Home Buying in Palo Alto>Question Details

Jannymac23, Both Buyer and Seller in Palo Alto, CA

Have any of you realtors seen a buyer try to renegotiate purchase/sale price after all contingencies are removed, and the contract is in escrow?

Asked by Jannymac23, Palo Alto, CA Tue Dec 13, 2011

If so, does this happen rarely? Fairly often? A lot in a buyers market? And is it viewed as common practice? Is it viewed as ethical?

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Answers

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Lance King-Founder/Broker’s answer
Janny,

It is very rare because the buyer's deposit would be at risk if they default after removing contingencies so they have no leverage as James pointed out. The only legitimate reason I can think of is if some new material fact was discovered after removing contingencies - otherwise doesn't make a lot of sense.

Best Regards,

Lance King/Owner-Managing Broker
lance@fixedrateproperties.com
415.722.5549
DRE# 01384425
1 vote Thank Flag Link Tue Dec 13, 2011
It's pretty rare. The buyer has no leverage if the seller says "no." It's not unethical, especially if the seller agrees. But again, it's very rare.
1 vote Thank Flag Link Tue Dec 13, 2011
I have not been an agent for a couple of years as all I do is lending. I have had a couple of agents pull that one. I generally told them to take a flying leap, I did keep in mind it was usually the result of a lame real estate agent, and it did not seem fair to make they borrower suffer on t hat. I got in the habit of sending over a notice when the contingencies expired, asking them to sign something removing the contingency,
You really do not have much leverage as if you back out you lose your down payment and be subject to being sued.
0 votes Thank Flag Link Thu Dec 15, 2011
ALL of the time!
It's called buyers remorse. Every agent for the buyer deals with it and advises the buyer such action will not produce the results they seek. The remorseful buyer who want to renegotiate is reminded of the great attributes of the home, the rationale for the purchase, the motivation the buyer expressed regarding their relocation, and the buyer responds appropriately.

On rare occasions, the buyer was influenced by uncle barney who guaranteed HE could buy the property for $35,000 less! A significant, Non-refundable escrow is the best barney baloney cure.
0 votes Thank Flag Link Wed Dec 14, 2011
The buyer can ask and the seller can say no. A lot of things can happen but you must NOT rely on advice from this forum. Disposition of the deposit is a legal issue. California Civil Code contains details that are not generally discussed or understood by the public and many real estate agents. It has to do with reasonable damages. If the seller is harmed then the parties may have to discuss the deposit. The release of the deposit to the seller is not automatic. It's a myth.

This all falls into the range of consulting with a highly experienced real estate attorney. Your agent and broker should have a good enough understanding of this to explain it to you. If you are dissatisfied, find a good real estate attorney who practices here in Silicon Valley. Keep in mind this is California law. Answers from practitioners in other states are likely not applicable here.

Mark Burns, Realtor
Coldwell Banker Elite - Top 2% Worldwide
President - PRDS, Contracts and Forms for Silicon Valley Residential Real Estate 2008-2012
DRE# 00896552 Licensed since 1985
Over 600 Homes Sold in Silicon Valley
Web Reference: http://www.markburns.com
0 votes Thank Flag Link Tue Dec 13, 2011
Jannymac,
A general rule of thumb is anything can happen in a real estate transaction. That being said it is not common that the request comes in, and even less that is is successful. The buyer has a right to ask for anything at any time, and the seller has a right to say yes or no at any time, however after the removal of contingencies if the seller has no incentive to say yes it often does not happen. If there is an incentive, I have seen it happen. So, if the seller did not reveal a material fact, something that is important that affects the value, then they have been known to renegotiate rather than face potential legal problems. If there is a precipitous change in the value of the house, and a buyer backing out would be more costly than changing the price I have seen it happen. When you ask if it is ethical, I think that is harder question to answer. Is it ethical for a seller to conceal something important? Is it unethical to say the house has lot 10% in value since I made the offer and you only hold a 3% deposit so renegotiate or you will lose 7%? Is it ethical to say I do not want to pay what I said I would so help me out? It depends on the circumstance?
Marcy Moyer
DRE 01191194
Web Reference: http://www.marcymoyer.com
0 votes Thank Flag Link Tue Dec 13, 2011
I provided a detailed answer to your other similar question. Just curious: In the scenario you're describing, are you the buyer or the seller?

If you're the buyer, don't do it. If you're the seller, consult with your Realtor and, if appropriate, your lawyer.

Hope that helps.
0 votes Thank Flag Link Tue Dec 13, 2011
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
Contact
It all depends in the reason why. If misrepresentation, some sort of fraud or extenuating circumstance occurred, it's possible. Could you be more specific?
0 votes Thank Flag Link Tue Dec 13, 2011
Janny -

After contingencies are released, it would need to be extenuating circumstances for me to recommend a buying client attempt a re-negotiation of price. One example would be new knowledge of a physical issue with the home that did not exist before the release but occurred before close.

Once I had a client release contingencies and the a week later, seismic activity created a large crack in the chimney, noticed by the seller and disclosed. A repair was negotiated. Another time I had a water heater bust two days before closing and the seller did not want to repair (bank owned property), so they simply credited the buyer cash toward closing. This delayed the closing but it was easier than re-negotiating the price, and sending the loan back through underwriting.

I can imagine that a buyer might want to re-negotiate a price if a comparable property closed and disclosed a lower price than expected impacting neighborhood values. To that I would say; tough.

Renegotiating price after contingencies are released is rare and typically associated with a new disclosure (repair) type items. Ethical? If a buyer is trying to bully you on price, simply evaluate what it is worth to you. The options of pursuing the buyer's good faith deposit if you say no and they cancel can cost time (house off market) and money (off market and potential legal services). Releasing the buyer and going back on the market, can potentially produce a lower price second time around (especially if it is a repair related item).

The risks have to be weighed with your agent that knows and understands your specific situation. If you believe it could involve a potential breach of contract, it is always best to consult with a real estate attorney before deciding what to do.

Good luck.
CJ
0 votes Thank Flag Link Tue Dec 13, 2011
I have seen this rarely, but it does occur. The buyer is in a bad position to do this and unless there is a NEW material fact it does not go in the buyers favor. It is not really un-ethical, but it is showing that the buyer either has buyers remorse, talked to one of there " friends" or family ( who say they got a better deal ), or they are very greedy and want to bleed ever last dime out of the seller. If there is a New material fact then that is a different story.
At your service,
Allyson
CDPE- Certified Distressed Property Expert
408-705-6578
allyson@homesbyallyson.com
DRE# 01397256
0 votes Thank Flag Link Tue Dec 13, 2011
Hi Jannymac,
Hard to answer without knowing what the exact circumstances are....but if there is a valid reason, then yes......if just to get a further reduction from the Seller without a solid reason, then no.....I wouldnt say its common practice...and if the Seller is being squeezed for additional money/price reduction...then perhaps the question of whether its ethical or not can come up.....
Consult with your Realtor who will have a better understanding of the full situation.
All the Best, Be well and safe,
Nina Daruwalla
DRE#01712223
0 votes Thank Flag Link Tue Dec 13, 2011
Hello Jannymac23,
After all contingencies are removed, the only reason for renegotiating the price could be that new disclosures, new elements just showed up, things that were not known (by the buyer) at the time of contingency removal, things that affect the value or desirability of the property. But then you most likely would be in a "legal" area, and your agent should advise you to talk to an attorney.
0 votes Thank Flag Link Tue Dec 13, 2011
I see this 2 or 3 times each year. Never ends well. After contingencies are removed, buyer looses their deposit if they don't close per the contract.
0 votes Thank Flag Link Tue Dec 13, 2011
Rarely happens. The Buyer has not leverage and risk their earnest money deposit. Unless a new material fact is presented. I wouldn't say it's unethical but I would say unless there is some valid reason, the buyer would not be acting in good faith.
Web Reference: http://www.terrivellios.com
0 votes Thank Flag Link Tue Dec 13, 2011
Not generally. Unless there is a material fact that comes up after the inspection are done that requires re-disclosure I would say I have not seen it occur with any success.

Pat Chadwell, broker
Realty World - Residential Specialists
408-927-6565 x 11
http://www.patchadwell.com

CRS, SRES, CDPE, CIAS, ePro, SFR
Web Reference: http://www.patchadwell.com
0 votes Thank Flag Link Tue Dec 13, 2011
It happens, but not often after the home inspection renegotiation is over. You can always say NO and hope they don't walk away from their earnest money deposit. What was the reason given to you for wanting a lower price?
0 votes Thank Flag Link Tue Dec 13, 2011
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