Falling out of Escrow is Like Falling Out of Love

Falling out of Escrow -- or Falling out of Love?

Did you know that in parts of this country (notably, Southern California), home buyers are falling out of escrow at a rate of more than 40%? And in other areas, as many as one in five fall out of escrow?

Not surprising, you say. After all, it’s not that uncommon for loans to fall through, appraisals to fall short, inspections to uncover monstrously expensive repairs. Moreover, in states like California, standard contracts give buyers 17 days to do inspections. During this time period, buyers get their earnest money deposit back if they cancel not matter what the reason.

It’s no wonder that far too manyescrows fall apart after an offer is accepted, sending the home seller back to square one, feeling jilted, disillusioned and abandoned.

Not to mention the real estate agents on both sides of the deal. In fact, I’ve been feeling jilted a lot this year. Buyers who appear motivated suddenly back out, despite concerted efforts on my part to help them overcome their objections. (One recent buyer backed out because hiscontractor wasn’t immediately available to do a remodel on the house. And another buyer canceled because the mobile home park had rules about dog size (no dog over 30 pounds allowed). When the mobile home park manager made an exception and accepted the buyers’ 60-lb. dog, they still cancelled, saying the manager had taken too long to respond!)

After a string of similar situations, I began comparing notes with other realtors. They, too, were experiencing disproportionate numbers of escrows falling out and buyers with “creative” reasons for backing out of their offers – causing me to wonder:  What the heck is going on? Why have solid buyers suddenly become so fickle?

Well, here’s what I think has happened: In today’s low-inventory market, well-priced homes are drawing multiple bids. There are not as many homes to choose from and a heightened sense of competition among buyers. Selection is limited, so you need to be alert and prepared each time a house in your price range comes on the market. You have to respond quickly as other potential buyers are executing the same game plan.

It’s easy for buyers to panic, get caught up in the adrenaline rush of “the chase,” and talk themselves into loving a house that is sought after by many others.

Unfortunately, reality eventually sets in and, just as easily, they fall out of love and decide to back out.

So, what’s an agent to do?

• Agents on the buying end who notice the signs of cold feet can provide counseling services and help buyers avoid making a mistake.
• Agents can also try to identify buyers who are most apt to get cold feet. Agents should feel free to ask why potential buyers are buying and ask about their history of bidding on other homes. A buyer who has been in the market for 12 months and has gotten outbid six times is way more likely to follow through than one who just started their home search and is making an aggressive offer on their first bid. Same thing can be said for buyers who are working against a job relocation or school deadline.
• Be sure not to hype the house. Under-promising and over-delivering helps reduce buyer’s remorse later.
• Also, get objections out in the open from the beginning. (If there’s a remodel involved, for example, are timing and availability of a specific contractor an issue?) Air whatever might upset the buyer later and resolve those issues before the offer, if at all possible.
• Try to involve the buyer emotionally by uncovering the buyer’s “pain” and revealing how the house or your services will reduce or eliminate that pain.
• Help buyers plan for remorse. Make a contract with your client about what they’ll do if they begin to question their decision.
• Describe what happens once the contract is signed. Make sure there will be no surprises or rude awakenings.
• Remain visible and accessible. Use e-mail, phone calls, visits, whatever works best for your client.

For other “jilted realtors” out there: Do you have other tips or stories to share? If so, I’d love to hear and learn from them!