John N. Frank is former managing editor for REALTOR® Magazine.
Calm Sellers’ Nerves Over Contingencies
Manage conflict when buyer demands put your seller on the defensive.
July 12, 2017
Your seller receives an offer, the price is right, and it looks like you’re headed toward closing. Then the buyer unexpectedly asks for a contingency—or two or three—and your client balks. Suddenly, the seller would rather walk away from the deal than accept a demand that he or she thinks is unreasonable. “I’ve had sellers who literally regard the buyer as the enemy” because of contingencies, says Carol Paruch, a sales associate with Baird & Warner Real Estate in Schaumburg, Ill.
When contingency negotiations put sellers on the defense, it can be difficult to keep them focused on getting to the closing table. You may even get defensive yourself in an effort to protect your clients’ interests—and before you know it, you’re all veering off course. But in tense moments such as these, sellers need a reminder to evaluate contingencies based on what makes the most sense for the transaction. For example, your client may need guidance to see that a few hundred—or thousand—dollars in repairs is worth spending to close the sale, especially if the seller’s home has stalled on the market. On the flip side, sellers should also be careful when asking for their own contingencies, as buyers, too, can terminate a transaction if they think they’re being asked to give up too much.
Paruch has seen buyer contingencies nearly derail a number of deals. One buyer demanded that Paruch’s seller reroute the home’s sump pump drain line so it disposed of water into a sewer rather than in the yard. The seller initially refused, noting the drainage system complied with local ordinances. But Paruch helped her client understand that it would be more expensive to pass on selling the home—which had already been on the market for six months. So the seller agreed to give the buyer an $8,000 credit. “You have to deal with these issues delicately,” Paruch says.
However, when buyer contingencies seem excessive or put your seller at a disadvantage in negotiations, it’s wise for you to seek measures to protect your client’s best interests. For example, Paruch represented one seller who received an offer that was contingent on the buyers receiving inheritance funds to pay a large portion of the home’s purchase price. Paruch counseled her seller to require written documentation showing when the buyers would receive the money. “Many times, inheritance funds can be delayed for months or years,” she explains. “This assured the seller that he could close according to the contract date.”
Break a Stalemate
Sometimes, in order to resolve a contingency conflict, the listing agent may have to put some skin in the game. Pam Roberts, a sales associate with William Pitt Sotheby’s International Realty in Stamford, Conn., once had sellers who listed 17 items, such as desks, shelves, mirrors, and door knockers, to be excluded from the sale. The buyer asked to negotiate for the items to be included, and they reached an agreement on every one except the wooden window shades. “It became a standoff,” Roberts says. Rather than let the deal fall through, she wrote a $100 check herself to buy the blinds and give them to the buyer.
Roberts, who specializes in $1 million–plus homes, made a costlier commitment to see another sale through when a buyer spotted moisture collecting in her seller’s basement. The buyer demanded that the home’s three sump pumps be replaced, which would have cost about $4,000. When her seller refused, Roberts, along with the buyer’s agent and the buyer and seller’s real estate attorneys, agreed to split the cost four ways so the sale could close, she says. “I see this as simple customer service,” Roberts says. It might seem like a high price to pay for a closing, but she notes it made business sense for her. The buyer offered $1.5 million for the home, and the commission to Roberts’ company was $37,500. “So rather than starting over and spending more time and money, the gift of $1,000” was a small price to pay, she says.
Be aware, though, of situations when accepting buyer contingencies truly isn’t in your seller’s best interest. Candace Taylor, a sales associate with Berkshire Hathaway HomeServices Georgia Properties in Dunwoody, Ga., once represented a seller who had listed a home for $324,900. An offer came in for $305,000 with seven contingencies, including having mold removed from the basement, a certification that mold was not in the home’s HVAC system, and a demand that the seller pay any special-assessment fee from the homeowners association. “My seller said, ‘Look at all these contingencies. Go on to the next buyer,’ ” Taylor recalls. Her client received a second offer from another buyer at $319,000 with only one contingency for a home warranty, and the seller accepted.
No matter the seller’s circumstances, dealing with buyer contingencies is a potentially dicey part of the transaction. This is when your client requires your reasoning skills, says Lori Joyal, managing broker at Lila Delman Real Estate in Watch Hill, R.I. “We need to calm the situation and act ethically to resolve it. Breathe and don’t overreact.”