Today we are seeing more buyers and sellers experience remorse and attempt to terminate the contract without reason or right. So what happens when a buyer or seller decides at the last minute that they want to terminate and in doing so would be in default. This podcast examines why it is happening and the legalities and realities of the default. I will also give you some strategies to avoid it.
Also in the episode is a new segment What's On My Mind. It even has some cheesy music. And of course, Gary's Good News Only!
This is edition dirt with Gary pickin South Carolina's only podcast dedicated to the real estate agents craft. And greetings everybody. Welcome back to yet another exciting episode of vision dirt. I am your somewhat talented, very opinionated, and often verbose post Gary picker with yet another tantalizing episode of vision, dirt. And of course, what could be more fun than waking up or working out or even cooking is out of my voice telling you all about the lows and limitations of real estate. So what are our woes and limitations this week? Well, we got a couple of big problems we've got to talk about in our current market. The first one, of course, we're going to talk about is buyer's remorse, and sell remorse. And in my 26 years of practicing law, I have never seen so many buyers willing to back out of closings after the due diligence period, as well as having so many sellers basically the day of closing saying they decide they're not selling the house. So we're going to talk about that problem with the legal ramifications or with the realities are in that and walk you through that we also have another big issue we're going to talk about today. And that is when to a quick sale on buyers loveless what we're talking about all these love letters that buyers are sending sellers trying to shame them into selling their house. And we're going to talk about the issues and all the legal ramifications behind that. And of course, we'll finish up with Gary's good news only. But before we start today, let's talk about what I need you to do. I need you to like us, listen to us, subscribe to us and tell all of your friends about us so that we can continue to grow our podcast. And if you are listening on Apple, we'd ask you to reach up there and click that like button up there so that we can get more likes. So let's jump right in here today and talk about buyer and seller remorse. So over my career of practicing law, I've represented multiple real estate agencies throughout South Carolina. And when I represent a real estate agency, or when I talk to a real estate agent represent an agent in a grievance or in a lawsuit, well I like to do is talk to them about legalities and realities. And the first thing we need to know about legalities legalities means that oftentimes, you might be legally right, I might be able to show you under the law where you have legal standing, the other side's in default, the other side has violated some statute or some law, some ethical violation, perhaps of the realtor code of ethics, but then also have to talk to you about realities. Because often being right doesn't really necessarily mean you're going to get anything out of being right. Because the realities of legal system is it's very expensive. It's very time consuming. And so I might tell you, yes, that persons in default, well, what are your damages? So what are you going to get? So what you have to understand is there's always a cost to bringing a lawsuit, lawyers usually charge three to $400 an hour, and they rarely, if ever will take a case on a contingency unless it's an automobile accident or some type of personal injury. So today, we're going to talk a lot about legalities and realities. And a lot of times what you're gonna see under the buyer and seller remorse is legally, that person may be wrong, but the reality is, what are we gonna do about it? lawyers will always tell you they love clients with principle, because a lot of times will call us and go, what's the principle of that? And clients will say, Well, I'm pursuing this because the principle of matter. And that's great, because principles, pay a lot of lawyer bills, as soon as that lawyer sends that first bill to the client person's principles usually kind of go out the window, and then they start thinking more about realities and less about legalities. So let's talk about buyer's remorse. And we'll talk about how legalities and realities apply to that. So what we're talking about what buyer's remorse is we're seeing a lot more cases today, where the buyer is just deciding for no reason whatsoever, they're no longer moving forward. And this is usually happening outside the repair agenda, or outside of the due diligence provisions. And oftentimes, this is happening the day of or a couple of days before closing. So why is this happening? Well, we're seeing a couple of reasons. Number one, the market is super hot. And what that means is that people are acting on impulse. So when the house goes on the market, people are having a usual time to digest the situation to decide whether they want to move forward or not. And so they are making a quick knee jerk reaction and putting in offers as soon as they can, because they know if they don't get that offer in within a few minutes, then more than likely, the house is going to go away. So we're having a lot of people get buyer's remorse because of the supermarket, a hot market rather. Secondly, people feel like they're overpaying for the houses every house that goes on the market now pretty much is being involved or asked or over ask. And so that is also causing a lot of buyer's remorse people are after they sit down and think about it like wow, I'm paying 10,000 $15,000 more than even the ask price. What does that mean in the future when I go to sell the house? And so that's creating some buyer's remorse we're also having out of town buyers are coming and seeing houses unseen. I had a client the other day who moved down from New York who had never seen the upstairs of the house and I said what do you mean you've never been in? He goes No, I've never been in it nor seen the picture of the upstairs. So what he told me was he flown down here three weekends in a row and made offers on houses only to get back home and find out he's lost. And so on this fourth weekend, he said I just couldn't afford to keep flying down here paying for airline paying for a hotel, get my hopes up on the house. We won't and lose out on it. So I just told my relative agent for house came up in that market make a full price offer and let's move forward. And so they did. And he never saw pictures because the pictures weren't even posted yet of the upstairs. So here's a situation where a buyer could come down here, take a look at it, and just bail. I've gotten phone calls from several agents over the last couple of weeks where this is exactly happening. People have gone down here, bring a spouse at work was not within the first time we're a partner, and the person doesn't like the neighborhood doesn't like the house doesn't like the area, whatever. And they're backing out. We've had that happen with college kids buying houses where the parents came down and said no way are you living in this neighborhood. I've had a buyer from Ohio come down, sight unseen, put an offer in on the house got down here just hated the house. And so they will. And so at this point, you have to start looking at what's the options of the seller when the buyer just has buyer remorse? Well, first thing we're going to do is always look at the contract. If the buyer has an out under the contract, such as an appraisal contingency, if the house doesn't appraise or financing contingency, they don't qualify for financing, then obviously those contingencies will give a buyer a way out. But if the buyer doesn't have a legal way out, then what do we look at? Well, typically, the seller has two options under the contracts that we use in our market, whether it's the ccrane, Central Carolina realtor Association contract, or the state contract is basically they can either accept the artists money as their damages and release the contract, or they can sue for damages. So let's talk about the earnest money. The earnest money, basically, you take the artist money, you release the contract, you list the house and put it back on the market. And that's the end of it. Or you can sue. And what you will be suing for is any damages that you have experienced now what could your damages be, you might have carrying costs. So if I have a house that was supposed to sell at the end of this month, and I've got to carry for two or three more months, before I can ultimately sell it, I might be able to claim that those monthly payments, the problem with that is a court typically will say, well, you have to live somewhere. So we have to sign some calls to you, it only really works if you've already bought another house and this is a second house payment, then you can clearly show you would not have made this house payment but for but if this is the house, you're living in the courts not gonna say you can't live for free, so there's gonna be some discount, it may be an entire discount. So that might not be a damage for you at all. We could talk about repairs, well, you can say, Well, I made all these repairs that I would not have otherwise made that the court could look at it and say, but you're going to have to make these repairs anyway, to sell the house. If you didn't make the repairs, the value is going to go down and you would have made less money. So the repairs are basically a neutral loss, you have no loss there. So then we come down to the final really damaged is if I have the house under contract to sell it to you for $200,000, you back out, I put it back on the market and can only sell it for 180. After using reasonable scale and expertise and knowledge and attempt to sell it, I can only get the 180 I've got a $20,000 loss, I could probably sue for that. But the problem is one of the hottest market we've ever been in. So typically, if I take my feet back out on my $200,000 contract, I can put this house back on the market and probably the next day sell it for 210 or 215. So we really don't have any damages there. In fact, there's a builder down in Charleston, I understand that's trying to buy back a lot of his contracts, he signed contracts selling houses for 250. He's trying to pay the buyer $10,000 not to buy his house, because he knows he can put it back on the market for 280 or 290 and make even more money. So it gets very difficult right now to sue somebody for the damages on in addition to that you got to pay an attorney three or $400 an hour. And you know, lawyers are going to do anything an hour, it's going to take them 10 1520 hours to do anything. So you're looking at an eight to $10,000 bill to sue the buyer for backing out. Plus it's going to take you about 12 to 18 months. So the reality of it is is well the legalities say yeah, your buyers in default, and you may sue them. That's not a good reality, the reality of it is it's going to cost you too much money. So in most cases, what we're seeing is that the seller simply accepts the earnest money and puts the house back on the market. So let's talk about two issues there. Number one is you have a duty to mitigate as a seller, once the buyer notifies you that they are not going to buy your house, you have a duty to mitigate the damages. And how do we mitigate our damages, we put the house back on the market, you do not have to have a signed release in order to put the house back on the market. Now, please understand that each one of these cases is very fact specific. So don't just take that as a broad statement that every time a buyer, you know just throws out watches won't buy it that we can go right on and put the house back on the market. That may not be the case. But once we know that a buyer has no intention of buying the house and they're very clear on that you have a duty to mitigate your damages. You should always contact the lawyer and a lawyer to determine whether it is okay now at this time to put the house back on the market. Certainly if you have a release on you're good to go but if we haven't had the release on then you need to talk to the lawyer and figure out but in most cases, the duty to mitigate is going to allow the seller but The house back on the market. Also note as a side note that agents you have a duty under our law to disclose material adverse facts and way they the way they define material adverse facts under 4057 30 is when a buyer or seller announces their inability or refusal to follow through with the terms of the contract, you must notify the other side. So once you know that your clients not gonna buy it, then you have a duty to notify that other side that your clients not going to move forward. so in this situation, a buyer's agent would have a duty to tell the seller the buyer is not moving forward. And so the seller can go ahead and relist the house and mitigate the damages. The second aspect, you have to understand that this buyer remorse is as you can tell, it seems the reality of it is the only recourse they truly have is accept the earnest money. So we have got to do a much better job in our industry of accepting bigger, earnest money. $1,000 is not enough in this hot market. You're in the hottest market we've seen in my 26 years of practicing law. So why are we accepting 100 $500 $1,000 is earnest money. Price is not the only driving factor in selling a house. All the terms are how much artists money, the type of loan, they're going to get how quickly they can close? Are they going to do due diligence or they're gonna do repairs, things of that nature are all major factors in multiple offers, when you are receiving 810 1215 offers on each house, why are you accepting $1,000 is earnest money, I just explained that earnest money is going to basically be your recourse in most cases. So on a $200,000 house, why are you not getting four or $5,000 in earnest money, and other markets will where as a buyers market, they can demand to put less money down. But right now the seller is in the driver's seat and should be able to demand more money for downpayment artists money to show intention to close, keep in mind that we have a 70 $500 jurisdictional limit for magistrate court. So you want to stay under 70 $500, in my opinion, on most houses, once you start getting into the multimillion dollar houses, then obviously gonna want to start getting more earnest money. But 70 $500 allows you to go to the magistrate court and file your action in the magistrate court. And most of the time, those cases are heard within a couple of weeks or a couple of months, when you get over 70 $500, you're not going to be kicked up into the circuit court. And it's gonna take many, many months. And typically, it's going to require you to hire a lawyer. So now let's talk about seller remorse, this is a strange thing that we've all sudden started seeing never had ever seen so many sellers back out of contracts, and particularly at the last minute, and what we're having is up to the day of closing sellers are just saying, Well, I'm not going to sell the house. And it's not because they're in a dispute with a buyer, which is typically where you have these kind of arguments that lead to statements like that. But it's because the seller has nowhere to live, what is happening is the sellers are putting their houses on the market. And within 810 12 hours, they're getting multiple offers and their houses under contract, they have not even begun the process of looking for a new house. And so all of a sudden there's panic, panic At The Disco, as the song says, where they don't know what they're gonna do. And then they start looking and they can't find a house and so they're under contract to sell their house, they can't find a house. And now it's time to terminate the contract in their mind. The other issue we have is where a buyer or the seller is under contract to buy a house, but that contract falls through either because of financing, repairs, inspections, whatever. And so when that contract falls through a week or two before closing, they want to then cancel their sale. The problem is under the contract, they have absolutely no right to do so unless they've added some what we call now reverse contingencies. But the contracts as a written ccra and the state contract, do not allow a seller to have seller remorse and decide they just don't want to sell the property there is no free get out of get out of contract timeframe. I get that call a lot also where people go How long do I have to back out this contract? There's no lemon law is a three day right of rescission on a contract, it is immediately enforced. And so what happens here with a seller remorse is when they decide they want to back out. It creates a lot of problems for everybody. So what is our legalities and our realities, all legality is the seller is in default. And the options of the buyer are to basically accept their earnest money go away. The second option is to go back to the seller and say, Well, if you want me to walk you're going to have to pay me and I've seen sellers do that. I've seen sellers write five and $10,000 checks for buyers to go away. I guess they assume that once they go away, they can eventually put the house back on the market for more money and recoup their loss. Or the third option is the buyer can refuse to let the seller out and fall what's going to Liz pendens against the property which is a lien against the property saying that I'm in the process of filing a lawsuit to enforce you to sell me this house under specific performance and so they can file an action ask the court to require the seller to sell the house, and I think that would be a pretty strong case. Now the legalities means that the seller is in default, the realities are again, we're talking many, many months, probably 10 1218 months. And we're also talking a lot of money, you're talking, paying a lot, or paying a lawyer three to $400 an hour to bring this action on your behalf. So what we would recommend on this situation is sellers really need to be having conversations with the listing agent upfront as a listing agent, you need to be talking to your sellers. Well, before they list a house, do you have somewhere to go, what is your plans, and they're like, well, let's get it and see what we can get. And they'll start looking that's too late. If your sellers getting a list of property, and they don't have anywhere to go, they need to go ahead and start looking even before they list the property, where is it they're looking for, what's the market going to look like in that particular area, how many houses are for sale in that particular area, what the cost is going to be, and they need to go ahead and start getting prepared mentally for what they're up against. And they may find that they don't want to list a house because they're not going to be able to get where they want to be for the price they want to be. The second thing that needs to happen is that the seller should consider using what's called reverse contingency. And a reverse contingency is you can put in the contract that the contract is contingent on the seller getting under contract for the purchase of a house owner before blank date. So let's say I was supposed to close by July 30, I can put in my contract and the contract is going to be contingent on me finding a house and getting under contract no later than July 4. Now you want to put a deadline date and you want to put that date several weeks before closing. Because what you don't want to have happen is that you get right up to the day of closing. And then the seller says oh, well, I can't find a house. So I guess I want to exercise my contingency and cancel the contract. Because at that point, the buyer has been put in a bad situation with a lot of lender fees, attorney fees and so forth. So this reverse contingency is something that we're seeing more and more of, to make sure that the seller can find a house. So that's something we should consider. So that's what we're looking at with seller remorse and buyer's remorse. Again, legally, they're going to be in default. The realities however, make it very difficult to figure out what to do you have any questions. Also, don't ever hesitate to pick up the phone and call Blair Cato 803 486. So now let's roll into our new segment called Quick tapes. And these are little tidbits of things that I have kind of on my mind, I thought we need to share. And I've even come up with a cheesy little intro song for a second, so many things. Yeah, that's just plain awful. Anyway, so we're gonna talk about love letters today, of course, what we're talking about all these love letters that people are sending with their offer as an attempt to try to shame the seller into selling the house to them. So what we're talking about something I first saw a couple of years ago when I had a client that was moving here from Seattle. And what he was telling me was the market was so hot in Seattle that they would take offers at a set time, which we're starting to see a lot of here in Colombia, and in Greenville, but what they would do is every offer would come with like a ring binder, three inch ring binder notebook. And in the notebook would be a letter about why the people want to buy your house, it would be drawing from the kids. And he said they were all very sad about why the kid had to go by the house because it was the school that would only help their type of learning disability or they had this type of illness and is living in the neighborhood would make it better and things of that nature. So they were very sad stories. And he said they were basically pulling at your heartstrings. And I asked him the question was, well, what did you do that assume you just took the highest off? And he said, Oh, no, I took the one that I liked the best. And I said, Why? Because my parents still live in the neighborhood. And I want to make sure they had good neighbors. I said, Well, what's your definition of a good neighbor? He just kind of looked at me. But my point was, what are you talking about? Are we talking about race, religion, national origin, color, sexual orientation? Is that what makes a good neighbor? And so he didn't, I didn't say that to him. But that's what I wanted to say. And he said, Well, you know, I just want to make sure nice people live near my parents, man. And so when you go on the internet today, and you type in on the internet, strategies for buying houses, this seems to be the number one strategy you're seeing that everyone's saying it's real estate agents, real estate brokers, you'll see lenders giving this advice and see attorneys given this advice, which is absolutely mind blowing. But I did a seminar last week or two with Byron King was on it. And this is one of the questions that came up and the state association Byron is the attorney for the State Association of Realtors. And we all agree that don't take these don't accept them. Don't give them don't offer them. Don't encourage them. Because it is a fair housing violation waiting to happen. Because when you start reading these stories, most of these stories will pretty much tell you the race, religion, national origin, color, sexual preference of these people somehow in there, you're going to be able to glean from the stories, the information that's in there, whether they're a family or not, and it hits a battle. Every one of the possible protected classes. So when you're when your client gets multiple letters, and they take one, and they don't take another one from somebody, and it's evident from the other person that they declined what race they were or what religion they were or what nationality, then the complaint becomes a fair housing violation because you didn't accept my offer, because in my letter, it was clear that I was of this race or of this religion or this national origin and you discriminated against me. So why in the world would you want to open up Pandora's box here and have the possibility of getting sued on a fair housing violations? Our position is and our advice is, as well as the association your state association is, don't accept them, don't give them don't take them. And when somebody tries to hand you one as a listing agent handed back and say, we will not look at these, if they asked you why say we believe that violates fair housing. Don't if your client asked you to give them to the seller, same thing. I cannot accept that that violates fair housing, in our opinion. So I think we all need to get away from these things and quit taking your legal advice from the internet because it's awful. Most of the time, and that is our thinking. areas. Good news only. millennial purchases are picking up in March. According to d h or d s news. The latest millennial tracker from ice mortgage technology found that purchase activity months and millennials increase in March 2021. Even as interest rates rose, according to the tracker purchase activity represented 51% of loans that were closed by millennials in March 51% of all loans were closed by millennials. That's an increase over February's 46% purchase share. So millennials that is your main market right now, today, and chief economist Daniel Hale for the realtor.com website stated that initial job claims dropped to 498,000. She said that was a good sign in the economy was actually stabilizing, said mortgage rates also slipped to 2.96% below 3% yet again, median list prices were up 15.4% year over year, but inventory is still down 52% this month, year over year from last year. But days on the market is also down 25 days. And the new listings This is good news here. new listings are up 18% that's the fourth straight week, which listings have gone up which shows that perhaps the inventory is getting better and that could slow down some of this price growth. Now let's talk about COVID Coronavirus, Coronavirus, CDC fi acknowledged a COVID-19 is not spread through close contact but it's rather it's an airborne virus. So what does that mean? Six feet, social distancing is a sham always has been and CDC is known as for quite a long time way to go CDC. Three weeks ago, expert Megan Rainey tweeted out that in person dining combined with decreased masking Was it a recipe for a surge? Well, let's see how great this expert is. Since then her great comment cases are only down 43%. So the question is How much longer will it be before the media acknowledges that these so called media experts have absolutely no idea what they're doing and we don't need to be listened to. So what's happened since the so called experts reported that Texas was going to be killing people because of lifting their restrictions. Well, since then, deaths are down 75.3%. Literally 75.3% says the media and all the politicians in the CDC claim that opening up taxes was a death sentence for Texas people that it was reckless in the NFL thinking so once again, politicians and the media are completely wrong. In fact, COVID hospitalizations are the lowest they've been in 11 months in Texas. And they've had five consecutive days with fewer than 2000 cases. In Texas, their positivity rates below 5% for the sixth straight day for the first time and for ever, and fatalities are down more than two thirds, which is the 75%. So once again, media experts, politicians know not what they talk about. Also, the CDC this week showed that 3.1 million kids aged 17 and under have tested positive well that's also questionable because we know that the level of which they searched for the virus was so hard it was picking up old viruses. But what we also know is that only 282 of them have died with COVID amongst the 42,429 deaths of children last year. Also, we're finally starting to see some states lift some other restrictions. DC has lifted most of its cover advise restrictions, which is unbelievable when washington dc starts lifting restrictions. It's time for South Carolina to fully open and they're saying that that will happen by May 21. Also interesting news and England The Prime Minister finally got rid of the face mask for children in schools, not just in classrooms, but in all communal areas too. Thank God for some sanity in the UK and for Lexington fall for also removing the get the mass requirements. Hopefully some of these other districts around here will finally take action as well as 6am. On May the ninth we have 330 million vaccine doses have been distributed with 260 million have been administered. That's about 79%. Additionally, 152 million people have received at least one dose of the vaccine and 114 million have been fully vaccinated. That means 45.8% of us populations received at least one dose and 34.4% have been fully vaccinated. I think that means eventually 45.8% will get vaccinated because I've already received the one dose. In South Carolina we've had 4.7 million doses distributed in 3.4 million administers the 3.4 million doses of the vaccines have gone into South Carolinians. Now let's talk about the seven day averages. I love these averages. So the seven day average now new cases are down to 45,817. That is a decrease of 13.2% compared with the previous seven day average of 52,007 72. From the peak, we have now decreased at 1.6%. This thing's going away guys, it's almost over, we need to open up and get life back to normal. The seven day average present positive test is it now sits at 4%. So that means every time they take a test, only 4% of people taking tests are actually testing positive hospitalizations, a current seven day hospitalization average 4006 40 that is also an 8.4% decrease from the previous every time I give you these stats, the numbers are a decrease. So that's very good news. So hopefully we're seeing the end of the Coronavirus. And it looks like people are getting back to normal when I go out. Now I'm seeing very few masks. I'm seeing more and more people out Lana Braves this weekend had full capacity, there was like 35,000 people at every game. And so the fireflies are starting up this week as well here in Colombia. No, they're also starting up at the Greenville drop. So finally we're starting to see life back to some normalcy. And that's Gary's good news. So hope that you like our show. If you do feel please like us, subscribe to us and share us and please pass the word to any real estate agent, you know, in South Carolina or out. We are as I said earlier, picking up a lot of listens from the Denver area, the Seattle area, do have clients in both of those areas. That's why I'm picking up there. I'm also picking up in Cleveland in Atlanta. So help keep passing this word so we can continue to grow this great. Thanks everybody for all you do for us. And don't forget Blair Cato for your real estate book.