Real Estate E&O Insurance
Real Estate  10/30/2019

When Home Buyers or Sellers Become Horrors

By Harry J. Lew

Have you ever encountered a real estate buyer or seller who was so unreasonable, so unhinged, it frightened you? Guess what? Buyers and sellers come haunting 365 days a year.

Listing agents and their clients often encounter buyers who use home inspection results to bludgeon sellers into reducing their prices. Often, they submit long lists of “defects” for which they demand fixes or, if not, price concessions. Worse, they use the inspections as a ploy to bring up minor problems they already knew about in order to reopen price negotiations. Has this horror ever happened to you? Has it left you or your seller-client screaming?

It did just that to one California couple. They were trying to sell their home of several decades in order to move to a retirement community. At the time of the sale, both their current home and their intended new home were in escrow as they tried to sell their present abode to generate cash. According to a media report, the couple invested weeks of labor and $5,000 out of pocket getting their home prepped for market. They repainted the entire house, inside and out, and upgraded both bathrooms. They replaced a stove with a broken burner. They brought in a landscaper to make the home’s exterior visuals more appealing. All the work paid off when a buyer emerged with whom they reached a deal.

But then the person became a nightmare. Two weeks into the escrow period, the buyer delivered a new set of demands to the listing agent: 10 items had to be fixed or he would withdraw from the contract. Not surprisingly, the listing agent was annoyed and the sellers were horrified. They enhanced their home in good faith and thought their investment had produced a sales contract. But now a buyer was threatening to throw all their hard work into the burning pit of Hades.

Such cases are especially frustrating because they often occur in a sale’s final stages. However, buyers can turn to horrors throughout the process, driving listing agents mad and making sellers feel as if they’re trapped in a horror film. Here are just a few examples of how nightmare buyers drive sellers and their agents insane.

  • Calling listing agents on their own. Why do some customers hire a buyer’s agent, but then contact listing agents themselves without getting their agent involved? Are they control freaks or just freaks of nature? In either case, when they find a property they like, an evil spirit within persuades them to call the listing agent to discuss the property without considering how their own agent will feel. Similarly, clients may call listing agents to schedule a showing rather than have their own agent do it. Agents who experience this are left to wonder whether they’ve entered The (Real Estate) Twilight Zone.
  • Becoming an unqualified borrower. Buyers with a property appetite larger than their means often get far down the sales path before a listing agent pulls the plug. They might even get to the sales agreement before it becomes apparent to the seller that their financing is as solid as a rotting attic floor in the Psycho house.
  • Treating a home for sale as if it were theirs already. Have you ever had prospective buyers behave during an open house or showing as if they owned the place? They might fool with the thermostat, let their kids play noisily inside, or use the bathroom personally! And if the seller had requested buyers to remove their shoes before entering, they might blithely refuse to, tracking mud on pristine floors. What is it about buying a house that transforms normal people into boorish banshees?
  • Making deliberately deceptive offers. For example, some buyer ghouls might make offers that are way too high, figuring they’ll negotiate a reduction after the appraisal undercuts the inflated price. A related horror is when they make an as-is offer knowing they intend to nick the buyer for every little flaw listed in the home-inspection report.
  • Demanding frequent access to the home after a deal has been reached. Buyers, especially first-time ones, often get super-excited after signing a purchase agreement on their dream home. Now they need to show their Great Aunt Betty the property or give their interior decorator a “sneak peak” in order to get a jump on redecorating. Like gremlins who keep popping up in haunted-house movies, these homeowners just can’t leave well enough alone. They get in the sellers’ hair when they’d rather be packing or doing other essential chores.
  • Rushing the closing date. Buyers often pressure sellers to set a closing date before the latter is ready to move out. All they think about is their needs and how wonderful it will be to get into their new house as soon as possible. But they give no thought to what an early closing date does to sellers, who now see their buyer as Michael Myers coming back for revenge.

Sellers Horror Stories

If horrible buyers have sellers screaming through the night, horrific sellers can put buyers through torment, as well. Sellers do many demented things. But when their monstrous activities began to harm buyers physically, that becomes a scary new plot point.

Take the case of the Hankins family, who jumped at the opportunity to buy a $35,000 starter home in southern Oregon. The original owner apparently had financial troubles, as the property had been foreclosed and was now being sold “as is.” The cash-strapped Hankins asked a carpenter friend to inspect the house rather than hire a more expensive, but more capable, professional home inspector. “We knew there were a couple of broken windows,” Jonathan Hankins told ABC News at the time. “We knew the furnace was probably on its way out. Overall, the house had great bones. Little did we know those bones would be contaminated and poisonous.”

After they closed on the property, they began fixing it up. Problem was, Hankins started getting nosebleeds and sinus headaches. His mouth was always dry. The air smelled of urine. Finally, after weeks of feeling under the weather, Hankins ordered a do-it-yourself home test kit. It came back positive for methamphetamine, at a level nearly 80 times higher than Oregon’s standard. Clearly, the home had been a meth lab, and dangerous chemicals seeped into its floors and ceilings.

The horror story went from bad to worse. The Hankins learned that the cost to decontaminate the house exceeded its value. “It’s horrifying,” Hankins told ABC News. “It’s like a nightmare, you know . . . a home buyer’s nightmare.” Presumably, the Hankins family was forced to take a total loss on their purchase, becoming yet another victim of a nightmarish seller. In this case, the seller was Freddie Mac, who disavowed all knowledge of the house’s “Breaking Bad” history.

Not all horrific sellers are as bad as that. Most drive buyers and their agents crazy in more mundane ways. Here are some of the things they do:

  • Refusing to listen to reason when it comes to determining a home’s selling price. Sellers often have a fixed notion of what their house is worth, which can be unmoored from market reality. Despite their agent’s guidance, they remain “stuck” on what they need to get for the home rather than what’s actually possible to get. And they stick to their guns for months or years despite evidence to the contrary. In effect, their greed chains them in the basement, making it impossible to move on with their lives.
  • Cancelling the sale and keeping the buyer’s earnest money because they just don’t like the person. Just as the “soup Nazi” in the TV show "Seinfeld" refused to sell his wonderful soup to customers he didn’t like, many sellers take deposits and then decide to not close the deal for purely personal reasons. In one case, a seller terminated the sale because he didn’t like how the buyer criticized his failure to repair his house after a recent hailstorm. Making matters worse, he refused to return the buyer’s earnest money until threatened with legal action (which would have cost him more than the earnest money).
  • Being irrational about requested repairs. Sometimes sellers refuse to make reasonable repairs for financial reasons, even though the cost represents only a small share of their future profit. For instance, a buyer requested a furnace repair worth 5 percent of what the seller would clear in the transaction. Yet the seller was adamant in his refusal to help the buyer out, even though he’d jeopardize his much larger profit. Working with such a buyer is a case of an unstoppable force (the buyer’s need for a good deal) meeting an immoveable object (the sellers intransigence in the face of reason). Agents stuck in the middle of such a transaction are like the character trapped in Edgar Allen Poe’s short story, “The Pit and the Pendulum.”   If the pit doesn’t get you, the pendulum surely will.
  • Trying to limit financing. Some sellers refuse to accept certain types of financing such as FHA or VA loans, preferring cash or conventional financing instead. Although their desire to avoid the procedural logjams of government secured loans is understandable, it does come across as jabbing hot pokers into the eyes of sellers and their agents. Plus, it limits the pool of potential buyers, which may make the home harder to sell.
  • Getting offended by low-ball offers. Many buyers submit initial offers that are too low. Most reasonable sellers respond by countering with a more reasonable price, kicking off a normal back-and-forth process. But all bets are off when you’re dealing with a crazed seller. This individual takes a low offer as a personal insult, not as a normal negotiating gambit. Some may respond by totally ignoring the buyer or even by increasing their asking price. To spite their buyers, these sellers are willing to cut off their proverbial noses. The resulting “look” isn’t pretty.
  • Making their agent do multiple open houses. Some sellers have an obsession with open houses. They view them as the magic bullet for closing a home sale. They believe the more open houses their agent schedules, the sooner their house will sell. What they fail to understand is that today’s open houses are much less effective than they’ve been in the past. Internet web sites and social media have largely made them irrelevant. Instead, open houses have become a venue for casual browsers to amuse themselves and for real estate agents to drum up new clients. By and large, they are where ill-fated home sales go to die.

Have you encountered the buyer and seller horror stories we just described? If so, you’ve probably come to accept them as a normal part of doing business. But being normal doesn’t mean they’re any less horrifying. Still, one thing is clear: becoming a successful real estate agent might depend less on your knowledge of real estate markets and financing and more on your ability to manage the quirks (and horrors) of human psychology.

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