Home buyers have more clout now than they’ve had for years. So, they are more discerning, and focus only on the best houses at the best prices. If the seller won’t negotiate a satisfactory deal, buyers would rather walk away than overpay.
The incidence of failed transactions appears to be rising. Last year, buyers couldn’t buy fast enough. Many paid over asking price, overlooked property defects and bought “as is.”
Today’s buyers are cautious going into a transaction and less likely to accept full responsibility for correcting defects found on inspections. When a resolution can’t be reached on an inspection issue and the buyer decides to search for a better deal, the seller is left with two options: He can either put his property back on the market, or he can wait for a friendlier market.
The second approach is risky if you want or need to sell in the near future. Although the current market won’t last forever, it may be some time before we see a market that’s better for sellers than it is today.
HOME SELLER TIP: Before letting a deal fall apart, sellers should seriously consider their chances of negotiating a better deal with another buyer. Depending on state disclosure requirements, a seller might be required to disclose the inspection issues to future buyers.
For example, in California, sellers are required to disclose all material facts to prospective buyers. A material fact is one that affects a buyer’s decision to buy or the price he’d be willing to pay.
Disclosing newly found defects to a subsequent buyer could affect how much he’d pay for the property. Also, remarketing a property is a hassle, it takes time and it might be no more lucrative than the first deal. In fact, it could be worse.
Putting a property back on the market in a rising inventory environment can be challenging. Rekindling enthusiasm is difficult because most buyers focus their attentions on the new listings coming on the market, not than those that are back on the market.
A listing comes back on the market because something went wrong. If there are plenty of new listings to choose from, there’s less incentive to narrow in on a listing that someone else didn’t buy, even the listing is back on the market for a reason other than the condition of the property. For instance, a certain number of transactions fail because the buyers were unable to secure financing.
Last year, buyers were less inclined to withdraw from a purchase over inspection issues. The listing inventory was so limited that they were afraid it would be difficult to find something else to buy. According to the National Association of Realtors, inventories nationally now represent a 6-month supply at the current sales pace. This puts inventory levels in balance for the first time in years. By comparison, in April 2005, inventories in California represented a little over a 2-month supply; it gave sellers a decided advantage over buyers.
The primary reason there are more listings back on the market is that some sellers are reluctant to accept that the market has changed. It has often been said that when the market changes, sellers are the last to know. This is understandable. No one likes to hear that a valuable asset is worth less than anticipated.
There are sellers who realize weeks after they let a deal fall apart that they made a mistake. If you find yourself in this situation, consider a price reduction to send a message to prospective buyers that you’ve changed your stance.
THE CLOSING: Sellers can keep further negotiations over inspection issues to a minimum by providing presale inspections reports and disclosure statements to buyers before they make an offer.
Dian Hymer is author of “House Hunting, The Take-Along Workbook for Home Buyers” and “Starting Out, The Complete Home Buyer’s Guide,” Chronicle Books.