Advice for Sellers reduction of termination risk   Recently updated !


Sellers are looking for the highest offer that they believe has a high probability of closing, not only the highest offer price. Lots of buyers are submitting disingenuous offers to lock in a house and then decide if they really want to live in it. We all know the standard contract option period gives buyers the right to terminate for any reason and back out of the deal for a small fee. I also see some outrageous prices offered with the agent hoping the appraisal and negotiation for repairs can be leveraged to bring the price back down.

When a home is in contract the sellers negotiating power goes down and the buyers negotiating power goes up. My advice to sellers is always the same. Look at the contract as a handshake and a framework for a transaction.

Don’t believe just because you have a contract the buyer will perform. All outs in a contract favor the buyer. For reasons not discussed here, If the deal does not close, it is highly likely the seller will release the earnest money. To reduce the risk of a failed transaction, communication is the key to a win win outcome.

To help reduce the sellers risk, the listing agent should establish a friendly dialog with the buyer agent and lender. I question them on the buyers level of interest and current situation to hear they have strong intentions. Secondly, the lender should be asked what steps have been taken to pre-approve the buyer and only offers with a pre-approval letter or proof of funds should be considered. The buyers current living situation should be understood to make sure they do not have a hidden contingency. All parties of the buyer should have seen the property. All income, assets, source of funds, and expenses should have been verified by documentation. This line of questioning is smart diligence and amounts to lookIng the other party in the eye and hear them affirm the buyers credibility and stake their reputations on it.

Ronald reagan photo

Photo by Opus Penguin

I follow the doctrine of Ronald Reagan whom said “trust but verify”. It’s impossible to eliminate all risk of a failed real estate transaction. Understanding the risk and sincerity of the parties is the best offense to a winning transaction. Then, keep the communication ongoing to see that funding and closing activities stay on track.