Doug Buenz
Real Estate Broker
Alain Pinel Realtors
(925) 463-2000
I am a local Real Estate Broker with
Alain Pinel Realtors serving the
Pleasanton and the Tri-Valley
area. I am an avid watcher of the
local real estate market, as well as
cultural and political events.
But that is what I do, not who I am... » read more
Real Estate Q & A
Unreasonable buyers asking for more money from Seller
I entered into a contract to sell my house a couple of weeks ago. Because the market is slow, I ended up taking a lot less for my house than I was planning on. Now the buyers have had inspections, and they want me to credit them $3500 for repairs, most of which are complete B.S. I am really mad about this. Should I tell them to take a hike? Fred W.
Fred, take a deep breath and relax. In some ways this market can be called "Revenge of the Buyers". Remember 4 or 5 years ago when Sellers told buyers things like "take it or leave it" or "don't ask for anything to be fixed... we have 2 other buyers who want it". Now the tables have turned. Don't get hung up on the details of what the buyer wants. Some may be legit, and some might be categorized as outright extortion. But so what. If you want to sell you house, swallow hard and sign it. If you think you can do better in this market, tell them no. It is really that simple. But tread carefully, because working with buyers today is a little like trying to feed a squirrel. They don't really trust you, they are skittish, and at the first sign of trouble they go scampering for the woods. If you refuse the $3500, it could end up costing you $5000, $10,000, or even $20,000 more to get the next buyer in contract.
Stubborn Seller Won't Move Out?
I am buying a house in Pleasanton, and the contract is signed and the escrow is getting ready to close, and the seller decides he does not want to move out at close of escrow, but wants a week after close to move out. When we express the fact that this will not work for us, he threatens to cancel the contract. Can he do this? Ben in Pleasanton
Ben, I have good news and not so good news. The good news is that no, the seller can not unilaterally cancel a ratified contract just because he doesn't get his way. If all contingencies are removed and you are coming down to the wire, the seller can't arbitrarily start changing the terms. And he certainly can not cancel a contract. Real estate contracts are bilateral. they require the agreement of both the buyer and seller. If he attempted to cancel the contract, you could likely tie up his property so he could not sell it to someone else, and take him to court to force him to sell to you under the terms of the contract. That is the good news. The not so good news is that this course of action is time consuming, emotionally draining, and costly. If the seller becomes difficult to deal with, try to relax and work around him if you really want the house. You can always take him to small claims court after the close to recoup any out of pocket expenses you incur. Unfortunately, there is virtually no protection in a contract for an obstinant seller. You can either put up with him as best you can, and then seek renumeration in small claims court, or threaten him back, but it is difficult if not impossible to physically force the seller out of the premises. As always, consult an attorney about the specifics of your case.
Confusion on Commission Agreement?
Doug, my friend listed her house with an agent with the understanding that if one of her friends (named specifically) buys her property, the agent would be compensated at 4% commission. So one of her friends has made an offer. When the agent sent my friend the estimated pay out from the transaction, the agent put in her commission as 6%. Her explanation is that the original deal was only good until she listed the house in MLS. Is this ethical? Or legal? Or standard practice? Ginny C.
Ginny, that is a great question. As is often the case, the devil is in the details. Any agreement involving the sale or transfer or brokerage of real estate in California must be in writing to be enforceable. So if there was no written clause regarding the friend, then your friends are out of luck. So is it legal? I think a better question is the agent legally entitled to the 6%. Based on what you have described, the answer is yes, since there obviously is no written agreement regarding this situation. Is this ethical? I always have a problem with any party that does not honor the spirit of an agreement, even if the details are not specifically spelled out. But keep in mind that neither you nor I heard what was actually said. Again, this is why all agreements dealing with real estate must be in writing. I this standard practice? Again, I am not sure what you are referring to, but if there is an exception or exclusion to the commission agreement for one party, there normally is a time limit during which the party must act. Whether or not that was clearly stated in writing, or clearly explained, is a matter of conjecture at this point. The lesson here is to always get agreements in writing, especially if they are modifications to standard agreements.
So the news is filled these days with the recent (an certainly not unexpected) troubles of the “subprime” lenders. Subprime is not a word for a lousy cut of meat. It is a catagory of mortgage loans made to less than perfect borowers, who normally have some credit issues, or in some cases unsubstantiated income or assets. Normal “A Paper” borrowers typically have strong credit, and easy to verify income and assets. But, as the old Forrest Gump saying goes, “Stuff Happens”. Job losses, medical bills, carelessness, and business failures have shredded the creditworhtiness of some buyers. Enter the subprime lenders, who have made boatloads of money making creative loans to these borrowers. Because there is more risk due to the nature of the borrower, the lender can demand higher rates and fees. So it has been a very profitable segment of the mortgage business, especially when home prices are strongly appreciating.
Unfortunately, the last couple of years has seen home prices erode, especially in some of the lower cost areas where these types of loans are common. This has lead to an increase in the default rate for all loans, but it is especially pronounced with subprime borrowers, who may not have the means to weather the storm of price declines. Even more troubling is that many of these loans were made with below market “teaser” rates that turn into negatively amortizing adjustable loans either immediately, or after some period of fixed rates and payments. So on top of declining home prices, borrowers have often seen their payments incrase dramatically at a time when their equity is shrinking. This is a recipe for disaster.
So how does this effect you? Mortgage lenders are already coming under immense pressure to tighten underwriting guidelines to make it harder to obtain these types of loans now that the default rate has skyrocketed. Inevitably, this knocks some potential (albiet marginal) buyers out of the market, thereby decreasing demand for homes, especially on the lower end of the price structure where buyers often struggle to get into that first home. Liquidity in the real estate market often comes from the bottom up, meaning that when a person buys a starter home or condo, it frees that seller up to purchase a more expensive home, which then frees that seller up to pursue an even more expensive home, and on and on. It will also tighten up underwriting guidelines for all borrowers to some degree or another (this is a result of the increased default rate on loans). So the bottom line is it is going to be a little more difficult to get loans for the foreseeable future. Perhaps equally as important is the deluge of bad news in the mortgage industry just when real estate was starting to show signs of recovery, which could impact buyer’s attitudes and their outlook for the market. Stay tuned….
2 Comments for the post: Subprime Mortgage Lenders and You
Comment posted by don Ruth
on March 15, 2007 at 9:06 am
The subprime is only a failure to the people who took out the loans not being able to repay and the holders of the notes. The new bankrupcy laws mean many will spend their income to the vultures who are buying the debt up and the people who are buying the houses at a discount of probably 50%.
Comment posted by Wendell
on March 15, 2007 at 11:46 am
If the government deregulates the industry it will be the demise of the entire financial services industry. Mortgage Brokers/ Real Estate Agents screwed their clients to benefit themselves and line thier pockets.
They never care about thier client like they are suppose to, it’s always been about the money they can get. The oath that a realtor makes and the home builders are scam artist. I can say this from first hand experience that I personally and painfully went through both spectrums of being on top and then being on the bottom. I have been attacked buy the vultures and screwed by the subprime lenders paying hig fees and point’s try to save my childrens home it’s like fighting a goliath and not even god could save you from the disater.
But the devil sure did prevail, special when the vultures of supposingly good RE/Broker/Loan Agents portraying themselves as good Christian’s of faith in god come to screw you every way they can. This is true and factual Catholic family who the members of my former parish and their friends tried endlessly to rip me off in the name of god 3 years ago. Just the begining when the markets started seeing the effects subprime mortgages.
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Comment posted by don Ruth
on March 15, 2007 at 9:06 am
The subprime is only a failure to the people who took out the loans not being able to repay and the holders of the notes. The new bankrupcy laws mean many will spend their income to the vultures who are buying the debt up and the people who are buying the houses at a discount of probably 50%.
Comment posted by Wendell
on March 15, 2007 at 11:46 am
If the government deregulates the industry it will be the demise of the entire financial services industry. Mortgage Brokers/ Real Estate Agents screwed their clients to benefit themselves and line thier pockets.
They never care about thier client like they are suppose to, it’s always been about the money they can get. The oath that a realtor makes and the home builders are scam artist. I can say this from first hand experience that I personally and painfully went through both spectrums of being on top and then being on the bottom. I have been attacked buy the vultures and screwed by the subprime lenders paying hig fees and point’s try to save my childrens home it’s like fighting a goliath and not even god could save you from the disater.
But the devil sure did prevail, special when the vultures of supposingly good RE/Broker/Loan Agents portraying themselves as good Christian’s of faith in god come to screw you every way they can. This is true and factual Catholic family who the members of my former parish and their friends tried endlessly to rip me off in the name of god 3 years ago. Just the begining when the markets started seeing the effects subprime mortgages.