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3 times you should walk away from the deal when buying or selling a home.

When to walk away from real estate transaction.

There are hundreds of reasons a real estate transaction can fall apart that will cause a party to walk away. They range from random life events, to petty disputes over lamps. Today we are going to focus on three areas (which cover the majority of the valid reasons) that give just cause for a buyer or seller to walk away from a home sale. Those areas are unreasonable purchase agreement offers and counter offers, inability to reconcile the inspection report, and a low appraisal. The common denominator you will find with all three of these, or any other reason people walk away, is that one party or another is being unreasonable. My experience tells me that it is usually both.

Unreasonable offers or counteroffers. It is not uncommon that someone who is trying to sell a house has an unrealistic view of its value. It is also not all that uncommon for the buyer to want to get the house for much less than it is worth. In order for these two opposed views to come together, it is important that the Realtor on either side both educates their client on current market conditions, and sets reasonable expectations when preparing an offer or counter offer. Simple enough right?

Not always. Frequently enough, one party or the other will insist that this deal is the exception to the market and that their price is right. Sometimes the buyer wants to make a ridiculous low ball offer AND expects the seller to pay all the costs involved in closing. Sometimes the seller refuses to make any concessions. In both of those cases, it only makes sense that the other party is not going to keep wasting their time. They walk away AND they should.

That said, before you do that… ask yourself if your position is actually tenable. None of us ever wants to admit it, but there is always the chance that our own position is the one causing the gridlock. Discuss the neighborhood comparable sales history with your Realtor. Ask specifically about who pays for what in a typical real estate transaction in your area. If you review the data, and your position is still valid, and the other party won’t budge…its best to move on. If you see somewhere that you can give value to the other party and still be getting a fair deal, make another counter offer and see what happens.

Reconciling the home inspection report and response. More home sales fall apart over the inspection report response than any other single issue. That is because of two major factors.

First off, the home inspection is not a single issue, it is multiple issues under one umbrella. The inspection report is going to tell us about the condition of the home under a microscope. From the foundation and “bones” of the house, to the wiring, the plumbing, insect infestations, roof condition, soil conditions, flood reports, radon and other hazardous material inspections… all of these may be reviewed. When there is an issue, it has to be mitigated. Which leads us to the second factor.

A problem in the report means we are renegotiating the amount of money that will be made by the seller vs how much the buyer will pay. Given that the first negotiation is usually a fairly emotional a draining process for both parties, having to go back to the table and hash it out again can be daunting. Doing so without a strong agent to support you is doubly so.

So here we are, trying to reconcile a bad report of whatever type. Sometimes the seller wont fix things. Sometimes the buyer expects the seller to fix things that were disclosed prior to the inspection. Some buyers (and disreputable agents) try to use the inspection report as a method of “taking a second bite” at the price negotiation apple.  When the parties are unreasonable like that, it is best to mutually release the contract return the earnest money and walk away.

A better situation arises when both parties view this as an opportunity to insure that both get a fair and equitable deal. This means that the seller arranges repair (or negotiates price down) for previously undisclosed defects, and the buyer only expects those types of defects to be remedied. For more on the subject of inspections reports see this article. (The home inspection on the house I am buying came back with a bunch of problems, what do I do now?)

The home appraisal is lower than the negotiated selling price. This one is especially tough. The reason a low appraisal is so hard to deal with is because buy the time we get to the appraisal; the buyer, seller and both agents have already gone through the initial negotiation and the inspection response and have come to terms. Both parties feel like they are getting the deal they want. Then in comes the lending institution saying that the buyer cannot pay the price that they are willing to price…unless they have the cash that is. I wont go into al the ins and the outs of what to do about a low appraisal, but you can read all of them in this article (What happens if the appraisal is too low?)

At the end of the day, if the banks appraiser says the deal cannot happen at that price…it can’t. the most common way to reconcile this is for the seller to knock the price down to the appraised value, and usually the buyer will give up some concessions to counterbalance the sellers loss. Just like the other two situations….if both parties are not reasonable, then its time to let the deal die.

As always, the better outcome for both parties is to be reasonable in their expectations and continue to negotiate and close the sale. Short of that, move on.

If you want to buy or sell a home and would prefer to have a Realtor that will help you avoid these situations… call Robb at 317-657-8059 or email robb@yourrealtylink.com to make an appointment for your home buyer or seller consultation. Its both informative and free.

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