A few months back I was assisting a Buyer who was relocating to the Colorado area from Pennsylvannia. Her home in PA was valued at about $750k of which she had over $450k in equity not to mention all the other assets she was liquidating to move here. Point is, she was coming with cash in her pocket and money to spare.
SELLERS and BUYERS - this article is also written for you. Make sure that when you are in negotiations that your counter offers, are in the best interest of the goal in which you are trying to achieve. Either selling your home, or buying one. It is NOT about winning, but about business and closing the deal.
Gary and I had worked with our Buyer, a young widowed woman, who was relocating since her daughter was going to a college in our area. So for several months Gary and I had looked and previewed properties, spent time on the phone with her and took her out to see the cream of the crop on her quarterly visits. Of course, until her home was in contract, it was just looking. But what it did was give us a real sense of what she wanted, the type of neighborhood, the quality of home etc..
A few months later her home went into contract (it was a mostly a cash purchase so the loan was minimial for her Buyers). They had strong credit, relocators themselves who wanted a quick close. Therefore, they put a little more pressure on our Buyer to relocate to Colorado but the deal appeared to be very strong.
Having said that, she started to send us homes she really liked. She was in the low $350k but could do more. She found a home she really liked.. She love it. So Gary and I went out there and took more photos, looked at the neighborhood, researched the community, property to get a better feel for the home. It was new on the market and come to find out, the Seller had already relocated and needed a quick close.. PERFECT!! so we thought,
Our Buyer wrote a full price offer, paid the $4,000 in Earnest Money, it was to be a cash deal, we requested no closing cost concessions but did state there was a contingency on the offer providing that loan conditions were finalized on the home our Buyer was selling. My Buyer needed a 45 day close however, if possible wanted to move it up sooner. I fully expected a counter offer with a "right of first refusal" on it and that was it.
What I got was a counter offer that looked like this.
- Must close in 21 days
- Earnest Money to be $20,000.00
The Listing agent called me and said we are not comfortable with your Buyer not seeing the home before writing an offer. I explained that we have been working with her for several months and we provided her with whatever information she needed to feel comfortable in doing so. We sent over our Buyer's purchase contracts for her home and everything they requested. I stated that it was NOT noted in the MLS that out of state Buyers will have to pay a $20,000.00 Earnest Money deposit but a local Buyer only has to pay $4,000.00.
The Listing agent said that the Buyer needs to close in 21 days because the Seller wants to not have to pay for an empty house. I said we couldn't do that but as soon as possible thereafter we will. The Listing agent wanted my Buyer to close earlier and rent it back, even if she wasn't moving out for a few more weeks, basically my Buyer to pay for an empty house. I explained that we needed to want until her home closed to fund the cash purchase.
My Buyer was so insulted about the Earnest Money she walked away from the deal. She felt like the house had been tainted. It was a back and forth issue between that agent and myself. It was if my Buyer was being punished because she was coming from out of state. The Listing agent said well the deal could fall throught. Absolutely, but so can the first time home buyer that writes an offer and there is a loan issue a week before closing. My Buyer was cash. All deals have the potential to fall through.
I went and found her another house which was $15k more, same deal and it closed without issue in less than 40 days. Right around the time of our closing, the previous agent called me back saying that would still love another offer from us. I said, had you not countered the way you did, you would have been closing on your Seller's home right now. My personal opinion it was not the Seller's idea to jump up the earnest money so much, but her agent's... That killed the deal.. My Buyer had the money, but it was principal in which she said - No Way!
I don't know about everyone else, but I know there are a lot of relocators that buy a home site unseen for a variety of reasons. Should they be punished with excessively high Earnest Money? Can not a local deal fall through just as easy? Maybe this is common practice in other places, but it is not my common practice. Any comments??
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