I was talking with friends of mine the other day who have been looking for the perfect house and property to renovate and turn into their dream home. They have been looking for quite some time, and they are in no hurry. The buyer’s market we are in makes this workable for them, since there is rarely any pressure from other buyers competing for the same home — particularly when it comes to the types of major fixer properties at the high price end that they are focusing on.
They found a home that needed a lot of work, but was on a terrific property for all that they had planned. As it approached the end of their contingency period for completing all inspections, they were finding lots of problems with the house, including severe mold problems. So, they asked for a further extension to the allowable contingency period, but the sellers refused, and they fell out of escrow.
Now, I have two points to make here from the perspective of each party. First, for the buyer, if you are planning on doing major renovation or even a tear-down, there might be little need to perform elaborate inspections unless you are planning to salvage most of the home and try to make it work. Second, for the seller, unless you have other buyers hanging around hoping to see your escrow fall out, you should be as cooperative and nurturing of your buyers as you can be. Of course, if it drags on for months, it just might be best to serve a notice-to-perform upon the buyer and risk falling out of escrow, since alternative buyers are reluctant to look at a house that is listed as “sale pending” or “in escrow.”
I had a house once that went through a couple of escrows. During the first one, the house sailed through the contingency period with no problem, but we had accepted a contingency on the sale of the buyer’s existing home, which was not selling (and they were unwilling to drop the price). After a few months, with no end in sight, we served them a 72-hour notice-to-perform, and they elected to drop out of escrow. Then, we entered escrow with a new buyer who got hung up on more contingency inspections that I have ever seen, and when all was done and the contingency period was ending, the buyer was so nervous about signing off on contingencies that we almost had to serve a notice-to-perform once again. However, the buyer ultimately came around – one day past the contractual deadline.
A key point to make here is that the buyers must be sure that they are not wasting everyone’s time in a contingency period that they know is doubtful. Drop out of escrow as soon as you know it’s not going to fly. Desperate sellers do not need the added burden of having their home off the market and tied up in a hopeless escrow. And the seller should not jump into an escrow too quickly without being completely comfortable that the buyer is sincere about the property. Also, the seller should try to avoid a sale contingency when dealing with a buyer, if at all possible. (If necessary, it might be better to be willing to carry part of the mortgage, at least until their property sells.)
In any case, it’s always important for a seller to be cooperative and helpful with the buyer, no matter what the market conditions, but it’s especially critical in this difficult housing market – in which a buyer has a wide selection of homes and many eager sellers seeking their attention.
Seek simplicity, comfort, and value!
Tags: escrow-contingencies, home remodel, home-sale, sell-home, stage-a-home