I'm selling a property and had it listed on the MLS, we have already opened escrow, completed home inspections and appraisal , and past due diligence period
The buyer's agent put in a purchase price of $150k, however under additional terms she put in "Buyer will pay $3k to seller at close of escrow. $3k to not be in the loan amount financed."
When i read that offer, I saw it as total purchase price of $153K. The appraisal came in at $145, so now the buyer wants me to drop the $3K.
The buyer agreed that purchase price is not contingent on appraisal, and the EMD is non-refundable, but wondering if his whole contract will be void because of the $3k outside of escrow.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
13y
Because you have a line of potential buyers and you have $2,500 EM and there's no financing contingency, I'd play hard ball. Respond "no". You have a valid contract where the seller agreed to pay the price regardless of the appraisal. Now they don't like the appraisal and want a break. Too late. If they don't want to close, they lose their $2,500. Otherwise they need to stick to the deal they already agreed to.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
13y
You say you're seeing a sale price of 153 after talking about 3K being POC. Need to be more specific, what is the contract sale price? Are you saying the 3k is in addition to the contract price?
It is not illegal to pay any item outside of closing, paid outside closing (poc), so long as it is fully disclosed.
The agent's statement is not well stated and they appear to be saying they will pay the 3k in cash rather than from the loan but that's really no issue as to the source of funds so long as any lender involved is aware of the amount and source. :)
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
13y
Agreed with Bill...
Just to make sure the implication of what he said are clear -- the contract will NOT be voided based on the appraisal or the $3K paid out of closing. The buyer is still responsible for upholding the contract, and if he defaults, the remedy is whatever the contract states (probably just you getting to keep the earnest money).
But, if this does go to closing, you're going to want to ensure that the $3K is disclosed on the HUD for the lender (and everyone else) to see, even if it's just a check that the buyer hands to you outside of closing.
Real Estate Investor · Atlanta, GA · Member since 2013 · 27 posts · 1 vote
13y
If you have a buyer that has the money right now, take it. If you reject the offer based on the $3k and wait for another offer, which could take weeks or months your carrying costs will be more than the $3k and the next offer could be less than the $150k. The opportunity cost of not flipping the next house could be higher. Move and shake!!!!!
Specialist · Kirkland, WA · Member since 2013 · 1k+ posts · 817 votes
13y
Jeff, if he is in the Vegas Market, he might be better letting the contract fall out, collecting the EMD, and waiting a month. Prices are skyrocketing. Inventory is at less than 40 days. Take it off market and the DOM reset.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
13y
Bruce L. I agree with the others, the EM gets forfeited by the buyer if they walk. How much EM? Whether to close at $150k or not, is a different decision.
But, can you explain, I assume you asked, why the $150k purchase price, "plus $3k at closing to seller" (on the side), as opposed to $153k price? This is not a short sale, right? Anything else? They're probably just taking a shot at trying to save the extra $3k, and will follow through if you don't bend.
Bill Gulley, contract price $150k plus additional $3k POC.
Troy Fisher Yes, this property is in Las Vegas. I got 26 offers in 4 days. Market is hot for properties in that price range. I listed $5k below market at $140k, appraisal came in at $145k, buyer to pay difference.
Wayne Brooks Traditional Sale, the EMD is $2,500 non-refundable after 10 days DD. I'm not sure why the buyers agent wrote the contract that way. I do know that the buyer was only approved for a loan amount of $127k.
Someone told me that I could try to reduce the buyer's agent co-op from 3% to 1.5%, but the agent's broker might come after me. Does anyone know anything about that? If true, I could make an addendum to have the buyers agent pay for all of my closing cost which is near $2,500, that way it still looks like I paid the agent the 3% co-op.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
13y
Because you have a line of potential buyers and you have $2,500 EM and there's no financing contingency, I'd play hard ball. Respond "no". You have a valid contract where the seller agreed to pay the price regardless of the appraisal. Now they don't like the appraisal and want a break. Too late. If they don't want to close, they lose their $2,500. Otherwise they need to stick to the deal they already agreed to.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
13y
Edited as Jon and Phili posted while I was typing, and I did't see the 26 offers since it wasn't addressed to me, so I agree with them as well...additionally now....
Then, it appears the agent drafted the contract at a sale price at 150k and an additional 3k to be paid POC. It also appears, reading between the lines that the 3k was offered on an addendum. Now, why would the agent do that?
The 3k might be something that's not disclosed to the lender, it's an 85% LTV, if the sale price were 153k, to keep that approved loan committment the buyer would need another 2540 down he may not have. Raising the contract price reduces the LTV but if the buyer didn't have the funds verified by the lender that could well be the reason for the POC amount. Maybe the buyer is borrowing 3k from a private party or hocking his Elvis collection with those pawn stars in Vegas. Either way, it's beginning to smell, you don't want to be a party to loan fraud. I'd check with the closing agent and see if they are aware of the 3k poc and if not, get that addressed to be shown on the HUD-1, accepting more than shown will be a problem for you on several fronts.
Your agent dropping 1.5% may mean they get nothing or very little after the split with thier broker, why would they do that, who ever suggested that, I suggest you not talk to them anymore about RE.
Looks to me like the buyer is messing with his lender over available and verified funds to close. What's not clear is why the buyer offered more in the first place, unless they thought it was needed for you to accept the deal, but didn't have good funds.
Again, disclose the amounts to the closing agent, if that kills the deal with his financing, I'd keep the EM and move on. If they declared it fell under any financing contingency to get the EM back, I'd say they dealt fraudulently, in attempting to obtain the financing and keep the EMD! I'd also be reporting that agent who wrote it up....but right now, that's speculation, so see what the facts are. :)
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
13y
The commission to the Buyers agent is none of your business, and you do not get to dictate how the total commission gets split between the brokers. If you have that many offers, stand firm. You know you didn't get everyone's best offer on their first shot.
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
13y
Several have mentioned your additional $3k on top of the purchase price of $150k is "outside of escrow". According to the original info you provided, there is no reason and no implications that those funds are to be outside of escrow. In fact, since it is listed on the purchase and sales agreement, escrow sees it and will have it on the HUD1.
Secondly. If they have no appraisal conti bench, then by contract, they are required to bring the difference in cash. If they fail or refuse to close and do so, the buyer has violated the contract and you have all remedies available to you per the contract and per NV laws. Part of that is the ability to keep their EMD,, of course they will have to sign a doc to release that which they will likely fight. That said, if you fight back, you will win.
Since you are in one of the hottest markets in the country right now as evidenced by e numerous offers in just 4 days, inform the buyers agent that his/her client needs to close and bring the cash to the table for the appraisal difference as per the contract or they will lose the EMD. You then keep that EMD to cover your costs and re-list and get another better offer. Make sure that any other offer you take does not have an appraisal contingency.
Real Estate Agent · Henderson, NV · Member since 2011 · 1k+ posts · 550 votes
13y
One question no one has asked yet: Why did you even bother with this offer in the first place? Honestly, I'd walk from this offer, and relist your house at a higher price. In this market, why would you list below market value? You should be listing well above, so you don't leave $$ on the table.
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
13y
I don't read that clause as changing the purchase price. Unfortunately, it just addresses where the funds are coming from and how they will be dispersed. I'm thinking the agent may have meant to write the buyer would pay $3K over appraisal. I've seen several offers like that recently. Regardless, I don't see it written in such a way that makes the pruchase price $153K.
Both your buyer and their agent know you gain by putting it back on the market, and that they lose not only earnest money, but the chance to buy at that price in an appreciating market. You were expecting $153K. They obviously have some cash and they do have to perform on at least the original contract purchase price (as written) regardless of appraisal or lose EM. Could you do it at $151.5K?
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
13y
Originally posted by Phillip Dwyer:
One question no one has asked yet: Why did you even bother with this offer in the first place? Honestly, I'd walk from this offer, and relist your house at a higher price. In this market, why would you list below market value? You should be listing well above, so you don't leave $$ on the table.
I know why I would have taken that offer. It's because the majority of offers may been FHA buyers with no down, buyers with difficult lenders, and buyers who asked for concessions. 20+ offers doesn't mean much unless they were all over asking and all cash. If the OP didn't get all-cash offers at asking, which I am assuming he did not, his best offer is a buyer with lender funds combined with cash.
We can talk about selling at below market all day long, but buyers needing 97% financing are not the market. The lenders are the customer. We are all working for the bank when there are no cash buyers. The appraisal came in at $145K. Only buyers with some cash can pay over appraisal.
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
13y
Originally posted by Bill Gulley:
Originally posted by Bruce L.:
The buyer agreed that purchase price is not contingent on appraisal, ..............void because of the $3k outside of escrow.
Will Barnard
There was the issue. :)
I read that, again, the quote of outside of escrow is still incorrect as it contradicts the fact that the $3k was in the contract, thus not outside escrow. Either way, no need to spkit hairs, my advice stands. Send a notice to perform and if not, keep EMD and re list.
Just got the addendum in, I'm not sure I trust the agent, what do you guys think?
"Buyer agrees to pay the difference from appraised price of the property as the only additional amount being paid from buyer to seller. The $3k additional cash stated in the purchase agreement is to be credited to the seller from buyer's agents commission."
Real Estate Agent · Henderson, NV · Member since 2011 · 1k+ posts · 550 votes
13y
K. Marie Poe, sorry I'm on my iphone so the @mentioning doesnt work. Anyway, in this price range in the Vegas market, over half the buyers are cash. You're scenario doesn't hold much weight in our market conditions. In a flat, slightly increasing, or declining market I can see why you'd price low. Or if you were desparate. I don't think Bruce is desparate, so I don't see the logic behind the pricing.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
13y
Bruce, again not the best language in the world....but they're saying the buyer will pay the contract price, and the Buyer's agent will pay/credit $3,000 to you. I don't know why the agent would, unless they're related. But, you need something signed by the Buyer agent's broker agreeing to that. The buyer, for that matter the buyer agent, can't give you any of the buyer side commission as it belongs to the buyer agent's broker.
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
13y
Originally posted by Phillip Dwyer:
K. Marie Poe, sorry I'm on my iphone so the @mentioning doesnt work. Anyway, in this price range in the Vegas market, over half the buyers are cash. You're scenario doesn't hold much weight in our market conditions. In a flat, slightly increasing, or declining market I can see why you'd price low. Or if you were desparate. I don't think Bruce is desparate, so I don't see the logic behind the pricing.
I understand that Vegas is full of cash buyers as I'm in a similar market. But if the OP had an all cash offer over asking, wouldn't he have accepted it? His appraisal is what it is, regardless of a $150K (or $153K) purchase price.
Perhaps Bruce can explain why he accepted a financed offer......if half his offers were cash over asking.
Wayne Brooks So, the agent is willing to part with the commission, but is there a way to protect myself without having the broker involved? Like buyer's agent will pay for seller's real property transfer tax, title insurance, etc, as long as it's near $3k?
K. Marie Poe As far the cash, I had 3 cash offers, 2 of them were too low, the first one I accepted, but the investor decided to back out of the deal before DD. Philip is correct, I'm not desperate.
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
13y
Originally posted by Bruce L.:
Just got the addendum in, I'm not sure I trust the agent, what do you guys think?
"Buyer agrees to pay the difference from appraised price of the property as the only additional amount being paid from buyer to seller. The $3k additional cash stated in the purchase agreement is to be credited to the seller from buyer's agents commission."
This is totally convoluted. Something is up with the mention of the buyer's agents commission as a credit. Now that you have an appraisal amount, why not have the addendum just state the one and only purchase price. No "credit", no "additional amount" or "additional cash".
Last summer I received a very similar addendum right before closing. The agent said it had something to do with the lender and cash back at closing but didn't really understand it either. I insisted that addendum state the revised and final purchase price only, and I wouldn't sign anything that used the word "credit". The buyer was furious and the agent told me he walked out. I said no problem, send over the cancellation. 24 hours later the buyer changed his tune and signed the new addendum for the final price.
I'm beginning to wonder about this offer now too. Did you get any all cash offers and if so, why didn't you accept one? :)
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
13y
Originally posted by Bruce L.:
So, the agent is willing to part with the commission, but is there a way to protect myself without having the broker involved? Like buyer's agent will pay for seller's real property transfer tax, title insurance, etc, as long as it's near $3k?
K. Marie Poe As far the cash, I had 3 cash offers, 2 of them were too low, the first one I accepted, but the investor decided to back out of the deal before DD. Philip is correct, I'm not desperate.
Thanks for the additional info. I know you are not desperate. And time is on your side if your buyers don't perform. But it appears you did not get a viable cash offer at $150K (or 153K), cause if you did we wouldn't be having this discussion. Where I am, I take that kind of market feed back seriously.
Wayne Brooks If the buyer's agent is willing to give up his commission, what's the typical and best way to credit that? I really want to learn how that works. Does the listing agreement change? Does the buyer's agent waive his fee?
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
13y
K. Marie Poe I personally have never "contributed" any of my commission to make a deal happen. Some title co.s may simply accept an emai from the agent or the broker. If it's the buyer agent, that wouldn't affect the listing agreement with the seller, he's still paying out the same amount. The point to the OP was that the buyer and seller can't enforce a reduction/split change on the buyer agent, so language in a contract or addendum would not control it, unless actually signed by the affected broker. Only the buyer agent's broker can, technically, agree to a change since by law any commission agreement is actually with the brokerage, not the agent. The split between the listing and buyer agencies is already set by MLS verbage, or other agreements, and isn't subject to buyer/seller approval.