Dear Monty: Six tips to resurrect a failed negotiation
By Richard Montgomery
Reader Question: A buyer has an accepted offer on a home, and a home inspection has revealed several items that are defects. The buyer’s attorney delivered a letter to the seller’s attorney stating that all work discovered in the inspection has to be completed by the seller. The seller has not responded. Can the listing agent put this property back on the market at a price lower than the price agreed to with this buyer?
Monty’s Answer: In most negotiations, “expiration” or “drop-dead” dates are standard. Assuming that date has passed and there are no conflicting statements or contingencies that would override the expiration date in the attorney’s letter, the seller can reduce, or raise, the price to whatever price they choose. When the seller acted through silence and allowed the expiration date to pass, it means the seller rejected the buyer’s demand. Check with your attorney or listing agent for verification, as there is very little detail in the question. With these caveats, the answer is “yes.”
Consider a pause here
In answering your question, there may be additional steps to consider before taking action on the price reduction. Your story implies the inspection revealed issues with considerable expenditures to repair or replace. The seller’s reaction suggests they may be overreacting to the news. Here are questions to consider before acting on the urge.
- Can one assume that the buyer is now out of the game? Has the agent who wrote the offer spoken with this customer? When there are additional advisors injected into the conversation, the chances for a miscommunication increase. Even if the agent working with the buyer did speak with them earlier, this is a period when, with new information, participants will change their minds. Make certain this customer has lost all interest before reducing the price. A conversation with the rejected buyer may lead to the question, “If the repairs have changed your opinion about value, what price do you think the home will be worth after completing the repairs?” You want to determine if this buyer will pay as much or more than the new price the seller is considering.
- Have two competent contractors in each of the specialty services required to make the repairs (examples; electrician, plumber, roofers) rendered a cost estimate after viewing the property? It is easy to overestimate what these repairs will cost. The estimates may also serve to demonstrate to any new customers (and the rejected buyer) what the repairs will cost. Prospective buyers can also overestimate what repairs will cost. It is also possible that a specialty contractor will overrule a home inspector. As an example, a reader recently made me aware of an inspection that called for mold remediation in the attic. A mold abatement contractor determined it was not mold after testing the area in question.
- The homeowner may have several reasons unknown to the listing agent for the pricing strategy under consideration. A cash flow issue, fear the buyer does not ultimately close, or concern the buyer will find the repairs unsatisfactory, are examples of legitimate concerns. A good real estate agent will take the time and have the expertise to ascertain these concerns and offer practical guidance or solutions. Many real estate agents will get involved and coordinate the necessary inspections.
- Does the seller understand they cannot ignore the discovery of these defects? Does the seller know there is no such thing as an “as is” sale? An article about offering a home for sale “As is” can be found at https://dearmonty.com/5-as-is-myths-selling-buying-home/.
- Update the original market analysis of the property. Has new competition joined the fray? Are the same properties still for sale? Have there been price reductions? Are the most recent sale prices affecting the neighborhood market?
Don’t send the wrong message
On the surface, it seems odd that the listing agent was not able to convince the seller to make a counteroffer back to the buyer to keep the conversation active. While there may be rare exceptions, ignoring a buyer’s counteroffer is not a good negotiating strategy. In that same conversation, the other party can communicate their desires as well. A written conversation goes a long way to making your goals and concerns known without the drama and emotion that can occur in a face-to-face meeting. While no agent can control a customer or client’s actions, a good negotiator will rarely allow a transaction to die while the ball is in their court.
Richard Montgomery is the author of “House Money – An Insider’s Secrets to Saving Thousands When You Buy or Sell a Home.” He is a real estate industry veteran who advocates industry reform and offers readers unbiased real estate advice. Ask him questions at DearMonty.com.