Does the Word 'Binding' Still Exist?

By
Real Estate Broker Owner with Broadpoint Properties Cal BRE #01324959

Short Sale ContractsDo you remember when you got your first checking account? Maybe you were eighteen and you were told that when you sign a check, you are signing a binding contract.

Same goes for the real estate purchase contract. It’s binding. Not sure what has happened over the last several years, but in the state of California, it appears as if many people are not taking the real estate purchase contract seriously.

For example, a buyer offers to purchase a property and close the transaction within 45 days of acceptance of the offer by the seller. Seller accepts, and 30 days into the transaction, the buyer says that his lender cannot close the transaction on time. The lender needs another 21 days.

Or, a buyer offers to purchase a property as-is for a specified price. Then, after the offer is accepted, the buyer changes his mind and wants to pay less. Or… the buyer was going to pay cash, and now needs to get a loan. 

While everyone understands that circumstances arise that can impact a buyer’s decision to purchase a property, it seems that these situations arise more and more frequently.

When it comes to short sales, this is even tougher to swallow. After spending several weeks convincing the lien holder to move forward and accept a short sale based on the terms and conditions of a contract, imagine the lien holder’s dismay when you contact them to say that the buyer has changed his terms, needs an extra month to close the transaction, or wants some additional repairs on a property that is being sold as-is.

Recently, our office negotiated a short sale and the buyer had trouble closing on time. It took over 90 days for the buyer to get his loan docs into escrow. And, by then, the banks advised us that the short sale had to be processed all over again from the very beginning. You see, short sale approval letters can only receive so many extensions before then bank is done.

So, with respect to representing buyers in real estate transactions and especially in short sales, it is vital to set buyer expectations and to explain the real estate contract in great detail. Make sure that your buyer knows what s/he is signing—a binding contract. Frivolous changes and cancellations can be costly. And, in the case of a short sale, a buyer’s inability to respect the terms of the contract can lead an unsuspecting seller directly into foreclosure. And, that would be a real bummer, don’t you think?

 

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Re-Bloggged 4 times:

Re-Blogged By Re-Blogged At
  1. John Cocomile 01/12/2012 10:47 PM
  2. Petra Norris 01/15/2012 11:32 AM
  3. Mary Macy 01/16/2012 12:00 AM
  4. Michael Collins 01/16/2012 11:30 AM
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Topic:
ActiveRain Community
Location:
California San Diego County Escondido
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Tags:
short sale approvals
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Comments 57 New Comment

Rainmaker
160,014
Marlene Dietrich
Marlene Dietrich Newport Coast Realtor
Newport Coast Real Estate Team

We always have both sides sign a release of continguency after the 17 days are up. In fact we give a 48 notice 48 hours prior to the en of the 17 days.

With Short sales you can Open an escrow to tie the buyer in to the home otherwise they feel no desire to stick with it

www.MarleneDietrichNewportCoastRealtor.com

Marlene Dietrich, Tony & Mike

January 14, 2012 06:36 PM
Rainmaker
1,162,117
Gene Riemenschneider
Turning Houses into Homes
Home Point Real Estate

The flip side of this problem is getting a straight answer from a lender.  A promise means nothing from them.

January 14, 2012 08:36 PM
Rainer
40,894
Diana Roca
Century 21 Camelot Realty Inc.

It is the sign of the times. Homeowners walking away from properties because they are upside down. I have met many people who tell me "I do not want to pay my mortgage, it's underwater". They feel entitled to walk away. No consequences.

January 15, 2012 11:28 AM
Rainmaker
233,907
Jenny Durling
For Los Angeles real estate help 213-215-4758
L.A. Property Solutions

The current lending environment has made it practically impossible for anyone to stay withing their loan contingency period.  I'm almost used to that. What I DON"T understand is how you can present an offer with a 3 -day response time and have the seller not get back to you for a week or more!  If they are going to do that, at the very least they should extend my client's offer to the date of their counter IN the counter. It's like the wild west out there right now!

January 15, 2012 11:24 PM
Rainer
83,887
Brad Baylor
ERA Coup Agency

Something I have experienced is a buyer getting cold feet and then talking their lender into issuing a rejection letter so the buyer can get their escrow deposit back.

January 16, 2012 09:25 AM
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Melissa Zavala

Broker, Escondido Real Estate, San Diego County
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