SLC townhome #2 contract problems
June 22nd, 2007 by KenricThe buyer of my townhome was getting 100% financing and wanted me to pay $10,000 in closing costs! In addition, the buyer wanted new appliances and new carpeting. All these concessions were to be paid at closing in the tune of around $17,500. Well, I wasn’t going to concede $17,500 to the buyer on a $200,000 property in a good market. Therefore, the buyer came in at about $10,000 above asking price to offset some of the $17,500 she wanted.
I mentioned to my realtor that the chances of my place appraising at this price was pretty slim. After all, this contract price was well above the last sale price in the subdivision. We had brought this up to the buying agent that if the appraisal came in below the contract price that I was not going to budge on my final price. So any difference between sales and appraisal price would come out of the buyer’s pocket.
Well, now we see the difference is $7,000. Big difference for the buyer, but not really my problem. Now they want to reopen negotiations again and split the difference. So basically, I’d be getting $3,500 less than before. My response was that we already discussed this scenario and I’m not taking another $3,500 less. At this point I would be just giving away this townhome. So I say, take it or leave it.
They start with the sob story of their buyer which makes absolutely no sense to me. Buyer needs all $10,000 of closing costs to pay down points. Apparently she’s paying 5 points on your loan? WTF? Buyer has already extended her lease and its costing her $900/wk. Really? She can afford $900/wk in rent but can’t buy a $200,000 place without paying points?
Posted in Real Estate | 6 Comments »
Stumble it!
I share your concerns..
By Desa on Jun 22, 2007
If you were sure that the townhouse would not appraise and that you were not going to budge on the price, why didn’t you put an agreement in the counter-offer stating the buyer waived the appraisal contingency and would buy the property whether or not it appraised for the purchase price? By not doing that, this contract was shaky from the start. The buyer and the buyer’s agent made it clear from the beginning that they wanted to negotiate everything. The buyer’s agent probably told the buyer she could negotiate the price down after the appraisal came back and still get all the improvements and financing concessions she wanted.
With regard to not budging on the price, “bringing this up” to the buyer’s agent is useless, because it is not in the contract and therefore could be ignored. The sob story is just another negotiating ploy.
Look at the current (this week’s) market for townhouses in the area and then decide whether to “give the property away.” If she needs 100 percent financing (hence the 5 points you would pay for her in this market) and $7,500 cash back, there’s a good chance she can’t go forward and you will be putting the property back on the market.
It’s best to know as much as possible about your buyer before agreeing to a contract. If you are giving her $7,500 in credits beyond closing costs, it’s a cash back deal that scares the heck out of lenders right now. A large percentage of these deals collapse at some point before closing.
If this is the only offer I got, I would consider the possibility that I priced the property above the market. In your shoes, I would consider lowering the price a little to see if I could attract a larger pool of more qualified buyers.
By Another Investor on Jun 22, 2007
I priced the property at $5,000 below what the last similar one had sold for. That property appraised no problem. The buyer came in just about $10,000 over my price. Therefore, we were stretching the appraisal by only $5,000. This was/is definitely possible in an upward market. The SLC market is still moving up, but alot slower now. So, I believed that there was a good possibility that it would appraise. However, we also knew that there was a chance that it wouldn’t appraise. We thought that the least it would appraise for was maybe $3,000-$5,000 below the contract price. If the appraisal came in $3,000 lower, the buyer would have conceded $3,000. In fact, she is doing $3,500 now. But at $7,000, she can’t afford to concede that much in closing costs.
As for giving it away. I don’t want to post exact numbers until its sold. But I will tell you that at the current contract price, she is getting a steal. On a $200,000 townhome (cheapest in the area) she is getting it for under $190,000 with all my concessions. The last one sold for above $200,000. The reason I took this contract 3 weeks ago was because this is the townhome with the smoker tenant and the feedback from other buyers has been horrible. I really didn’t think it would sell with him living there.
However, since it went under contract, I’ve given the tenant his notice to vacate. Within a month, he will be leaving so now I can go in and change carpets, repaint, get it professionally cleaned and list it at top dollar.
By Kenric on Jun 22, 2007
I am an agent here in Scottsdale, and I read your blog regularly.
You should tell the Buyer’s agent that if he wants the deal to happen, and the Buyer is in that bad of shape, he can credit the Buyer from his commission.
Your request will be just as shocking to him as his now seems to you. Likely response: What? Take money out of my pocket and give it to the Buyer?
Commission rebates happen all the time, and depending on the agent, he may just go for it, or at least give enough to make the deal happen.
By Cameron on Jun 22, 2007
Hi Cameron, thanks for the advice. Here are some words that would probably make that request even more shocking to her…
New agent, just got her license, 1st deal
By Kenric on Jun 22, 2007