Sellers Beware!

I don’t know if it’s because of the TV reality shows they’ve been watching or because they’re tired of being at a disadvantage in this long lasting sellers’ market, but lately I’ve noticed a few more buyers making demands of sellers around closing time. It’s only happening in a small number of transactions, but this is something I used to rarely ever see.

So what types of demands are buyers making? There are two main types that I’ve been seeing (although many others are possible). The first type of demand is made before closing. Typically, a day or so before closing so the seller feels pressure to capitulate in order to make sure the deal closes, the buyer claims there’s a defect in the home that wasn’t there at the time the agreement was entered into and threatens not to close unless the seller reduces the purchase price. The second type of demand is made after closing. In this case, the buyer claims the seller left the house in a mess and/or there was damage to the home or the appliances and threatens to sue the seller unless the seller pays for cleaning and the repairs to whatever is allegedly damaged.

Before we look at how you might respond to these types of demands when selling your home, let’s take a step back and examine a seller’s obligations because the first thing you need to know is whether you’re in breach of your obligations. Once you determine that, you can decide how to respond.

Your obligations are set out two places – in your agreement of purchase and sale with the buyer, and by the law.

The first type of demand is usually covered by the law. There is law that states the buyers are entitled to receive the home on closing in the same condition it was in on the date they entered into the agreement of purchase and sale, unless the agreement provides otherwise. (The agreement may contain a clause, usually referred to as the “as is” clause, which states the buyers will receive the property in whatever condition it’s in on closing regardless of the condition it was in on the date of the agreement.) If there have been any material changes to the property since the date of the agreement, the buyers may have the right to a price reduction or to have the agreement terminated, depending on the circumstances. But the change has to be material, which raises the question of “what is material?” It’s not unusual for both parties to disagree about this and that becomes an issue in the negotiations.

The second type of demand is covered by both the agreement and the law. With respect to the home being left sufficiently clean, most agreements of purchase and sale contain a clause stipulating the seller will leave the property in broom swept condition and free of debris on closing. This means exactly what it says. You have to remove all your stuff and sweep the place clean. You’re not obliged to wash the floors or wipe the cupboards or scrub the sinks even though most sellers do those things as a courtesy for the buyers. When it comes to things being damaged, these would be covered by the law as set out in the preceding paragraph unless the agreement contains a clause stating something different. (For example, the “as is” clause  or a clause stipulating that all appliances will be in good working order on closing so even if they’re broken at the time the agreement was entered into, they have to be fixed before closing.)

Okay. So now we know what your obligations are as a seller. Let’s say your buyer comes to you and says “I noticed a crack in the foundation that wasn’t there when we did the deal and I’m not going to close unless you reduce the price by $50,000”. What are you going to do?

First, you’re going to do your best to determine if the crack was there at the time the agreement was signed. Did you see it? Did you even know about it? Was it hidden or could the buyer have seen it when he was looking at your home? Was it mentioned in the home inspection report you made available to buyers? Did this buyer do his own home inspection? Anything you can find to show the existence of the crack at the time the agreement was signed and that the buyer could or should have known about it will strengthen your case.

Second, you’re going to consider your options:

  • Tell the buyer you won’t reduce the price because the crack was there at the time of the agreement, the buyer could have seen it, it was in the inspection report and besides, it’s such a small crack as to be immaterial.
  • Reduce the price by $50,000 because it’s a new crack or because you don’t want to risk the deal not closing.
  • Agree to a compromise and reduce the price by a lesser amount, whether or not the crack was new.

What would you do if your buyer comes to you after closing and says “The kitchen faucet isn’t working and you left the house a mess. I’m going to sue you unless you give me $3,000”? Your options are similar to before:

  • Tell the buyer the agreement only called for the home to be left in broom swept condition and free of debris, which it was, and the faucet was working when you moved out and you don’t know what anyone did to it after the buyer moved in. (As a side note, two separate buyers recently accused two separate clients of mine of not leaving their homes in sufficiently clean condition. One client had hired a professional company to clean the home after moving out even though that wasn’t required and the other had spent 12 hours along with a cleaning person giving the home a thorough scrubbing which wasn’t required. You can guess which option my clients chose.)
  • Acknowledge that you left stuff behind and either arrange to have it removed or pay the buyer to have it removed. If the faucet wasn’t working properly, have it fixed or pay the buyer back for what it cost to have it fixed.
  • Agree to a compromise and pay the buyer some lesser amount to pacify the buyer and avoid a potential lawsuit.

Generally speaking, there are three components that go into determining how these situations are usually resolved:

  • First you determine the parties’ rights and obligations under the law and pursuant to the agreement of purchase and sale.
  • Then you look at the facts. (When did the crack appear? Did the buyer know about it? How clean was the house? Was the faucet really broken?) It’s not unusual for each party to have a different view of the facts. (The seller may say the crack was there all along and the buyer may say it just appeared.)
  • Then you negotiate. How hard you negotiate depends on your rights and obligations and on the facts, but also on your appetite for risk. What will the repercussions be if the deal doesn’t close? How concerned are you that it may not close?

The third component often turns out to carry the most weight. Every person is different and every situation is different. You have to do what’s right for you under the circumstances. As I said before, these situations aren’t all that common, but if you do happen to find yourself facing these kinds of demands when you sell your home, at least you’ll be prepared. One final word of advice: I’d strongly suggest you speak to your lawyer if you ever find yourself in this kind of situation.

And if you’re a buyer, do the right thing. Don’t try to take advantage of a situation to renegotiate the deal to which you originally agreed.

As always, I’d be happy to talk to you about your options if you’re thinking of buying or selling in the near future. Also, if you know anyone who is interested in learning how the market works and would like to receive the kind of help that involves honest answers, straightforward advice, no pressure and being treated like family, please let me know the best way for me to connect with them because I’d like to offer them this kind of help. And as always, don’t be shy if you have any questions or comments about this post! Thanks for reading.

Tags: , , , ,

No comments yet.

Leave a Reply