Yesterday, I wrote a post called How Easy Is it To Get Out of a Contract? It was very well received, since this is a topic most buyers and sellers wonder about and most Realtors have to deal with, at some point.
Turning the subject around, how do we protect Sellers from a buyer who changes their mind? That is a little tougher.
Keep in mind that each state has a different sales contract, and my comments deal specifically with Virginia.
When a contract is ratified in Virginia, more often than not, it has contingencies. There is a mandatory contingency for any property located in a Property Owners Association; the buyer has the right to review the rules and determine if they can live with them. If they get the POA documents and decide that they are too restrictive (or, unfortunately, if they just have changed their mind), the buyer can walk away with no penalty as long as it is done within the 3 day review period. The seller has no recourse if the buyer walks away at this contingency.
The other contingencies are opt-in contingencies: financing, appraisal, home inspection, radon, third party approval and others, as specified in the contract. If the buyer opts in to these contingencies they can use them to get out of the contract. The seller has no recourse. The caveat here is that to use the several of these contingencies, a condition must be met; an appraisal that doesn't come in at a certain value, a third party who does not accept the contract.
So how can we protect the seller? One thing we can do is make sure that the lender letter is a solid and not just a 'pre-qualification'. Of course, the lender has been hired by the buyer, so there is only so much information that we can get from them.
I have found the best way to protect the seller is to create a strong rapport with the buyer's agent and then usher the buyers through the contingencies methodically and with purpose. Encouraging the seller to make their property quickly available for the home and radon inspections, to be available for the first appraisal appointment and to order the POA docs immediately upon receipt of the contract.
Just like working with buyers, one of the most important thing a Realtor can do is to counsel sellers about the contingency period and what it means for them. It is not a time to start packing. It is a time to hold tight and cooperate toward the removal of the contingencies. This can be one of the hardest times in the sales process; it feels like you have sold your property, but it is not yet a 'sure thing.'
Clearing the contingencies quickly and getting the contract from 'contingent' status to 'fully under contract,' should be the goal of both the buyer and seller agents.
Cancellations happen, but with a clear understanding of what the contingency period means, a seller can rebound from this disappointment and move on to the buyer who was meant to buy their home.
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