Can a seller still back out after we agree to his counter offer?

Dave,

We recently made an offer on a house and the seller sent us a counter offer that we agreed to, but then we received word that he had changed his mind and was going to sell the home to another buyer. We feel like he made a deal and he should have stuck to his word and had to sell it to us. We feel we lost out on the perfect home and we are now struggling to get in the mood to find another home. We have lost our oomph.

Dale & Nicole, Grand Junction

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Dale and Nicole,

No doubt you are feeling “wronged” by this sellers actions, but it may have well been within his rights to not sell you the house, even after a counter offer was given. When the seller made you the counter offer, I am assuming, that it was in writing. A seller has the option to withdraw a counter-offer any time prior to your “accepting” the counter offer in writing and delivering it to the seller's agent. If your acceptance was in writing prior to the counter-offer being withdrawn and was delivered to the seller agent, then you would have a binding contract on both parties. If this was the case the seller should honor the contract and in the state of Colorado, close the transaction with you as long as you abide by the dates and deadlines of the agreed upon contract.

If any part of this offer/counter-offer process was done verbally, then you would have some significant gray area. Verbal offers and counter-offers are often used by agents throughout the process of negotiations, but when doing this you open the door to many, much more significant issues and misunderstandings that often times lead to problems. If you only accepted verbally or the counter offer was made verbally, then I would say that you do not have much of a case. Without written and signed contracts, enforcement becomes a larger issue and inevitably it comes down to he said/she said. You would need to weigh the cost/benefit of attempting to hold the seller to a verbal commitment and I believe that would be very difficult to achieve.

“Things do not always work out the way we think they should and often times in negotiations people change their mind on an ongoing basis, I see it every day. ”

Things do not always work out the way we think they should and often times in negotiations people change their mind on an ongoing basis, I see it every day.  The best rule of thumb is to do everything in writing and be prepared to respond promptly and make sure you respond in writing. Communication is difficult, even under the best circumstances, this is part of the reason why we have contracts and we do our best to make sure all negotiations are done on paper. Contracts should spell out the terms and conditions and remove interpretation or changes of mind from the equation.

Please remember this is not legal advice and I always recommend you speak to an attorney and see if you have any legal grounds for recourse, he/she will be able to steer you in the right direction. Don’t lose hope because of this set back, doors open and doors close and maybe an even more perfect home is right around the corner. Keep the faith.

Dave Kimbrough
The Kimbrough Team

What exactly is title work?

Dear Dave,

We are in the process of selling our home and will be purchasing a new one. Right after we listed our property for sale, we received title work from our agent on our home. Can you explain what exactly title work is? We were told that we need to review it, but what should we be looking for on the property we are selling? When we purchase, what should we look for on the title work for the new property – anything different we should look for or the same stuff? Thank you for your help.

Dennis, Grand Junction

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Dennis,

This really is a great question and a part of the buy/sell process that is far too often glossed over. It is glossed over, because most of the time people and agents do not know how to answer your question thoroughly and with command of the specifics of what you are looking for. I am very lucky to work closely with Bob Reece, President of Advanced Title, who is one of the very best real estate experts I know and knows title work inside and out! I have relayed your question to Bob, to ensure you get the best possible explanation!

"Title work" is really the title commitment and the documents that are referenced in the title commitment such as protective covenants. The commitment outlines the current status of title interests in the property such as the name of the owner(s), any lender and other interests such as easements holders, and the commitment gives sellers and buyers the opportunity to review the title to the property before the closing occurs. The seller should compare the deed with which they acquired ownership to the property with their name(s) as it appears on the title commitment to make sure it is the same. A similar comparison for the legal description is essential. The third area of the commitment are the Exceptions to Coverage that lists various protective covenants, easements, agreements, reservations, etc. that affect the property. These items should compare favorably to the exceptions that appeared in the title policy that was issued when the seller originally acquired the property. And, by example, any easements granted by the seller should also appear as an Exception to Coverage on the title commitment. Any discrepancies found by the seller should be disclosed to his real estate agent as soon as possible and prior to closing so a buyer becomes fully aware of the matters that affect the property being purchased.

A buyer would be wise to review a title commitment in similar fashion; to make sure their names properly appear on the title commitment as found under the real estate contract and on any lender application; that the legal description matches the one found on the seller's acquisition deed; and to review the documents referenced as Exceptions to Coverage to make sure they understand any obligations, restrictions to usage or third-party rights that affect the property about to be purchased.

“Your rights and the rights of others should be spelled out in your title work and thus leave few things, hopefully, to chance.”

As Bob intimates, your title review is a very important part of the process, as it lays out virtually everything you need to know about your property and the property you are going to purchase. Your rights and the rights of others should be spelled out in your title work and thus leave few things, hopefully, to chance.  It is always sound advice to ask questions about ANYTHING you do not understand.

I hope this helps and remember if there are any discrepancies make sure to bring them to the attention of your agent or the title company that has provided the title information so they can be addressed and remedied if need be. Best of luck selling and buying!

Dave Kimbrough
The Kimbrough Team

Home updates with the best resale value

Dave,

We are considering selling our house in a few months and have done some research online about what home updates will get you the best return when selling. There are mixed opinions in the articles we’ve read. We don’t want to pour money into updating a part of our house that will not increase our home’s value—especially since we won’t live here any longer to enjoy it.

What home updates do you suggest to your clients when they are getting ready to sell their house? Do we need to consider big projects or will small things—like painting—make a difference?

Becky, Fruita

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Becky,

Super great question! It is one of the most frequent questions I get and the reason I spend at least one column per year addressing which home improvements provide the biggest bang for the buck. After all, who wants to do upgrades that don’t pay off? NOBODY, but you must remember that not all upgrades or home improvements are created equal! Listen, if you spend big money on a cigar room, wine tasting enclave, commercial kitchen or home dance studio you can’t blame anyone but yourself when your return on investment is non-existent. Spending too much on over personalized upgrades will never pay off a big return, if any at all. However there are home improvements that do provide a great return on investment.

“The two home improvements that will generally create the largest bang for the buck return and are always the first two I discuss with people are flooring and paint!”

The two home improvements that will generally create the largest bang for the buck return and are always the first two I discuss with people are flooring and paint! In my experience, over 15 years and literally thousands of homes, buyers have the most positive reactions over flooring and paint and the reaction is universal to price range. It does not matter what price point you are talking about, buyers love the smell of new carpet and new paint and remember buying a home involves all the senses and smell is a very influential one. For example, and heaven forbid, you have blue, sage or mauve carpet your return on investment will be over 100%! If you have 4 bedrooms and each one has been painted a different color of the rainbow, your return on investment will be over 100%. These are easy improvements to make a decision on. Do not procrastinate that kind of improvement, just do it and you will be glad you did. 

There are also other easy and cost effective home improvements. Next to flooring and paint, new light fixtures, plumbing fixtures, doors, door knobs and hinges also provide a great return on investment. In the grand scheme of things all these improvements are also quite cost effective and will not break the bank, however they will provide great return on investment. If you have a 70/80’s vintage home and have the old dark stained wood doors, replace them with white 6 panel doors (around $100 each at Home Depot) and behold the transformation! Give that dark dingy hallway a bright and light feel! While you are at it, remove the brass door knobs and brass hinges and take it a step further. Same goes with light and plumbing fixtures, costs are not huge and the rewards are awesome.  Lastly, don’t neglect the outside of your home. Outside home improvements are also cost effective and provide a great return on investment.

If you want all the latest and greatest on home remodels and improvements go to Remodeling.com and their cost vs. value report for 2016 and get the skinny on all things home remodel and how much you can expect to get back on your investment. This is a great resource that also breaks things down regionally so you can see what is most important in our neck of the woods. Hope this helps and best of luck on your home's facelift.

Dave Kimbrough
The Kimbrough Team

Move the unpaid balance of one home loan over to the loan on a new home?

Dave,

When we moved here in 2007 and purchased our home for $243,000 and refinanced in 2008 for $276,000 and currently owe about $255,000. We think our home would sell in the neighborhood of $250,000, which leaves us with about a $20,000 short fall, when we factor in the costs to sell. We are not in financial distress, but would really like to move to a larger home that would better accommodate our family. 

We have saved up enough money for our down payment on the new home and were planning to have the amount we were short on the sale of our home transferred over to our new home. We have been told we can’t do that and must have the money to cover the amount we are short at the time of closing. We do not have the extra money available to cover the loss and would like to move that over to our new home, as we can afford the higher monthly payments. Is this possible? Or are we just stuck where we are? We do not want to wait to move into another home if there are any alternatives. 

Thanks.

Danny and Colleen, Grand Junction

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Danny and Colleen,

It does appear that you may be stuck. It is true that you can’t just move the unpaid balance of one home loan over to the loan on a new home. Your loan needs be settled at close, so the lien can be released to allow transfer of title over to the new owner. It does seem that it would make sense, since you can afford the monthly payments, to allow a reasonable amount to transfer over, but that is just not the case, your current mortgage must be paid off in full and released at close.

There may be other options. If you have any other tangible assets that can be used to collateralize the short fall, that may be an option. If you have any other property that has an equity position, you may be able to look at refinancing and pulling some of that equity out to cover the short fall on your home and get your short fall covered. Another option is looking into your retirement portfolio. If you have a 401k, you may be able to borrow from yourself and then pay yourself back with interest. In this case you can borrow the funds from your retirement account, look out to see if there are any penalties, and then pay yourself back over time and give yourself an option to get out of your existing home and make some money for retirement at the same time. 

“If you are stuck, then I make the suggestion to ride it out and work on paying down your principle debt and as the market continues to improve, meaning prices are moving up, you are working to reduce your debt basis down and hopefully speed up the time table for moving out.”

If you are stuck, then I make the suggestion to ride it out and work on paying down your principle debt and as the market continues to improve, meaning prices are moving up, you are working to reduce your debt basis down and hopefully speed up the time table for moving out. You can also spend that time making some improvements that are cost effective and will result in added value in an attempt to speed up your homes appreciation as compared to the general market. The biggest mistake I see in cases like this are people just loose hope and let their property start to slide in appearance and upkeep and it has the opposite effect of what I am pointing out. Making modest and cost effective improvements can help bolster your eventual selling price and if you work on reducing your principle debt, you may be able to move faster than you thought possible. You just need to be determined and don’t get side tracked with what you can’t do and focus on what you can do and create a plan to get out of your current undesired situation.

Don’t get discouraged, get determined and make a plan to get your debt down and bolster your value and you might get in that new home sooner than you thought possible. Hope this helps, but sorry I did not have a more immediate and timely solution. Best of luck.

Dave Kimbrough
The Kimbrough Team

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