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#421140 - 03/05/13 04:54 PM Best Way to Cancel Escrow ...in this case
Noordlife Offline
Member

Registered: 09/26/08
Posts: 27
Loc: CA
I submitted an all cash offer with a 5 day inspection contingency removal and no other contingency removals. We are on day 2 of escrow. The buyer(an appraiser) was planning on putting a loan on the property after the close of escrow...but now he realizes that the property will not qualify for a loan. Since there is no loan contingency removal how do I cancel escrow without an inspection report.(buyer does not want to pay for a report now)

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#421143 - 03/05/13 05:35 PM Re: Best Way to Cancel Escrow ...in this case [Re: Noordlife]
Vermont Offline
Major Contributor

Registered: 04/12/08
Posts: 7950
Loc: Vermont's North-East Kingdom
Without the "changed my mind" contingency, I think your Buyer is SOL.

Is s/he old enough to enter into Contracts in your jurisdiction ?

If the Seller didn't sign the Offer . . . . maybe you don't yet have a Contract ?
_________________________
Dale C. Hittle of GOLDEN RULE PROPERTIES in Glover, Vermont
Where We're Always Striving To Put Together "THE FAIR DEAL"

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#421146 - 03/05/13 07:01 PM Re: Best Way to Cancel Escrow ...in this case [Re: Vermont]
Noordlife Offline
Member

Registered: 09/26/08
Posts: 27
Loc: CA
Thank you for the reply Vermont!
Unfortunately the buyer is 45years old and the seller has signed the contract...

any other ideas anyone??

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#421151 - 03/05/13 08:38 PM Re: Best Way to Cancel Escrow ...in this case [Re: Noordlife]
Dodger52 Offline
Member

Registered: 10/14/11
Posts: 266
Loc: Montana
Originally Posted By: Noordlife
I submitted an all cash offer with a 5 day inspection contingency removal and no other contingency removals. We are on day 2 of escrow. The buyer(an appraiser) was planning on putting a loan on the property after the close of escrow...but now he realizes that the property will not qualify for a loan. Since there is no loan contingency removal how do I cancel escrow without an inspection report.(buyer does not want to pay for a report now)


You could be in a sticky situation. One option is to ask the seller to cancel, we often overlook the simplest route. Being only 2 days in the seller may not be interested in a prolonged fight, and you might just get a cancellation. Every day that goes by makes this a less likely option.

Does the buyer have more earnest money up than the cost of an inspection?

Does the contract allow the seller damages above and beyond the earnest money?

Its unlikely that the seller would force the close, this is an expensive option and hard to accomplish, but your contract probably provides for the option (you need to check that out).

The earnest money is probably lost, unless you use that remaining contingency. Your concern at this point is how much money above and beyond the earnest money is your buyer going to lose.

Its not unusual for a buyer to choose to finance a portion or all of the purchase even when making a cash offer. But if the buyer does not actually have the cash than you have crossed a line. You have two concerns here, one is making sure your buyer doesn't lose too much money, the other is making sure that you don't lose any either.

I am going to assume that both you and the listing agent verified the buyers source of funds. This means the seller will at least know that there are funds available to collect for damages. Without using the remaining contingency you put those funds at risk.

I would be concerned that the buyer is an appraiser, and didn't recognize that the property would not qualify. Advise him to talk to an attorney, you need to do a little CYA here.

Just my opinion, not legal advice!

Good luck!
_________________________
Dodger52 (Chris)
Prudential Montana Real Estate
www.MT-RE.net
www.facebook.com/MissionValleyMTHomes

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#421157 - 03/05/13 10:44 PM Re: Best Way to Cancel Escrow ...in this case [Re: Noordlife]
Vermont Offline
Major Contributor

Registered: 04/12/08
Posts: 7950
Loc: Vermont's North-East Kingdom
If the Buyer is truly a licensed "Real Estate" Appraiser, then I can't have too much sympathy for him.

He should know that executing a Contract is serious business . . . . we're using real money over here, and most people are "playing for keeps" !

I can only hope that he didn't rely on any counsel from you indicating that there wouldn't be any repercussions or penalty for simply changing his mind.

He should know better . . . . much better.
_________________________
Dale C. Hittle of GOLDEN RULE PROPERTIES in Glover, Vermont
Where We're Always Striving To Put Together "THE FAIR DEAL"

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#421183 - 03/06/13 10:06 AM Re: Best Way to Cancel Escrow ...in this case [Re: Noordlife]
KT Offline
Major Contributor

Registered: 01/18/05
Posts: 1581
Loc: Ohio
Originally Posted By: Noordlife
I submitted an all cash offer with a 5 day inspection contingency removal and no other contingency removals. We are on day 2 of escrow. The buyer(an appraiser) was planning on putting a loan on the property after the close of escrow...but now he realizes that the property will not qualify for a loan. Since there is no loan contingency removal how do I cancel escrow without an inspection report.(buyer does not want to pay for a report now)


Not knowing the full background, about either the house in question, or the buyer, having prof inspection(s) could turn up items that 1. aren't disclosed, 2. aren't visible/out in the open, or 3. not even known.

(usually) Just walking through a house a person, by they a lay person or an appraiser, they can't tell if there's radon, if the well water is safe, wood destroying insect activity, HVAC, electric, plumbing, and appliances, not too mention structural, roof & garage. Honestly, the best thing to do is pay the buck for the insp(s). Appraisers appraise. inspectors inspect.

***So not legal advise.

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#421194 - 03/06/13 01:43 PM Re: Best Way to Cancel Escrow ...in this case [Re: Noordlife]
Bigtoe Offline
Major Contributor

Registered: 10/14/07
Posts: 2364
Loc: Outer Banks
Ask the seller to fix/repair/replace everything that is causing the house to not qualify for a loan. You do not need an official inspection report for this.

If the seller refuses you can walk away, if the seller complies then you can get a loan.
_________________________
Your Outer Banks real estate agent. Helping people buy and sell OBX real estate since 1989.

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#421198 - 03/06/13 04:37 PM Re: Best Way to Cancel Escrow ...in this case [Re: Noordlife]
sacbroker Offline
Member

Registered: 10/31/07
Posts: 330
Loc: Sacramento
Walk away if you have a five day inspection contingency and you are on day two then just sign a cancellation. You don't have to give cause as to why.

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#421294 - 03/08/13 03:29 PM Re: Best Way to Cancel Escrow ...in this case [Re: sacbroker]
dial1010 Offline
Member

Registered: 01/19/09
Posts: 435
Loc: CA
As sacbroker mentioned just cancel it. Send an addendum for cancellation. You don't have to have a home inspector report. If your buyer decide to cancel sooner the better.
Good Luck!

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#421295 - 03/08/13 04:23 PM Re: Best Way to Cancel Escrow ...in this case [Re: Noordlife]
Vermont Offline
Major Contributor

Registered: 04/12/08
Posts: 7950
Loc: Vermont's North-East Kingdom
Originally Posted By: dial1010
". . . As sacbroker mentioned just cancel it . . ."

That's easier said than done !

I don't know everything about Contract Law; but most Contracts cannot be abrogated by just one Party.

Contracts are made and come into being by the Agreement between two (or among more) Parties.

And without a specific clause providing for unilateral cancellation, Contracts can only be ended (or annulled, repealed, canceled or otherwise killed) WITH the "mutual consent" of BOTH (or all) Parties.

It may be that some Parties won't fight you on it . . . . but you have to be prepared to fight.

That's part of the reason only Adults can enter into Contracts . . . . they are to be taken seriously.
_________________________
Dale C. Hittle of GOLDEN RULE PROPERTIES in Glover, Vermont
Where We're Always Striving To Put Together "THE FAIR DEAL"

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#421298 - 03/08/13 06:32 PM Re: Best Way to Cancel Escrow ...in this case [Re: Vermont]
Dodger52 Offline
Member

Registered: 10/14/11
Posts: 266
Loc: Montana
I think this Home inspection question is highlighting the differences between the contract and addendum forms in our different areas. Currently I work with a set of forms that make it look very easy to cancel a contract with the home inspection clause. The HI response form really has a check box for a clause that reads something like "the buyer finds the home unacceptable, and is withdrawing from the contract". No report or formal inspection is needed (apparently). I consider it the "I changed my mind form". I have been talking with our forms committee trying to get some clarification but they seem to think that without any case law there is no need to adjust the forms.

In the past I have worked with forms that wouldn't allow this, the home inspection report must be attached, any defects apparent or disclosed at the time of contract would not be covered under the HI clause, and if the seller was willing to correct the issues the contract remained in full force.

How we look at the home inspection clause differs from area to area, and you need to read your forms and check with your broker or an attorney to find out whether this is an option in your area.

I personally think we have done a lot of damage to our industry making these contracts too easy to get out of. I know that we have made those changes to protect ourselves, but I think it has made our job a lot harder.
_________________________
Dodger52 (Chris)
Prudential Montana Real Estate
www.MT-RE.net
www.facebook.com/MissionValleyMTHomes

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#421305 - 03/08/13 09:07 PM Re: Best Way to Cancel Escrow ...in this case [Re: Noordlife]
Vermont Offline
Major Contributor

Registered: 04/12/08
Posts: 7950
Loc: Vermont's North-East Kingdom
The problem with this one is that the Buyer originally committed to the conduct of a Home Inspection . . . . but now has decided that he doesn't even want to bother following through on that element of the Contract, or spend one penny on an Inspection (by anyone).

I agree that being able to wiggle out of this deal all depends on whether this Contract's wording allows for the Buyer to just stop in his tracks, hold his breath, and just say that he's decided he doesn't want to buy the place anymore.

That's why God invented Attorneys.
_________________________
Dale C. Hittle of GOLDEN RULE PROPERTIES in Glover, Vermont
Where We're Always Striving To Put Together "THE FAIR DEAL"

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#421310 - 03/08/13 11:20 PM Re: Best Way to Cancel Escrow ...in this case [Re: Vermont]
Dodger52 Offline
Member

Registered: 10/14/11
Posts: 266
Loc: Montana
Originally Posted By: Vermont
The problem with this one is that the Buyer originally committed to the conduct of a Home Inspection . . . . but now has decided that he doesn't even want to bother following through on that element of the Contract, or spend one penny on an Inspection (by anyone).


Vermont I agree, and I take a broader view; The problem is that the buyer committed to buying the home, has now changed his/her mind (for reasons not provided for within the agreement), and believes that they should be able to do that with no penalty to themselves. To make the situation worse it appears that most of us feel that this is just a part of being in this business, and its perfectly acceptable. We have watered our contracts down to the point that they hold little or no value, and yet we still want to get paid for putting them together.

This buyer works in the industry, if he/she doesn't see that entering into a contract requires a commitment on the part of both parties, why would anyone else. If this business gets anymore watered down they wont need us anymore.
_________________________
Dodger52 (Chris)
Prudential Montana Real Estate
www.MT-RE.net
www.facebook.com/MissionValleyMTHomes

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#421311 - 03/08/13 11:22 PM Re: Best Way to Cancel Escrow ...in this case [Re: Dodger52]
Dodger52 Offline
Member

Registered: 10/14/11
Posts: 266
Loc: Montana
I have now jumped off my soapbox!
_________________________
Dodger52 (Chris)
Prudential Montana Real Estate
www.MT-RE.net
www.facebook.com/MissionValleyMTHomes

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#421331 - 03/09/13 01:35 PM Re: Best Way to Cancel Escrow ...in this case [Re: Dodger52]
Bigtoe Offline
Major Contributor

Registered: 10/14/07
Posts: 2364
Loc: Outer Banks
Originally Posted By: Dodger52

To make the situation worse it appears that most of us feel that this is just a part of being in this business, and its perfectly acceptable.


Actually, my response came from the op's remark that "the property will not qualify for a loan". The only visual reason I know of that would make a house unavailable to get a loan would be obvious structural defects. Thus my response to use the home inspection clause the way it was intended to be used.


Edited by Bigtoe (03/09/13 01:36 PM)
_________________________
Your Outer Banks real estate agent. Helping people buy and sell OBX real estate since 1989.

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