Uncategorized April 3, 2024

Protecting Yourself From Buyers Who Are Bad Actors

In this real estate climate characterized by low inventory and substantially fewer transactions, some real estate agents and homebuyers have sought new and questionable ways to generate income by getting a property under contract while concurrently seeking out a buyer to sell the property to at a higher price, thus “double escrow-ing” the property, pocketing the difference and earning the buyer agent commission, to boot.

Meanwhile, I am seeing increasing numbers of buyers crafting and completing the purchase contract with terms that afford them opportunities to unreasonably draw out, delay and renegotiate the transaction to their benefit.

Based on these examples and other efforts by bad actors it has become increasingly important to recognize the telltale, “warning signs” in a written offer that identify a buyer who may have less than honorable intentions and to that end, I submit the following:

Spotting Possible Bad Actors

Questionable terms in their contract
• All-cash offer with very long escrow period (30+ days)
• All-cash offer with added right to obtain financing
• A modified assignment provision that gives the buyer an extended number of
days to name the assignee
• Buyer contingency and review periods in contract have been extended while
seller-delivery timelines are shortened
• Buyer emphatically insists on using unfamiliar escrow and title companies
with no acceptable explanation
• Amount of buyer initial deposit is notably less than 3% of the purchase price

The goal when responding to questionable terms in a purchase contract is to respond to such terms with terms in the seller’s counteroffer that will nullify or modify the buyer’s offer in such ways that will protect the seller’s position.*

Note: Any one of these questionable terms, on their own, does not necessarily constitute a bad offer crafted by a bad actor, but conspicuous terms are something to be mindful of when taken in context with the rest of a purchase contract.

Questionable Actions During Contract Negotiations
It’s been said that every home tells a story. It can also be said that every purchase contract tells a story too. Below is a list of some “red flags” that might come up during contract negotiations.
• Buyer’s lender does not provide acceptable responses to vetting questions.
• Buyer will not double ap with another lender, of Seller’s/Realtor’s choice.
• Buyer delays or does not provide acceptable verification of funds.
• Buyer does not respond to counteroffer in a timely manner or responds with
odd requests.
• Buyer will not agree to key terms in counteroffer.

Questionable Actions Taken by Buyer During the Escrow Period
• Buyer requests another showing after acceptance and hasn’t yet wired
deposit to escrow.
• Buyer does not, (or significantly delays) wiring money into escrow.
• Buyer delays scheduling inspection.
• Buyer delays ordering appraisal.
• Buyer is slow responding to contingencies & contractual obligations.
• Buyer requests extending contingency(s) or closing of escrow.
• Buyer schedules appraisal for all-cash purchase.
• People show up at home inspection who are not inspectors.
• Buyer makes demands that are outside the terms in the contract.

*While there is no magic fix that will absolutely prevent a bad actor from tying up your property there are contractual actions you can take that will make your property untenable to a buyer with bad intentions. You can also vet the buyer by verifying they are financially qualified to purchase the property. If you’d like to know more about the actions that I take to protect my clients, please contact me.

DIRECT- 310.367.2322