Those people do sound like very interested buyers. I love the way you check things so diligently! It sounds like a lovely, water-tight home.
Good grief about the city thinking that the pump is sucking up energy! Those things rock! People who never had them have no idea how much they are missing out. 
Not having to let water run for a couple of minutes before getting into the shower is priceless, especially on a cooler morning.
Can someone explain something to me? Not necessarily related to cb’s flip, but I need to understand.
Using made-up round numbers:
Suppose you are asking $1 million for a house.
Buyer 1 offers $900,000. You enter into negotiations and agree to a price of $950,000. You sign a contract and the buyer puts $$$ into an escrow account.
Buyer 2 comes along right after the contract is signed and offers $975,000. Are you permitted to go with Buyer 2 at that point? Of course you would give Buyer 1 back his escrow money.
And if you can dump Buyer 1 to go with Buyer 2, at what point is the deal irreversible – only when all the papers are signed at the closing?
(It’s a slow news day!)
Yes, I thought it was ridiculous about the recirculating pump… In order to submit plans to the City you have to have a Title 24 energy review (which costs money of course) that spits out a bunch of complicated numbers and ratings. Obviously, insulation and new dual pane Low E windows got us a bunch of points. I actually got on the phone and had a long discussion with the guy before we finalized plans and he ran the review. He was the one that recommended the specific hot water heater I purchased because of our gas line situation. But he warned me to not put the recirculating pump on the plans because it would significantly lower the energy rating and might cause issues. Good Grief!!!
Another thing we are going to change out now is the dang humidity sensors. I have an issue that one of the sensors in the jack/jill bathroom senses humidity during rains (duhh!!) and suddenly just turns everything on. So it could be the middle of the night and the fan and lights just suddenly come on. Not fun.
Also, the humidity sensor in the master bathroom is attached to the recessed LED in shower and the bluetooth fan (which is a big hit with all the crew). So, if you walk into the bathroom and want the light on above the shower, you have to push the humidity sensor on. If it doesn’t sense any humidity in 10 minutes or so it shuts itself off. Also the dang thing makes a chiming noise whenever you turn it on (the bluetooth connection signal) which could be annoying if someone is still trying to sleep. We are going to get rid of the sensor and change it to a regular switch so that the light/fan will stay on. It’s a special ultra quiet fan to minimize noise to the adjoining bedroom. Then I’m going to get one of the young techie guys to get rid of the annoying chime.
Will,these three time visitors be getting an offer together? You don’t have to say here…but…if they don’t…I am not sure I would say yes to a fourth visit from them unless this is a standard thing in your area.
When we sold our last house, we had a couple come through three times. They were there for a LONG time…1 1/2 -2 hours each time.
Theynasked for a fourth showing…and I politely asked my agent if they were casing my house! I said no…did they think the house was going to grow another room?
Turns out, they bought a MUCH less expensive house. I guess theynthoight we would come down in the price if they kept coming again and again. Oh…and we got full asking price for our house.
Our agent said their agent kept bringing them back to our house…so,they could see what a great deal theynwere getting on the one they actually bought. Apparently, this agent was known around town for this selling strategy!
Anyway…it’s one thing to come at a different time, or to bring the wife or husband if they didn’t see the house the first or second time. But after that??
The seller is locked in upon signing the initial contract. However, if the buyer fails to meet any condition – such as releasing the inspection, financing or appraisal contingencies exactly on time – the seller might be able to get out if the deal (subject to notice periods, etc.) Buyers often try to negotiate “fixes” after the inspection; the buyer in the situation you describe would have no leverage.
It is much easier for the buyer to get out of the deal.
But honestly at the $$ figures you are describing a seller would be unlikely to blow the deal on the hopes that the second buyer would come thru.
Once you have a signed purchase and sale contract, you cannot just back out of the deal to take a higher offer. You will almost certainly get sued, and one remedy is to force performance of the contract, which can actually require that the second buyer vacate the property if they closed and moved in. Which will then generate a second lawsuit…
VH
In cal there is a back out clause in the contract with default of 7 days and it is negotiable.
No, here in WA the seller cannot dump Buyer 1 if both signed the offer - it is a binding contract at that point (can include some contingencies for a way out though). If the seller dumps Buyer 1, Buyer 1 can sue for specific performance (gimme my house!!!). If the transaction with buyer 2 is closed at that point, it will open up a whole new can of worms.
Here is a good overview:
Cross-posted with nottelling and NRE - same thing as they said.
If Buyer 2 makes an offer, the seller can let them know they are primary back up (forgot the legal term) and their offer will be accepted if the first offer falls through. This means buyer 2 would not have to write a new offer even if the deadline had passed on the original offer.
Sorry VH
In CA, " standard forms" to purchase a realty, is called CAR, in the CAR form it does not appear that the seller can back out the deal unless the buyer does not perform and in violation (ie make deposit or release of contingency) but the buyer can do it in 17 days(default), this is called inspection contingency, it is negotiable. An explanation is provided here:
You do not have to use the standard form and have the lawyer to draft one. Due to the nature of a residential purchase, CAR form is frequently used. However, in commercial real estate purchases, a lawyer is normally hired to deal with the transaction.
When you buy from a bank in REO situation, a CAR form is used, but the bank normally has a lot of riders to modify the form and you need to read it carefully.
Buyer 1 is locked into contract and as long as they meet all of their obligations to release inspection, appraisal and loan contingencies on the agreed dates, Seller cannot cancel contract. Buyer 2 can submit a legal offer on the California purchase agreement form (CAR) and the Seller can accept their offer in Backup position. This is very desireable for a Seller to have an official signed Backup Offer because it puts pressure on Buyer 1 to perform to every date in the contract.
For example, Buyer 1 may ask for 17 days to do home inspections and they are supposed to release the inspection contingency on Day 17. Buyers may submit a legal Request for Repairs at the end of the period. If a Seller has a backup offer they are in a better position to refuse to repair every single thing on the list and/or negotiate a credit to buyers so they can fix stuff. You wouldn’t believe the things that people write up for repairs. My agent and I focus solely on items that are a Health or Safety issue and I will always fix those things.
The standard clause in the CAR form is that Buyers and Sellers have 3 days to respond to a notice. I will always counter that in the original negotiations down to 24 hours. A lot of buyers are very nervous about releasing contingencies and will drag it out forever. So, if the home inspection contingency period is coming up, we will send a Notice to Perform on that very 17th day which requires signoff of contingency within 24 hours. For some reason buyers do not understand that they have signed a contract that requires performance within certain periods. I am constantly fighting buyers / agents to get the paperwork signed and released.
BTW, I am not aware of any standard residential purchase agreement that lets Buyer cancel for no reason within 7 days. There is not a ‘waiting period’ for residential real estate contracts. That would turn into a nightmare for Sellers who have taken their home off the market to find out 7 days later … Oh, we’ve decided to back out.
However, there are a lot of games that Buyers can play to get out of a contract, but very few that a Seller can do to get out of a contract. There are basically three contingencies in a California contract:
At the beginning buyers can just quickly change their minds and just disappear and not put a deposit into escrow. Seller has no choice but to try to cancel the contract.
Physical Inspection Contingency (standard in contract is 17 days, I will always try to tighten that up) Buyers can announce that items found in a home inspection are not acceptable and cancel the contract during that contingency period.
Appraisal Contingency - If the buyer is getting a loan the bank will send out an appraiser. If the appraisal comes in lower than sale price the buyer can back out of the contract. Usually this results in a bad situation for the Seller because the buyers will try to negotiate a new lower sale price. If the buyer does not have enough cash to make up the difference in down payment requirements and the Seller sticks to the original sale price, the buyer will have to cancel. This happened a lot during the recession years because appraisers were very careful and valued low. A lot of flippers got stuck in this situation. It has only happened to me once (on Hoarder House) because the appraiser did not know how to value the ‘accessory building’ that had an office and bathroom. We appealed and asked for a 2nd appraisal and it came in fine.
Loan Contingency (standard in new CAR is 21 days) And, later in the escrow they don’t qualify for a loan or they have put stringent loan criteria in their offer (such as… we must get a loan at X percentage rate or we will back out of contract). I am always careful to not allow unreasonable loan expectations to be put into the contract. This contingency gets really sticky if the buyer is self employed and the bank is taking forever asking for a bunch of documents or processing the loan.
Thank you all. I understand now. And, believe it or not, I’ve bought and sold three times; I should have a general idea about these things! Well, I’ve bought three times and sold twice. I’m still living in my current house.
A lawyer drafted agreement can do anything you wanted, does not have to follow the “standard rules”. Actually there is no standard rules for real estate transactions. It is a contract, as long as both parties agree, you have no rules.
The norm as I understand it in California is to work through an escrow company rather than via lawyers. The escrow company tracks everything as it comes in, holds all monies, and essentially executes the sale. This is way different from just putting funds in escrow. Once the contract is signed, they essentially take control of the process. Of course there can be multiple addendums to the contract.
The lawyer is not a replacement of Escrow, the lawyer draft contracts, review due-diligence data and negotiate the terms in the contract. In commercial real estate, that is what I specialized in, there are no “Rules” or CAR forms and it all depends whether both parties agree. In commercial real estate, actually they started with a letter of intent and it is NOT binding for either parties, and the purchase agreement is prepared after the letter of intent and there could be more changes after the letter of intent is signed. I have also seen a transaction went through purchase agreement directly and if signed, it is binding. More over, the contingency period could be as long as two or more YEARS in some cases.
I think it’s great that there continue to be showings and great interest but I’m confused…and I can appreciate that this probably shouldn’t discuss this so perhaps it can be discussed in the abstract. I thought an offer came through on the house a few days ago. I also thought that the seller, by CA law, had a short window to respond (24hours? 72 hours?). So, while it would be great to line up other interested parties in case the first offer doesn’t come to fruition, isn’t the house likely under contract at this point? Would these people looking at this house at this point know there’s already been an offer? Sounds like I missed a post along the way.
And, CB, I am so impressed with your diligence. 4 hours on hands and knees to make sure there weren’t any leaks? And you found a small one and fixed it? I truly wish you lived in the Bay Area! People are so lucky when they purchase your homes.
Happy new year everyone!
However, everyone else is talking about personal rather than commercial real estate so less confusing to stick to discussing the usual process in California for residential real estate. Of course anyone can work with a lawyer if they want with any kind of contract. The question was if the seller can cancel a contract just because they see a better offer and the answer was no.
“So, while it would be great to line up other interested parties in case the first offer doesn’t come to fruition, isn’t the house likely under contract at this point?”
Here is what happens in my state. If one party counters, the ball is in the other party’s court and so on. This game can go on for a while, and the seller can show the house while these counteroffers keep flying. A counteroffer can become a contract if the other party signs it… As soon as that happens, showings stop.
Just because an “offer” came through does not mean that she had to respond to it .
low ball offers or those unacceptably contingent on multiple items are often rejected out of hand, and nothing requires that it be done in writing.