Tuesday, November 13, 2012

Unreasonable Counter Offer

A few weeks ago I received this absurd counter for a home that my buyers had submitted an offer on. The home was listed for $599,000 and we submitted an offer $36,000 over asking. The listing agents told us they received 24 offers in total and we were given less than 24 hours to respond to the counter below.

The counter had the following terms:

1. Purchase price to be $685,000. (Sellers are asking $86,000 over asking price! Pricing the home so low seems almost unethical.)

2. Close of escrow to be 30 days or sooner by mutual consent. (Closing escrow in 30 days or less is nearly impossible in today's real estate market. Usually 45 days is pushing it.)

3. Seller's approximate carrying costs equal $100 per diem based on PITI, if this escrow does not close 30 days after the day of acceptance, buyer will cover the per diem cost of $100 a day until escrow is closed by bringing additional funds to the closing. (Buyers would have to pay a penalty if they are not able to close in 30 days. Again as I mentioned above, it's very rare for an escrow to close in less than 45 days.)

4. Buyers are required to deposit a full 3% of the eventual sales price into escrow. (This would be reasonable if the next 2 items below were not part of this counter. 3% of $685,000 is $20,550.)

5. Item 3H4 will apply, there will be NO loan contingency, and therefore this sale is NOT contingent on the buyers getting a loan. (This means the buyers could lose their 3% deposit if they for some reason can't get a loan. I would never advise my buyers to agree to a term like this because I would never want them to put their money at risk. Some buyers have been saving for years to buy a home. $20,550 is a lot of money!)

6. Item 3I will apply, there is no appraisal contingency and is hereby removed, therefore this sale is NOT contingent on the subject property appraising. (Another term that is ridiculous. Especially in today's market, we have seen a lot of problems with appraisals.  It's becoming more and more common for a home to fall out of escrow because it does not appraise. If the home does not appraise the buyers must bring additional funds to cover the difference of the purchase price and appraised value. A buyer may try to renegotiate the price with the sellers but usually the sellers do not want to sell for less than the purchase price. )

7. Title & escrow seller's choice. (This is usually common for a seller to choose escrow and title.)

8. Seller will NOT provide a home warranty plan. (A home warranty for this home would not exceed $400.00. Most sellers provide this to buyers for the 1st year.)

9. The following appliances and items are excluded from the sale: kitchen refrigerator, washer, & dryer. (The washer and dryer were old anyways but the kitchen refrigerator was stainless steel.)

10. Item 14B1: Is hereby removed and NOT a contingency of this agreement. Property is sold in "as-is" condition with no work to be done by the seller, buyer has read both the physical inspection done 10-15-12 and the termite report done 10-16-12 and will be responsible for any and ALL fix up costs. Buyer to take care of section 1 & section 2 of the termite report (cost stated on the report is $1,835.00) all to be done after close of escrow. (The sellers usually pay for section 1 of the termite report and buyers pay for section 2 of the termite report. The sellers in this case also don't want to pay for any repairs that may come up after a home inspection.)

11. Sellers and escrow will provide disclosures, preliminary title report and NHD and will be given to buyer within 48 hours of acceptance. Buyer has 7 days to complete all contingencies and contingency removal form to be signed and delivered by the end of the 8th day of escrow to the listing agents. (7 days to complete ALL contingencies is outrageous. Sounds to me like the sellers want an all cash offer. Usually the inspection contingency is removed in 7-10 days and the loan and appraisal contingencies are removed in 17 days.) 

The home was nice and some of the rooms had been updated but the home had freeway noise in the backyard. My buyer's decided this was not the home for them and they did not want to be in escrow with seller's so unreasonable. Hopefully whoever buys this home will have a real estate agent that won't put their buyer's money at risk.

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