I have seen several transactions fall apart right after the contract has been bound as well as at the last minute because the buyer got cold feet. In many cases, they did not have a legitimate or legal reason to back out: They were experiencing buyer remorse.
Several years ago, I listed a condominium for a friend’s elderly mother, who was moving into an assisted living center in Nashville. After spending several weeks preparing it for sale, we listed property in the MLS. We received an offer from a young lady who had recently moved to town the same day we put it on the market.
The buyer’s agent said her client was going to pay cash and forgo an inspection and appraisal. She could close in two weeks. This was good news for my client, as she was on a fixed income and needed every penny she could get her hands on.
Three days before closing, I received a phone call from the buyer’s agent. She told me her buyer decided she did not want the condo after all, and was not going to close on the transaction.
Apparently, the buyer regretted submitting an offer on the property so quickly without consulting with her parents and fiancé. My client was not happy, to say the least.
She contacted an attorney and settled with the buyer out of court for an undisclosed sum of money. There is a happy ending, however. A few months later, we put the property back up for sale, found a qualified buyer, and closed the transaction without a hitch. My client was happy.
What causes remorse? Over the years, working with clients and my own agents, I discovered that these are the most common factors that contribute to buyers developing cold feet.
1. Family and friends are quick to tell them why they should not purchase the home
Discuss with your buyers early on in the process the importance of keeping things in perspective when family members parachute in at the last minute with their opinions. Or you can ask your client to include their family members in the home search process from the beginning.
If they start to have second thoughts, you can help them to maintain the “bigger picture” point of view and remind them of the reason for why they placed an offer on the home in the first place.
2. Buyers sometimes develop FOMO
Ongoing viewings of available inventory after the buyer puts out an offer may lead to “the grass is greener on the other side syndrome”: The buyer sees other properties that they think better fits their needs, which then leads them to doubt themselves and their original choice.
Stop sending your buyers any automatic emails from your MLS containing new listings once they sign an agreement. Keep the excitement of their purchase in front of them, so they stay focused on the home they chose, and their upcoming closing date.
3. Buyers sometimes feel pressure when they find themselves in a multiple-offer situation
Due to a low inventory seller market, a buyer may feel pressured to put an aggressive offer on a house because they lost the last four or five offers they made on other properties. They feel stressed and begin to have reservations. This is a difficult one to manage because this may have been the third, fourth, or fifth property they tried to buy.
Remind them of the tight market and the fact they made an offer on the house because it can meet their needs. Educating the buyer early on in the buying process can help them understand buyer remorse and may help to alleviate any second-guessing on their part.
4. Inspections kick up issues that make the buyer’s end goal hazy —even after the resolution periods are over
They find other issues with the house that were not covered in the inspection contingency release.
In this situation, you need to advise the buyer they are past the contract’s inspection contingency period, and if they back out there could be serious legal consequences for them.
5. They feel you have not provided them with good counsel and guidance
Make sure you deliver outstanding customer service and offer professional expertise on a daily basis, so they know you are walking with them through the transaction. Also, communicate with them regularly so that you can quickly address any of their concerns.
6. Mental or emotional issues come into play
Advise your principal broker when working with people who exhibit behavior that causes concern. The broker is there to help you prevent issues popping up later by way of a lawsuit or a regulatory complaint. Obviously, if a client makes you feel physically threatened or in danger, seek safety and contact 911 immediately!
Whatever the reason for a buyer’s remorse, you, as their agent, have a fiduciary responsibility to discuss with your client the legal consequences of backing out of a contract without legitimate reasons that would stand up in court.
You should discuss the significance of breaches of real estate contracts early on in the home-search process, or when you discuss the “default” section of the purchase and sale agreement.
You can’t force someone to buy a property they don’t want. However, a forthright, clear and honest conversation with them might lessen the chances of the buyer deciding to walk away from the transaction for no apparent reason. This is drama that you and your broker don’t want or need.
Encourage your buyer, letting them know you acknowledge their remorse and want to assist them in making a wise decision on whether or not to continue in the transaction. If they trust you and have confidence in your ability to represent their interests, they might be more open to seeing the deal through to closing.
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John Giffen is Director of Broker Operations for Benchmark Realty, LLC in Franklin, Tennessee. He is the author of “Do You Have a Minute? An Award-Winning Real Estate Managing Broker Reveals Keys for Industry Success.”