For the first time in 15 years we had a buyer change their mind at the closing table. Our client, the seller, had already closed on his new home and the sale of his current home. We have been in the business long enough to see a lot of crazy things, but this perhaps is the strangest. The property passed inspection, appraisal, and financing, yet the buyer got cold feet on the day of closing and didn’t sign the paperwork waiting for her at the title company. As much as we all tried to persuade her to changing her mind, she was out.
This leaves us with a couple of interesting problems that we now have to deal with. First our client will not be able to buy his new home. This is a devastating blow for many reasons. Not only does he lose the home he fell in love with, but he is also out the money he spent for the inspection and appraisal. We made our offer subject to the sale of his home, so at least the earnest money he put down is safe. The biggest problem that we are going to have is finding him a new home in this crazy market.
In this market buyers are being faced with competing with multiple offers on the same property. It can be very exciting as a seller to see all the demand for your home, but in reality, it doesn’t always work out to their advantage.
Let me explain how things are going down:
- A seller receives multiple offers – They look them over and pick the best one. Most of these buyers have unsuccessfully written offers on other homes and have lost out. These buyers end up offering the asking price or above. The idea of getting a, “deal” isn’t a possibility in todays market.
- Second best gets a chance – The buyer that had the 2nd best offer gets their offer placed in a backup position. If the first buyer backs out, they are automatically given the option to become the primary offer.
- Everybody starts the search again – All the other buyers including the backup move on to find another home. Keep in mind, they are all looking for the same thing, so it isn’t unreasonable to assume that they will be competing on their next house with many of the same people.
- Here comes buyers remorse – Buyers are all feeling like they might have over paid for their home. They had to offer thousands over the asking price to, “win” the home and the excitement of their home begins to sour.
- The domino effect – The primary buyer backs out and the backup offer is notified. What could be simple isn’t. The backup offer has moved on and found another home. So the listing agent moves down the list notifying all the offers the deal has failed.
- Bad or worse choice – The only buyers that are left that haven’t found a house are the ones who aren’t making the over asking offers or that have less desirable financing. The seller now has to work with these buyers or put the home back on the market.
- Sell, buy, repeat – All is not lost, eventually everything works out. Sometimes, it even works on the first try. If you understand the game in the beginning, you can survive the craziness.
Buying or selling a home in this market can be a serious challenge. We have been doing this for a long time and know that what we are seeing now is a condition of inventory and not the housing market in general. The solution to the problem will be more sellers deciding to sell their home. As we alway say, “when the spring flowers come out, so do the listings”. Time will tell when this market will go back to a normal state. In the meantime, we are going to keep writing offers!
Want to know how our clients win more offers? I made a quick 1 minute video a while back explaining how. Check it out below. The home that fell out, here it is again… Luxury-Location-Affordablilty