The Anna Maria Island Sun Newspaper

Vol. 17 No. 30 - May 10, 2017


Hot buyer, cold feet


Binary is a word that is a by product of the computer age. Computers use binary to store data by using the digits 0 and 1. Now, however, it has become a word used in all phases of life and is applied to anything that can be expressed in two digits or two words like yes or no or on or off, but when it comes to buying real estate few things are that definitive.

Real estate buyers are anything but binary. They are an entire spectrum of grays, and just because they say yes, they may actually mean no or maybe. So, what happens when a hot buyer gets cold feet and wants out of the deal?

Typically, a real estate contract of sale contains contingencies for both a mortgage and an inspection. Also, in Florida if you're purchasing a condo, you will have three business days from the time you receive the condo documents to review them, as well as any other financial disclosures and rules and regulations. Anything you don't like can be used as an excuse to withdraw your offer.

Inspections could include termite, radon, oil tank, asbestos inspections and more. Usually there is a time frame attached to these inspections, and if any one or more of them come back with problems, the buyer can choose to cancel the contract without jeopardizing his/her deposit money.

What usually happens is the buyer and seller negotiate a way to keep the deal together if a problem arises, since it's in both their best interests to go forward, unless the buyer develops a sudden case of cold feet.

It's not unusual for buyers to use something minor in an inspection report as an excuse to terminate the contract, and there is nothing a seller can do. It's harder for buyers to cancel a contract if their mortgage contingency is met, since once there is a mortgage in place and the inspections are good buyers are virtually locked into the purchase.

That doesn't mean, however, that buyers can still back out if they're willing to forgo their deposit money, and plenty of buyers will take their cold feet and run. One way to help insure that your transaction is not subject to the whims of buyers is to insist on a larger down payment, giving a buyer less incentive to walk. Sometimes that doesn't work either, especially in the high-end market where buyers are willing and financially able to take a loss.

One little known issue that is sometimes overlooked when a real estate transaction falls apart after all contingencies are met, are the real estate brokers. Brokers earn their commission when they bring a buyer ready, willing and able to go forward, and if either one of the parties terminates the contract after these conditions are met, frequently the broker still wants to be paid for his/her time and expertise.

Brokers are typically paid by the seller, so it could be the seller who is on the hook for the broker commission even though his house is back on the market. If the listing agent and the selling agent are the same person, then it's a lot easier to negotiate with the homeowner in the hopes of finding another buyer for the property. But if the buyer was brought to the table by a different broker, he/she has nothing to lose and may look to the seller for compensation.

Few things in a real estate transaction are binary; everything is negotiable. Even a buyer who thinks he's made a big mistake can be turned around if you add a little meat to the stew and then turn up the heat on his/her cold feet.

AMISUN ~ The Island's Award-Winning Newspaper