Contracted buyer being difficult. Negotiate or cut him loose?

Question

We recently flipped a property in NW Indiana. We had a hard time getting accurate comps to choose a listing price (we over-rehabbed the house for the area it was in). So, we aimed high at a listing price of 340k. The first day the listing was up we had a showing and an offer for 320k. We knew we were asking high and had only had a couple more showings before the offer was about to expire so we accepted.

Everything went smooth until inspections. It seems the buyer started having second thoughts and became unreasonable with inspection repairs. It didn't help that the inspector they hired was a hack. He said our 3 month old furnace was 'nearing the end of it's useful life, approx 15-20 years, and needs replaced'. Along with many other screw ups.

Some of the things the buyer asked for included removing all the attic insulation and reinsulating up to current code standards, because the inspector found some mice droppings in the attic. They wanted us to have a foundation company come in and waterproof the FINISHED basement, because there were signs of rust on one of the steel beam columns (the basement was flooded when we bought the house the power was off). Their inspector said there were three layers of shingles on the roof, which is against code. Even after we got a signed letter from our roofer stating there were only two, and the town approved the job with final inspections and occupancy permits.

After 2 weeks of negotiations and a full month lost we decided to cut the buyer loose. We had only really had the house on the market for 2 days. Surely there was a better buyer out there right? Well after re-listing the house, the momentum was gone. Every person that considered making an offer asked why the first buy fell through. It was like everyone suspected something fishy going on because the first offer fell through. The house sat for 5 more months before we finally got another offer we could accept. We ended up selling the house for 294k. 26k under our original offer. In hind site if we had just done the first guys repairs, we would have ended up with more money and saved a lot of sleepless nights stressing about this property.

Did we make a mistake cutting the guy loose? How far do you go negotiating with a buyer before it's time to cut your losses? A bird in the hand is worth two in the bush right? Is my realtor partly to blame for not being able to negotiate an acceptable deal? (We did later decide she was incompotent and after cutting her loose we sold the house in 30 days with a new realtor).

Jon Graham · Answer

It wasn't overpriced, it was overbuilt for what the market in that area would support

Lee S. · Answer

I'm sure there are regrets for everyone on every single deal, I have mine. House looks great.

Jon Graham · Answer

Not bad advice thanks. I did something along these lines as a last stitch effort, though not as in depth as you are suggesting. I wrote a letter to the buyers, and it did start talks back up again, but by that point the deal was too far gone. If I had done that sooner it might have saved the deal.

Michael Hayworth · Answer

Let's start here - there are a TON of really bad home inspectors out there. As you probably know, you can get a home inspector's license through online courses. Many/most newer home inspectors either washed out in construction or were never in it to begin with. Those of us in the remodeling or home building trades don't have a hell of a lot of use for home inspectors. (And yes, there are some good ones out there, too. But experience leads me to believe they're in the minority.)

After seeing enough inspection reports that made me cringe, I adopted the following approach, and it works pretty well. Realize that the whole real-estate agent intermediary approach keeps buyers and sellers distant from one another, and it's harder to establish a connection, so I try to get past that.

• I put together an actual letter and send as PDF or JPG so the buyer's agent has to give the whole thing to the buyer. I'm very cordial, colloquial, I'm on their side.
• I tell 'em what a great house they're purchasing, how much I love this particular house.
• Then I talk a little bit about home inspectors qualifications versus people who are really in the trades. I kinda ruefully tell them that we see this a lot - inspectors who just don't know what they're looking at, and who are trained to point out every tiny thing, lest they be sued at some point for missing something.
• I go point by point down their repair request. Anyplace there's real concerns and I'm agreeing to fix it, I acknowledge that as something the inspector got right. If it's something that was valid to note, but I'm still not going to fix it, I just tell 'em that at this price point, that's not something I can do.
• Anyplace where the inspector screwed up, I provide background info and actual facts to make them feel OK about the house. Buyers are scared, and they're relying on the inspector. If I just say, "He's an idiot!" they don't believe me. If I present myself as us being in this together, and give them really good info, now we're working as a team to get this done.

This approach has been very successful for me (used it again just yesterday, in fact). And if you do it right, you even get the buyer's agent on your side - the BA wants to sell a house. Why not sell the one already under contract, rather than start again with lots more showings?

If you're not a contractor, you may need to get some time with your contractor(s) to get their input on the report and do the letter that way.

Now, all that said, if the buyer is just making stuff up because he's got buyer's remorse, that's harder to turn around - but even in that case, a nice letter reminding them of all the awesome stuff about the house can help quiet down buyer's remorse sometimes.

Good luck!

Rolanda Eldridge · Answer

There are always things we can do differently, but you made the best decision at that time. Cut yourself some slack..You made money. All Good..Keep it Moving!!!..

Contracted buyer being difficult. Negotiate or cut him loose?

Contracted buyer being difficult. Negotiate or cut him loose?

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