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Cash Buyer is not necessarily an advantage....
Old 08-20-2013, 08:26 PM   #1
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Cash Buyer is not necessarily an advantage....

Got a full price "cash" offer on my lake house that I accepted on July 24th.

Contract close date was set for August 23rd although the Buyer wanted to close quickly - in 10 to 15 days.

Papers drawn up, buyer already had a title company ready, but wait - he needs to run everything thru his attorney.

Now almost a month later, I don't even know if we are going to close. The title company issued a policy commitment weeks ago, which was reviewed by the buyer's attorney who then replied with an Objection Letter to several of the items in the title commitment, all of which were resolved with the exception of any defects in the survey which had been ordered but not yet received.

The survey was delivered to them last Wednesday, the 14th of this month. It was the last document the attorney was waiting to review.

They have the sooner of 10 days from the date of receiving the survey or the closing date (this Friday) to supply any additional objections.

My agent has contacted the buyers agent on a daily basis and the only response back has been "the Buyers attorney has asked me to inform you that the Survey was received on the 14th and we are following the terms of the contract regarding title review and closing."

I'm fully anticipating that I'm going to get another Objection Letter on the last of the 10 days, objecting to what I don't know, but which then opens another 15 day window for me to either cure the objections to their satisfaction or - if I don't - they can waive the objections or cancel the contract and be refunded their escrow. As of today, three days before the contracted close date, the title company can't get the buyer to respond to a request to schedule closing.

At this point, I feel like they are stalling for some reason. The silence and lack of communication is certainly unprofessional and inconsiderate, to say the least.

I'm offering all of this as a caution - "cash" buyers are not necessarily accompanied by positive attributes.
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Old 08-20-2013, 09:30 PM   #2
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Absolutely agree with your assessment.

Our last house sale had a cash buyer. It was to be a doctor from California's second house (this was in Vegas).

One day before close he walked. Gave no reason, simply went completely silent. He gave up his $2500 escrow, big deal. We had to start completely over with the whole process. His realtor was furious as were we. It caused a lot of follow on effects that were a lot more expensive than his $2500 covered.
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Old 08-20-2013, 09:51 PM   #3
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I'm offering all of this as a caution - "cash" buyers are not necessarily accompanied by positive attributes.
Couldn't the same thing have happened if the buyer had needed to get financing? IOW--why is this about the guy being a cash (non?)buyer? Sounds like "some people are jerks" just about covers it.
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Old 08-20-2013, 09:57 PM   #4
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It could but if you have to go through the pain that is part of getting a mortgage in today's climate I think you're less likely to say "oh never mind".

Whereas if you have enough free cash to buy a $+300k house it's easy to change your mind at any point because your earnest money is a pittance.
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Old 08-20-2013, 10:06 PM   #5
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A reason to have larger earnest money...

To the OP - did your buyer provide proof of funds? Sometimes cash buyers actually intend to borrow but not have a financing contingency and may stall to try to have time to raise the cash to close.
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Old 08-20-2013, 10:10 PM   #6
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Absolutely agree with your assessment.

Our last house sale had a cash buyer. It was to be a doctor from California's second house (this was in Vegas).

One day before close he walked. Gave no reason, simply went completely silent. He gave up his $2500 escrow, big deal. We had to start completely over with the whole process. His realtor was furious as were we. It caused a lot of follow on effects that were a lot more expensive than his $2500 covered.
I seem to remember that in my state you can sue for specific performance in real estate transactions in certain circumstances and get a court to force the other party to close.

What I don't remember is whether it applies to the buyer or the seller or both. I think both but that real estate law course I took was a long time ago. As I recall if all the contingencies are satisfied and the seller was having second thoughts then the buyer could sue to force a close under the terms of the contract. I think it worked the same way for the seller if the buyer for some reason refused to close but there was no good reason like a contingency that wasn't satisfied.

That said, I think it is done very infrequently and in many cases it might not be worth the effort and turmoil. Might be worth asking a lawyer about though.
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Old 08-20-2013, 10:19 PM   #7
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I think it is done very infrequently and in many cases it might not be worth the effort and turmoil. Might be worth asking a lawyer about though.
I asked our realtor about something similar. He said it would be more trouble and expense than it would be worth. This guy was a well known doctor so I assume he had deep pockets. Better to just let it drop.
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Old 08-20-2013, 10:23 PM   #8
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I don't think I would rely on a realtor for legal advice (even though he might be right). I would just make a quick call to the lawyer I use for my real estate transactions and see what s/he thinks.
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Old 08-20-2013, 10:26 PM   #9
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I don't think I would rely on a realtor for legal advice (even though he might be right). I would just make a quick call to the lawyer I use for my real estate transactions and see what s/he thinks.
It's been over a year ago and when we sold there wasn't a lawyer involved, so it's a lesson learned for us at this point.
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Old 08-20-2013, 10:39 PM   #10
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Buyers (and sellers) are often full of tricks, as are agents. You are not going to ever do business with the person who is buying a home from you, or selling one to you. Not a situation that typically creates happy cooperation. Though they may feign that.

Ha
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Old 08-21-2013, 01:36 AM   #11
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It could but if you have to go through the pain that is part of getting a mortgage in today's climate I think you're less likely to say "oh never mind".

Whereas if you have enough free cash to buy a $+300k house it's easy to change your mind at any point because your earnest money is a pittance.

Here it's not - its 10% of the purchase price. Keeps buyers honest and compensates you pretty well if they walk.
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Old 08-21-2013, 01:50 AM   #12
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Regarding the OP's deal...if it were me, I'd refuse to execute any Addendums to extend the closing date. I'd let the deal die and put the house back on the market as Active.

If the same buyer came back and still wanted to buy the property, I'd still sell it to them at the same price, but I'd mandate some pretty hefty provisions in the contract. Things like:

- No objection deadlines of any kind (they've had their shot).
- Higher amount of earnest money. Proportional to the contract price, but probably no less than $10,000.
- Buyer would forfeit all earnest monies in case of default or any failure to close.
- Buyer would be held to Specific Performance in case of default or any failure to close (although I doubt I'd ever sue somebody for this, it's not worth it, but it looks scary in writing).
- Deal must close within 7 days.
- Property is being sold "as is" with no warranties of any kind. If they're that picky while under contract, I'll be damned if I want them picking the house apart after closing and trying to come back on me afterwards.
- Right to keep marketing the home while under contract, and free to accept any other contract, and cancel this one, if another offer comes in I like better.

I would make it very clear if they come back to the trough a second time, they're either closing, or it's going to be very painful for them for wasting my time.

I doubt their lawyer would let them enter into such a contract, but I wouldn't care. I'd put it all in there anyway. If they want it bad enough a second time, it's my way or the highway.
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Old 08-21-2013, 04:17 AM   #13
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I agree with you, OP! We put our house on the market the beginning of this month. After the first weekend of showings, we had four offers on the table, all over asking price. The one we accepted was the cash offer. Easier to close, right? Fewer obstacles, right? Nope! They had the inspection done, the house passed with flying colors, then decided they needed to back out. They didn't like the fact that they were paying more than the asking price.

Basically, we told them to go pound sand and should soon be under contract with another offer over asking.

I still can't figure out why they even made their offer if they didn't like the amount they were offering.
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Old 08-21-2013, 06:23 AM   #14
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A reason to have larger earnest money...

To the OP - did your buyer provide proof of funds? Sometimes cash buyers actually intend to borrow but not have a financing contingency and may stall to try to have time to raise the cash to close.
Buyer put up $4K earnest money and provided proof of funds in the form of a Wells Fargo account with $3.3M current balance.

But I do think you are on to something in regards to stalling. All of his WF assets are in investment accounts, and while he was in a hurry to close when markets were up, he went quiet about the same time markets went down. Might be a bit concerned about realizing a 3% or more loss by withdrawing funds right now?
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Old 08-21-2013, 06:53 AM   #15
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I shocked at these tiny amounts of earnest money. Here you're in six figures for a median priced dwelling.
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Old 08-21-2013, 06:54 AM   #16
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Regarding the OP's deal...if it were me, I'd refuse to execute any Addendums to extend the closing date. I'd let the deal die and put the house back on the market as Active.

If the same buyer came back and still wanted to buy the property, I'd still sell it to them at the same price, but I'd mandate some pretty hefty provisions in the contract. Things like:

- No objection deadlines of any kind (they've had their shot).
- Higher amount of earnest money. Proportional to the contract price, but probably no less than $10,000.
- Buyer would forfeit all earnest monies in case of default or any failure to close.
- Buyer would be held to Specific Performance in case of default or any failure to close (although I doubt I'd ever sue somebody for this, it's not worth it, but it looks scary in writing).
- Deal must close within 7 days.
- Property is being sold "as is" with no warranties of any kind. If they're that picky while under contract, I'll be damned if I want them picking the house apart after closing and trying to come back on me afterwards.
- Right to keep marketing the home while under contract, and free to accept any other contract, and cancel this one, if another offer comes in I like better.

I would make it very clear if they come back to the trough a second time, they're either closing, or it's going to be very painful for them for wasting my time.

I doubt their lawyer would let them enter into such a contract, but I wouldn't care. I'd put it all in there anyway. If they want it bad enough a second time, it's my way or the highway.
Boiler plate Texas Residential contracts are pretty standard and simple. They scheduled their inspection (no issues) and I agreed to provide a survey within 10 days.

That's when it started to go downhill. The surveyor called the escrow agent from the field to advise that a portion of the property is in the flood plain, would the buyer need an elevation certificate? (DUH - it's lakefront property deeded to the center of the lake, of course a portion of it is in a flood plain).

That was communicated to the buyer that THE property was in the flood plain, did they want to order the certificate? I provided them with ample evidence and explanation that the home itself was well outside the flood plain and that of course the lower portion of the property where the lake is would be in the flood plain as is any lake property on this lake.

They got the certificate back which proved the home is well outside the flood plain and they don't need flood insurance. Concerns resolved.

Then the survey also came back that showed the concrete gazebo down by the water is in the flood plain, which the buyer told me he wasn't concerned about but that the attorney was just "crossing all the T's and dotting all the i's".

That's when radio silence began.

According to the standard contract, they have 10 days from receiving the survey or until closing to object to any defects in title or survey.

That will be the day after tomorrow. If I try to think like an attorney, I'm thinking that they are planning to send me a last-hour Objection Letter about the concrete gazebo being in the flood plain.

According to the contract, the closing date is then deferred as a new 15 day window is opened for me to effect any cures (at no cost to me, per the contract). If I don't or can't, they can decide to accept the "defect" and proceed with closing within another 7 days after the 15 days, or they can cancel the contract and be refunded their $4K earnest money.

If that is how it plays out, then I will simply offer to remove the gazebo which would effectively cure their objection and they would have to move forward. I'm sure their attorney knows that.

Here's the interesting twist, though - I'm sure they WANT the property because when we all thought closing was going to be a couple of weeks ago, the Buyer and I arranged to have utilities transferred on the what-we-thought-would-be the closing date.

So he's not only put up the deposits for water and electric, the meters are on his dime right now.

Plus he's on the hook for the $500 elevation certificate, $475 home inspection, the utility deposits ($225) and his attorneys fees. Not a significant amount in terms of the total transaction, I know, but it does show he wasn't kidding around.

So another thought I've had is - when he was in a hurry to close, markets were up. When markets dropped this past week, he's delaying. Could be he just doesn't want to lose 3% or so when he cashes out some of his investments to bring cash to close. I can't dismiss that as a possibility because this buyer is president of a large and well known local company with a reputation for extremely calculated decisions.

Lots of twists and turns, and again I offer them only as an illustration that a "cash" buyer is not necessarily the favored one.

Everything above I could have dealed with and worked thru, it's just this nagging and uncooperative silence that is annoying me. I need to plan as well, and I'm not asking them to deviate from the contract. I just think open communication and updates would be the professional and considerate thing to do.
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Old 08-21-2013, 07:13 AM   #17
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Here in MN where I'm a Realtor the standard earnest money is only 1% but often buyers round down.

In our state most contracts are settled by title companies, not attorney's. We did have an issue once with a personal residence where the buyer tried to back out at the end. We threatened to sue for specific performance and we came to a settlement where they paid us $5k to cancel. That was in the middle of the housing decline so when we eventually sold it was for a lot less.

I'd probably agree with the people that said to stop signing extensions and demand performance immediately or get a cancellation and move forward with getting it back on the market asap.
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Old 08-21-2013, 07:53 AM   #18
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There could be all sorts of things that went on or are going on with this transaction. From the buyer rethinking his desire for water front property considering FEMA changed the rules and both flood and homeowners insurance is going way up, realizing he will have a net loss of over 6% on that money (money he pulls out of investments plus carrying costs of home he can not recoup-unless he rents it) or perhaps even the wife is balking.

Buyers of cash deals for water front property really do want the property. Then reality can set in. For myself, Ive backed away from a couple of cash offers because (1) my own real estate agent was manipulating the situation somewhat and trying to control my closing and acceptance of things that really were not o.k. with me - like finding out the house was right at the CAMA line with no possibility of putting a pool in) (2) the place needed $100K of work because the seller had not maintained it and there were structural issues. (3) my own agent and the sellers agent during the initial offer price offered up the fact there was a second buyer as justification to get me to up my price. That second buyer never materialized and I was stuck with a price I did not want to offer. I have story after story of our experiences in trying to buy a second home in a resort area. Few of them are positive.

Where we are looking not only does a person have to be sure about what they are getting, they need to make sure it is what they want and there is no pressure in the sale that plays on the emotions of the buyer. Sure fire way to have buyers regret.
Hoping the buyer comes to this deal to close for you!
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Old 08-21-2013, 08:10 AM   #19
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Here it's not - its 10% of the purchase price. Keeps buyers honest and compensates you pretty well if they walk.
Here it is negotiable. IIRC when we sold they put a modest amount down when we signed the contract then a bigger amount once the home inspection had been passed. We wanted to to make walking away after the home inspection hurdle was cleared to be painful.
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Old 08-21-2013, 08:20 AM   #20
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OP, is it feasible for you to just call the buyer and talk with him/her/them?

If your suspicions are correct and it is a liquidity issue for them and you don't need the cash right away, perhaps you can work something out with a big down payment and a number of large payments due on certain dates over some short period of time. It could also be used spread out your gain for tax purposes if that is a benefit to you so it might be a win-win.

I had communications with buyers and sellers in past transactions but admit that there was no brokers involved but we talked directly to each other and then relayed the results to our respective lawyers for them to do their thing.
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