I had a deal fall apart yesterday. Very disappointing for my clients, the buyers. I was sorry, too. It was a great property and would have made an awesome home for the two of them.
The reasons the deal fell apart are not very important. (The bank would not make the loan, but it had nothing to do with subprime lending or anything like that.)
I mention it because the seller’s agent did something that was not in his client’s best interest.
My clients saw the home three weeks ago. We put together an offer that was significantly less than asking (around 20%). The property, a townhouse in a co-operative building, needed a lot of work. Plus, there were special assessments on the building. A lot to handle for a first-time homeowner!
Still, my clients braced themselves and moved forward.
We stuck with it, and after several rounds of negotiating, seemed close to a deal.
Around a week after we submitted the first offer, the seller agreed to our price.
I found out our offer had been accepted when I logged into MLSPIN one morning. The seller’s agent had already changed the status of the listing from “ACT – active” to “UAG – under agreement”. I then checked my voicemail and found out we had a deal.
Again, the seller’s agent had already updated the listing as “UAG”.
Before a home inspection. Before a lead inspection. Before the Purchase & Sale Contract had been signed.
Hell, before the revised Offer to Purchase had been signed!
This is a mistake, in any market.
It’s death in a slow market.
The correct way to do this is, the listing should remain “active” until the P&S is signed (usually two weeks after the offer is accepted). MLSPIN actually has a special code for properties that have an accepted offer but aren’t at P&S.
The advantage of this, for sellers, is that their listings still show up in the daily feeds of listings on MLSPIN. So, other people who are interested in seeing the property will still inquire about it.
Of course, leaving these listings as “active” mean the sellers’ agents have to answer phone calls from interested people, meaning they have to explain that, “yes, it’s available, but we have an accepted offer, do you still want to see it?”
This is exactly what a seller’s agent should do.
But, time and time again, you see the agent change the status, almost immediately.
Often, listing agents have open houses on Sunday. After the open house, they get offers which are accepted by Sunday evening.
Monday morning, the agents update MLSPIN (and LINK).
Okay, you get the point.
It’s a mistake. Yet agents, new and experienced, make it, over and over again.
What if the home inspector finds a major problem? What if the buyer’s attorney finds something disturbing in the condo docs? What if the buyers simply change their minds?
The only thing at risk during the Offer to Purchase is the buyer’s $1,000 deposit. If the buyer walks, he/she may be able to get the money back, or may need to forfeit it. Either way, there’s no further liability on the part of the buyer.
(In my example, we are negotiating the return of the $1,000, and I think we have a very strong case.)
So, in week one, we had the home inspection. Then, a lead paint inspection (none found). The deadline for signing the P&S Contract was March 18.
On the 17th, the buyers decided to withdraw their offer.
So, where does that leave the seller?
Well, out of luck. She just lost three weeks of prime selling season. Her agent should have been marketing the home, for back-ups. We wouldn’t have cared, since we had a signed offer. In fact, we would have thought it practical and standard business practice.
Did we feel bad for pulling out at the last minute? Yes, but we had every right to, and we were acting in good faith, the entire time.
The only one hurt in all this?
(Well, and the agents who don’t get their commissions!)