Diary of a Busted Austin Real Estate Deal
Well meaning Agent blows deal for Buyer
Recently a buyer on one of our listings terminated the contract, and then threatened to sue us and the Seller after the property was placed back on the market and a new offer was accepted. As is often the case with deals that go sideways, the buyer’s misfortune can be directly attributed to her real estate agent and her lack of understand about the sales process – particularly the importance of observing contract dates and deadlines.
Let’s take a look at the string of bizarre events in this deal and see how the agent’s lack of attention to important aspects of the deal cost his buyer a house that we later learned she desperately wanted.
Agent failed to ensure timely delivery of the Option Fee.
His excuse was that the “traffic was too bad at 3PM on a Friday” for him to drive the funds to our office. Instead, he chose to leave the Option Fee and Earnest money at the front desk of his office to be picked up by a courier, even after being told by the Title Company that a courier would not be able to pick up and deliver the funds that day, thus it would be Tuesday before it happened (due to a Monday Holiday).
The agent then chose to leave town the next day, Saturday, without personally delivering the Option Fee to our office, which would have ensured timely delivery and compliance with the Termination Option provisions of the sales contract. The agent knew or should have known from the outset that his actions regarding delivery of the Option Fee would result in his buyer not having an Option Period. This was the first red flag for me, and a head scratcher. How could an agent not make delivery of the Option Fee and Earnest Money top priority?
The Option Fee was received by the Seller on the 5th day of the contract, three days late. I discussed with the Seller the fact that the Buyer actually had no Option Period due to the fact that delivery of the Option Fee did not happen as required. I discussed the pros and cons of accepting or rejecting (mailing it back) the Option Fee.
The Seller decided to treat the delivery of the Option Fee as if it had been timely, thus providing the buyer with the benefit of having an Option Period to which she was not entitled. The buyer, as far as we know, did not know that this “near miss” occurred.
The agent chose to place his personal convenience and holiday travel plans above protecting the interests of his buyer. It was only the Seller’s good nature and pragmatic approach to working the deal that prevented this from becoming an issue of contention.
Agent failed to deliver Buyer’s loan pre-approval letter as promised
Buyer’s Agent promised upon delivery of the offer to provide buyer’s loan approval letter “within a few minutes”. Though not a critical element of the written contract, the loan letter was requested, delivery was promised, and the buyer’s agent failed to follow through and provide the letter as promised. Normally, when an agent tells us they have a letter in hand and it will be sent in a few minutes, it happens. This time it didn’t.
By itself, this is not a huge issue, but it’s one of multiple instances of the agent not performing or following through on an important item, which led to the eventual erosion of our confidence in him as an agent and his ability to get things done, which would in turn factor heavily in the seller’s decision to seek a new buyer. We’ll get to that in a minute.
Buyer’s Agent failed to provide Buyer’s lender with the contract
On Wednesday, the day after the Option Period expired, Sylvia contacted the buyer’s lender to check up on the loan and to make sure that things were on track to close on time, that the survey and appraisal had been ordered, etc.
The lender had no knowledge whatsoever of an existing contract and had not been provided with the contract. This is on day 6 of a deal that the Buyer offered to close in 14 days. This was a shock to Sylvia. The lender asked if there was a survey and was told there was not. Sylvia asked if the lender could still meet the approaching closing date, which was now 8 days away and was going to be a mailout to the Sellers (subtract 2 days). The lender said that it was possible, but that they needed to get going on it immediately, that instant, if it was going to happen and even then it would be iffy.
Sylvia called the buyer’s agent immediately to tell him that the lender did not have the contract and to discuss making sure the deal keeps moving. The agent then mentioned that he was at the house waiting for a plumber and frantically trying to arrange bids for several other things over the next couple of days. Sylvia informed the agent that the Option Period had ended the day before. His response was “No, it didn’t. It ends today and I’m still getting bids”.
Before Sylvia could discuss this further, the agent informed Sylvia that the lender was calling in on his caller ID and that he better talk to her, and the conversation ended. Sylvia then called to tell me that our suspicions were correct; the agent didn’t know that the Option Period had already ended.
Agent failed to properly calculate the number of days in the Option Period.
Normally, Option Periods do not simply expire without any communication (repair requests) from the buyer, except when the agent doesn’t know how to count the days, or forgets about the deadline. The Option Period was for 5 days. The Option Period expired with no communication whatsoever from buyer agent.
The Option Period thus terminated and, for the second time in this deal, the buyer officially had no Option Period as a result of the failure of the buyer and her agent to observe and follow important deadline dates.
Conversation, again, with the Seller
I explained to the Seller after Sylvia had informed me that the agent had his dates wrong, that the Option Period had in fact expired without any repair requests from the buyer. The seller asked “why would they just let it expire?” and I explained that the agent had not properly calculated the days in the Option Period and is under the incorrect assumption that the option period ends a day later (the current day) than it actually did, and was apparently still trying to get bids for repair items.
I then, for the second time in as many days, discussed with the seller the implications of the Buyer having no Option Period. I also alerted him to the fact that the closing would probably be delayed because the loan processing had not been initiated until that day.
It was decided that we would wait and see what happens by the end of the day, and make a decision as to how to proceed at that time. The conclusion being that the Seller was under no obligation to agree to any repairs whatsoever due to the expired option period, but that if it looked like the deal might blow up over modest repair requests, he could always go ahead and agree to a final amendment anyway. We would just wait and see what the buyer asked for.
Agent argues about indisputable facts and lets his personality override protecting his client
Later that afternoon, the agent called our office and spoke with me. He said the buyer was going to need to extend the Option Period for two additional days as further bids for repairs at the property were needed. At that time I explained to the agent that the option period had in fact expired the day before, and asked if he was aware of that fact.
The agent argued, saying the Option Period had not expired and was still in effect until midnight that day. I suggested that he simply look at the Effective Date written on the contract, and count the days himself, but that it was a fact, not my opinion. I then explained that the sellers had already graciously overlooked the fact that the Option Fee was not delivered on time, and that now the Option Period was in fact expired. The agent said, “whatever”.
I further explained that the Seller was reasonable and wanted to make the deal work, but that we needed good solid justification for extending the Option Period given the fact that it had already expired. He responded in a dismissive tone again with, “Whatever…they can either extend the Option Period or I’ll send over a Termination Notice. You want me to just send the Termination Notice?”
I asked the agent, “are you deciding to terminate the contract on behalf of your Buyer or has she instructed you to say that to me? You’re not making things better for your buyer. I’m trying to help you make this deal work but I need to know where the buyer stands and why more time is needed so I can explain it to my seller”.
The agent then accused me of being difficult to deal with and went off about how he’s the “best buyer’s agent in Austin” and has never had a listing agent give him this much trouble.
Trying to keep things moving toward a successful close, I suggested the agent go ahead and send a written amendment for extending the Option Period, along with an explanation for the request, and that I would present it for consideration to the seller, but that the Option Period was in fact expired and that he should inform his buyer of that fact. The agent said he would be sending both an Amendment to extend the Option Period AND a Termination Notice, in case the seller “drags his feet” and let’s the option period expire.
Arggghhh! I again tried to clear up his confusion about the dates and explained that a Termination Notice would be just that, a Termination of the deal, and suggested he carefully consider his buyer’s interests and explain the possible consequences to her before doing that.
Are you hangin’ in there with me on this one? It gets better.
Steve Calls agent’s Broker to discuss the poor handling of the deal
After the conversation with agent, and coming to believe that he was not capable of completing the efforts needed to keep the deal alive, I called the agent’s Broker, and provided an overview of the above facts. The Broker asked “what do you want me to do?”. I said, “I want you to get involved in this deal and supervise this agent because, in my opinion, your buyer is not being competently represented and is going to lose the deal”. The Broker indicated that he would step in to supervise the agent. In fact, as it turned out, he did nothing.
Buyer Terminates Deal
That evening, the agent sent over both a Termination Notice and an Amendment requesting extension of the option period. Of course, the Termination Notice controls and terminates the deal, period. The Amendment is meaningless, even if signed, unless it has language such as “this Amendment rescinds and voids the Termination Notice dated dd/mm/yyy”, which it did not.
So, the contract was at that point officially terminated by the buyer. I called the Seller to explain where the deal stood.
At this point, the other agent has provided us with no hint as to why more time is needed, other than they are still trying to gather bids. Despite trying to ascertain why the bids were needed, we have no clue as to what the buyer is thinking with regard to possible repair requests. The loan hasn’t even been started, so we know the closing date is also going to have to be extended, probably by 10 days if the weekend rolls around on us.
The agent is combative and unreliable, so we cannot trust that two more days of waiting will result in a positive outcome. In fact, the buyer has terminated and we may never hear back from her at all, nor does she have any obligation to come back to the deal. The seller could try to play hardball and lock the buyer into the deal based on the missed option period deadline, but the buyer would have other outs, and it’s not smart to invite legal issues into a deal. The other agent has yet to follow through on one single important deadline or promise, so the Seller and I are left to wonder why anything will be different in two days.
Back on the Market
The Seller decides to accept the termination (versus disputing it due to expired Option Period and trying to force the buyer to stick to the deal as-is).
I changed the listing status back to “Active” late that night, and by noon the next day, two new offers had been received from two new buyers.
First Agent informed of new offers and invited to get his act together
With multiple offers, both new parties are informed that multiple offers exist and instructed to let us know whether to leave their offer as-is, or to submit any changes. Additionally, Sylvia talks to the other (first) agent and explains that if the former buyer still wants the house and would like to submit a final Amendment rescinding the Termination Notice and asking for any final changes, he better get going.
The agent still didn’t get it. He insists more time was needed to meet additional vendors for bids before the Buyer could submit a new offer. Sylvia then stated point blank, “you do realize that the Seller is likely to accept one of the new offers today and this is your last chance for your buyer’s offer to be revived and considered alongside the other new offers?”. The agent remained steadfast in his refusal to move any faster.
New Offer Accepted
The seller accepted one of the new offers. The former agent and other new agent were informed. The former agent became enraged, saying “we were still negotiating and you knew it. This is unethical”. All we could do was to remind the agent “your buyer terminated the contract” and “we tried to help you stay in the deal”. The Broker for the first agent then called in a panic. “Our buyer wants the house. She’ll take it as-is. What do we need to do to keep this deal alive?”.
Next, the letter from the first buyer threatening lawsuit arrives. She has no clue what’s happened. This is followed by more calls from the Broker, with veiled threats that the Buyer may in fact sue. I just keep saying “the buyer terminated the contract, end of story”. Meanwhile, we’ve already moved down the road with the new buyer.
The new buyer sails through the inspection, accepting the property as-is without any repair requests or price adjustments, and closes the deal only a week later than we would have with the first buyer. Sweet! The other (new) agent was on top of every detail and the entire deal went off like clockwork. What a contrast to the first agent.
If you’re being represented by an incompetent, arrogant agent, it can cost you dearly. There are many dedicated, hard working agents who want your business and want to help you, but like all industries, the quality of service you receive can vary.
We later learned that the first buyer desperately wanted this house and would have stuck to the deal no matter what. She was both devastated and livid about losing the home. That’s really sad. She blames her loss of the home entirely on me and Sylvia and, as far as we know, doesn’t have a clue about her agent’s mistakes and poor handling of her side of the deal.
I asked the Broker the following questions during one of our conversations:
1) Why did the buyer sign a Termination Notice? What did she think that meant and why didn’t her agent explain the consequences of terminating the deal?
2) Why was the buyer under the impression that the Seller would hold the property off the market for her after termination?
3) Why did the agent not call her instantly upon learning of multiple new offers, and get her back to the table right away?
4) If she was willing to accept the property as-is no matter what, what was the reason for obtaining all of the remodeling bids? Why not ballpark the big items and shoot an amendment to the seller and see what happens?
5) And why didn’t you, the Broker, step in after I provided the courtesy “heads up” that the deal was heading south?
I understood the Broker’s measured response. And I heard between the lines – “we screwed up big time”, though he couldn’t come out and specifically admit that.
Never have I seen a buyer so poorly represented in a deal.