Q. I’m a home seller with a condo in escrow. The buyer decided to cancel when he found $30,000 worth of repairs during his physical inspection, and I refused to give her a credit. The escrow company sent both of us a cancellation form charging the buyer a cancellation fee from the balance of his full deposit. That was two weeks ago and the buyer has not signed the cancellation. Meanwhile my real estate agent told me that a new escrow cannot be opened until the cancelled buyer signs the form and the the prior escrow is completely closed. I feel like this disgrunted buyer is deliberately holding my property hostage.
A. You may resell your property and open a new escrow when the cancellation of another is still pending. The usual advice applies here: DISCLOSE, DISCLOSE, DISCLOSE. If the buyer submitted his request for cancellation to escrow, ask your Realtor to start marketing the property and get it into escrow. Your Realtor should disclose ON THE MLS LISTING FORM that the property is currently in escrow pending cancellation.
One thing you should consider before letting the buyer go: Is that really what you want to do? Now that you know about the damages to the property ($30,000 in repairs) you must DISCLOSE EVERYTHING TO YOUR NEW BUYER. This will undoubtedly affect the new buyer’s offer price. In addition, the market is fickle. How quickly can you resell your home? What is your time worth? Perhaps a compromise with this buyer makes more sense. Get good cousel from your agent BEFORE you make a final decision.
Now let’s assume you want to cancel escrow in the most simple way,so yo can get on with your life. Here it is. First thing Monday morning, have your agent set up a conference call between you, the escrow officer, and your agent. Ask the escrow officer to waive all buyer fees, in exchange for you bringing your new escrow back to them. Then have your agent call the buyer’s agent and ask them to agree to sign off in 24 hours if all fees are waived. Done!
Real estate is a RELATIONSHIPS business. Escrow officers depend on Realtors to bring them business. Your agent should use the power of her relationship to help you out of the mess.
If worst comes to worst, pay the cancellation fee yourself. Don’t be trapped into wanting to get a lawyer, etc. That will cost you more in time, energy, or actual dollars than small cancellation fee to the escrow company.
Q. I am planning to move to LA in a few months and am struggling on where to find a safe apartment to rent in a good area. Are the new lofts in downtown LA in a good neighborhood to live in? I have been looking at one on 7th Street, South Spring St. and 5th St and Broadway.
A. The lofts in downtown LA are really up and coming. Bits of the grimey past are still intact, but there are so many “lofties” down there that it has truly become safer, especially in the two buildings you are looking in. Downtown has an art walk, many galleries on Main Street, and so many new hip shops and gastropubs that you couldnt get to all of them in a year.
One thing to consider, however, is that the areas surrounding downtown can be uneven. Be sure to drive the surrounding areas both day and night, to get a feel for what the neighborhood is like. Sometimes downtown can feel too deserted for some clients. And try to get as many parking spots as you can in your unit; parking downtown is very tough.
A good Realtor can help you evaluate neighborhoods, values, and safety factors, such as crime rates. We have those statistics easily accessible.
Q. How is the short sale different from a foreclosure? Why are there so many right now? Why don’t lenders just use foreclosures, if it seems like short sales don’t seem to be successful?
A. Generally, a homeowner initiates the short sale process, not the lender. They realize that at least one, or maybe more of the following is occurring/ has occurred:
1: Property value has decreased to the point that their equity is gone.
2: They cannot qualify for a loan modification or refinance, based on their personal financial situation.
3: They cannot afford to wait out the market downturn for their property to increase in value.
When any of these happen, the borrower approaches their lender and proposes to sell the property, knowing that the lender will not get the full value of the loan repaid at closing. (Read my blog post on understanding short sales) The lender accepts the request for a short sale because it is, quite simply, in their best interest. A foreclosure is a costly, time consuming process that generally does not yield a higher value for the property, and generally requires many more man hours to complete as well.
The lender’s first choice is to do a loan modification and keep the borrower in the property. (See my blog post: Freddie Mac Helps Borrowers Complete Loan Modifications) Every lender has jumped on the bandwagon to make a concerted effort to make this work.
However, because of liberal lending practices in the early 90’s, clients were given “stated income loans” where the qualification practices were very lax. Borrowers got the home they wanted, but couldn’t really qualify for. The market tanked, borrowers lost equity, and now cannot qualify for a legitimate loan modification. Hence, the short sale.
Foreclosure is the path of last resort. It is handled separately by a different group from the short sales, and neither group generally knows what the other is doing. Foreclosure only occurs when a borrower has exhausted other options, and/ or has stopped making payments.
You make a good point that banks are not equipped to effectively process the short sale process. Short sales are extremely labor intensive, and this market tsunami hit them as hard and as unexpectedly as it did the general public. Most file reviewers are getting 100 new files on their desks EACH DAY, so they are vastly overworked. But to the bank, the short sale is still preferable to the foreclosure.
Why more short sales now? Because each percentage point of decline in market vale in any given neighborhood brings more borrowers closer to the tipping point of whether it’s fiscally possible to stay in their home. Not to mention the external factors, such as job losses and the overall economy.
It is predicted that the foreclosures being held back by the lenders right now will be released in another wave after January 1. The effect on the markets where those foreclosures are located will most likely be a drop in value. When that occurs, expect a whole new wave of homeowners to become short sellers, as the market forces them to the tipping point.
Q. We’re in escrow. Our agent and the buyer’s agent are from the same office. May I renegotiate commission now? When should agent have pointed this out?
A. Yours is a very good question. The Broker (let’s call them ABC Realtors) is the umbrella under which the Listing Agent (LA) and the Buyer’s Agent (BA) work. For the privilege of working at ABC, the LA and BA pay anywhere from 10% to 50% of every dollar they earn, and ABC provides an office, a broker’s license, staff, advertising, marketing, supplies, management and oversight, and in many cases, in house counsel. All of those things are to benefit you, the client, and to expedite the sale of your home.
When you agreed to list your home, you made an offer of a fee to the Listing Broker, and you made an offer to be paid to the Cooperating Broker. (Usually 3% and 3% in California, but not fixed by law). Your agent listed the home under those terms, and offered it in the MLS. It was a contractual offer.
Had the Buyer’s Broker not been ABC, but rather XYZ, you would happily (I presume) paid the fee you offered. All parties performed as you expected, and you got the desired result, a sale.
The fact that ABC is the Broker of Record for the LA and the BA in no way mitigates their cost, liabilities, etc. They have the same responsibilities to the Buyer and the BA as XYZ would have, and as such, deserve their fee.
From another point of view, think of it this way: you hired ABC and your LA because, to you, they were the best person for the job. How fortunate for you that you got a BA with the same level of expertise and professionalism standing behind them!
You ask when I would have pointed all of this out. My standard is this: When I go on any presentation, be it a listing presentation or a buyer presentation, I will have already dropped off all blank documents 48-72 hours in advance, so my client has read everything. I ask them to keep a yellow pad and paper with them to jot down questions, and feel free to mark up the blank documents.
Then, when I meet with my clients, I start with a Realtor disclosure, then an agency disclosure, then a dual agency disclosure. We discuss what each means, and I explain, just as I did below in my answer, that when they hire me, we are making an offer tho a sub agent (a cooperating Broker) as well.
My belief is that clients should be well informed, and that includes reading every document they sign.
Have a question you want answered? Contact us at TheBremnerGroup.com, and let us know. Or just leave a comment below. We are always happy to help.