It probably won’t surprise you to hear that there is some gray area in the real estate business.
The 10 pages of the California Association of Realtors’ purchase contract contains several important paragraphs that specify what you can and cannot do. Agents must not only know it inside and out, but also how to use it to their clients advantage:
Very good advice! Grift the Grifters.
Now can’t help but wonder what advice your better half veto’d.
She probably didn’t want the magician to give away all of his tricks and secrets…
Affirmative.
The C.A.R. purchase contract does address this scenario in its paragraph 3K, so I wouldn’t call this much of a gray area:
BUYER STATED FINANCING: Seller has relied on Buyer’s representation of the type of financing specified (including but not limited to, as applicable, amount of down payment, contingent or non contingent loan, or all cash). If Buyer seeks alternate financing, (i) Seller has no obligation to cooperate with Buyer’s efforts to obtain such financing, and (ii) Buyer shall also pursue the financing method specified in this Agreement.
Buyer’s failure to secure alternate financing does not excuse Buyer from the obligation to purchase the Property and close escrow as specified in this Agreement.
Jim,
Is a listing agent obligated to present all offers to the sellers? For example, can the listing agent block a legitimate cash offer just because it is low ball?
Thanks,
Bill
Interesting advice Jim. But in general the agents that I have come across have very limited thinking and if I say 40% they get bent out of shape I later reneg on my initial assumptions.
From your CAR note, (ii) – does that mean that the buyer is under obligation to buy PERIOD? And if other financing doesn’t pan out, they STILL need to buy or simply they lose the house (but no money is lost right?).
It would be interesting to see if a high downpayment with a lower offer would work? Why you ask? Because I don’t believe in paying “asking” price. If someone else does, they can knock themselves out and pay their large mortgage every month for 360 months.
Regardless, I find the entire process of “bidding” for overpriced properties truly despicable and offensive. Is this what people have become?
great advice jim!
I too hate bidding wars.But if you want something bad enough sometimes you have to think of any advantage you might be able to use in the contract.
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From your CAR note, (ii) – does that mean that the buyer is under obligation to buy PERIOD? And if other financing doesn’t pan out, they STILL need to buy or simply they lose the house (but no money is lost right?).
Noz,
As long as you know that financing didn’t pan out during your contingency period, no money would be lost, you’d simply cancel the contract.
If you release all contingencies in writing after your typical 17-day contingency period, and then can’t get financed, you’d lose your deposit.
Yes, to the question in your last paragraph – it might be a California thing though.
Jim,
Thanks for the reply. I think I understand but clarify one thing for me. Let’s say I have 40% down and put an offer on a home with stating that I plan to put down 40%. That is to say I want to put a lower offer and not get into bidding wars so I entice the seller to take my offer with 40% down….and I have the means to back it up.
Come time to close, I change my mind and say I don’t want to put 40% down but rather 20% (ie. the seller already chose my offer thinking I’m going to put down 40%).
Then what happens? Am I still liable to show 40% down? If you can clarify the limitations with this approach, I’d appreciate it. I’m thinking of using your suggestion but not sure what I’d be liable for.
Hi Jim – Interesting approach. I had always thought that a seller would have the right (if they wanted) to cancel the contract which seems to be what #1 of paragraph 3K is saying. Not that they would but they do have the right to cancel. Love the work that you do – keep up the good job and thanks for the shirt.
Nice tip. The Seller doesn’t care so long as you close. The bigger deposit tells the Seller that you’re also also more than likely going to be approved for a loan and can cover nearly any surprise appraisal number difference.
Just be prepared to put the 40% down.
I’d also add that you be willing to throw in 2% of purchase price for any squabbles.
Noz,
You can obtain any financing you want.
The only thing that matters is that you cancel during your 17-day contingency period if you cannot get the financing you want.
If you release all contingencies in writing, and then can’t get financed, then you lose your deposit.
The only time you might get crossed up is if the listing agent has insisted that you pre-qual with their lender, who determines that you’re a “slam dunk” with a 40% down payment.
Then you cancel during the 17-day period, and the listing agent wants to see that you got denied for a 40% down deal. Because paragraph 3K says that you must pursue both financing options, if you can’t show that you were denied then they might make your life difficult.
But there is a way out – have your agent show you.
Stormin,
Sellers can never cancel a deal. Once they sign, they are in, and the buyer has 100% control of the transaction.
The sellers can issue a ‘notice to perform’ if the buyers miss a deadline, but they get an opportunity to rectify before sellers can cancel.