We just closed escrow on the sale of my clients’ home in Aromas after a tough transaction that got even tougher towards the end with the buyer’s agent going completely incommunicado for the final two weeks while the rest of us scrambled to make up for the lack of diligence that had been displayed during the initial stages of the transaction.
He departed the country for an ill-timed vacation a few days before the scheduled closing date, leaving his clients to shop for insurance long after their property investigation contingencies had been removed, only to discover that they were going to have to get a California Fair Plan plus a supplemental policy and the quote came in at thousands more than they had expected.
The higher insurance cost was enough to knock the buyer’s qualifying ratios out of whack, necessitating a reapproval, which caused a domino effect on two other linked transactions in Oregon, where my clients were in escrow on their replacement property. The compounded stress is endemic with the increasing number of contingent offers that we are seeing in general these days.
But that wasn’t even the main challenge that was endured by my clients. Earlier in the transaction, they were dealt a blow when the appraiser brought the value in at $75,000 under the contract price, which was at our list price, less a $5,000 credit for condition. And even though we were able to find multiple comps that supported the full value, pressure from the replacement property transaction didn’t allow the necessary time for an appeal.
As a workaround, the buyer’s agent proposed to have my clients carry a silent second to make up the bulk of the shortfall, and we rejected their proposal on the grounds that it involves misstating the selling price and constitutes defrauding the lender, which is a federal offense that leaves the seller and their agent both complicit and vulnerable. Instead, so as not to lose the replacement property, we consented to a $50,000 reduction and the buyers came up with the additional $25,000 in down payment needed to close.
The process of putting and keeping a deal together is indeed getting more complex in the midst the current glut of interest rate hikes, but the main challenge as I see it is not the market itself but rather it is to maintain the right ethics and the right attitude—unlike the appraiser for this particular transaction, which will now officially show a $55,000 lower selling price for the record than it would have had they used the supporting comps that were available.
And as for all the talk about the market slowing, the year over year statistics for Santa Cruz County home sales have stayed remarkably stable, with 292 homes available and 112 homes selling this October countywide, compared to 283 homes available and only 101 Selling in October of Last year.
Not exactly grounds to panic.