract during the inspection and disclosure contingency process. And when we hear that you are suddenly disturbed that the home faces west, fronts a street, or is painted beige – all stuff you would have known had you taken off the ski mask — we know this is code for “Neener, neener. I changed my mind, and you can’t stop me.”
No reasonable person would expect you to proceed with purchasing a home you don’t like. Buying a home is kind of a big deal. But there is a little suggestion I like to share with my buyer clients; stay with me here, because this is where it gets complicated. If you don’t like it, don’t offer to buy it!
In business, there are strategies and then there are tactics. So it goes with home buying. Writing an offer is a tactic, but the seller’s assumption, crazy as it sounds, is that your underlying strategy is ultimately to purchase and move into their home. They are going to commandeer boxes, schedule movers, secure replacement housing, and even give notice at work. Putting them through all of that if you are just taking a practice run is not cool.
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. 
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Yeah, I guess the problem is the buyer can always claim something about the house is messed up and wasn’t disclosed because almost no home inspection comes up 100% clean. Of course if they don’t give a solid reason, do you advise the seller to keep the deposit?
Therein lies the problem. You can’t just “keep” it. If they haven’t removed all contingencies in writing, the contract says that the buyer is entitled to his money back. On the other hand, even if the buyer is in breach, the nature of the bilateral contract requires that both parties sign. So… you may find yourself in mediation/arbitration land. Either way, no solid reason is required.
Ah, interesting, then why ask for a deposit at all, if you can never keep it?
Great info Kris. Maybe a reason to depart from the standard CAR forms…
I just had a seller client cancel a contract… most bizarre experience in 18 years in the business. No reasonable explanation. Glad it is over.
Kris, this is great. I have been meaning to address this for a while now, no way could I have done it this well.. Great job. It has become so much worse with the short sales and the foreclosures and I have been trying to talk buyers out of the idea now because they hear about so many other people putting offers in as “place holders”
What about buyers that put 20 offers out there hoping to get a house?Is this ethical business practice?
This brings up a great point about the strength of a purchase contract to define the deal, but the problems do not lie only on the side of the buyer. The current market in Phoenix is ridiculous with REO listers carrying so many listings they can’t even return a phone call or acknowledge an offer, and short sale listers who have no clue how to manage the bank approval process. I have had short sale listers call back after 2,3,4 months of the silent treatment to say, “Hey, does your client still want this house?”
Don’t even get me started about what happens in escrow with any deal that involves a bank. We all know they make their own rules and have no regard for dates contained in the PC.
While I do not condone the practice of meaningless “letters of intent”, we have to acknowledge that in the current market, serial offers – letting each offer run its course before moving on to the next – doesn’t work for most buyers. That in itself belittles the value of the contract. Certainly, it will be a glorious day when the purchase contract means something to parties on both sides of the transaction.
Glad you got that off your chest Kris
And, seriously, I’m bummed for you that the deal fell through. Hope you can turn around the listing again soon!!
Drew – I believe you owe me a picture of a t-shirt.
Thanks for suffering through a day with me this past weekend. What a trooper!
Hello and Happy Thanx Giving to all. I am Charles D’Alessandro with Fillmore Real Estate in Brooklyn N.Y. I think we are in society it’s all about me attitude and if it’s good for me to #@$%@ with everyone else.With todays market environment buyers keep on shopping until the closing. If they find something better they move on and “Neener, neener. I changed my mind, and you can’t stop me.” Look at General Motors you can buy a car and if you don’t like it , bring it back
, no charge !
Hey Kris,
I’ve been reading your artilces on Inman for a long time, first time on your blog, good stuff…
I think there needs to be more accountability on behalf of both buyers and sellers. What you are saying about buyers is true but at the same time do you really think its reasonable for the first time home buyer looking to purchase with FHA financing to loyally waite 2-3-4 months for Short Sale approval and then have some unethical agent sell it to a buyer with more down that comes in at the last minute (or worse their own buyer) ? As a buyer and buyers agent you don’t have to be burned this way too many times to develop the attitude of “Ok, if thats the way its gonna be I can play like that too”, which leads us to the situation we are in today with buyers shotgunning offers. Really the only thing that you can do in my opinion is get a good buyers agent familiar with short sale and REO process that knows the right questions to ask to get a good feel for the trustworthiness and integrity of the seller/listing agent. I’m potentially going to be involved in a suit now because an agent in my office had a short sale listing, short sale got approved, we were moving through escrow and then seller decides they don’t want to sell because some salesperson convinced her she could get a loan mod even though she’d been rejected 2x already. Buyer is suing seller to perform, seller has no way financially to afford current mortgage payment due to stripping all equity from property with refinances, the suit has been dragging on for over 1 year, and because banks are so hesitant to foreclose in current political environment seller gets to live for free indefinitely because she’s figured out how to take advantage of the legal system, craziness….