By Jeff Stewart, CCIM, Broker Associate, Stanberry & Associates
We are experiencing a high number of failed contracts. The reasons vary, but two stand out. First, after buyers repeatedly lose out to multiple offers, they begin to pull the trigger with less caution. The result is that buyers may jump into a contract first and look later. Also when buyers pay full price or above, they understandably expect the seller to remedy issues found by inspection. If that is not the case, they tend to back out of the deal.
The other issue – which raises the question of, “Is it legal?” and “Is it ethical?” – is that of simultaneously placing multiple properties under contract with the intention of closing on only one. First, as long as the buyer has paid an option fee for the right to back out of the contracts in some specified period of time, I doubt there is any legal issue.
Why would buyers place several properties under contract at thesame time if they only had interest in purchasing a single house? The answer varies, but the root cause is lack of inventory. Some buyers contract for more than one property and then decide which one to close based on the results of the inspection report. In other cases, out-of-town investors have been known to contract for several properties and then come to Austin to decide what to close and what to release.
Is it ethical? That is a tougher question. Certainly it does not feel quite right if you are the seller and you were acting in good faith and have begun to make moving plans. Buyers on the other hand argue that they paid the sellers for the right to option out of the property and that they are completely within their rights.
The question of ethics on subjects such as this can get tricky quick. For almost the last year and a half I have been participating in graduate classes at St. Edward’s University. The program, organizational leadership and ethics, has served to remind me that the Board of REALTORS idea of ethics may seem valid from our historical point of view. But that perspective is from a shared culture that has been largely unchanged for quite some time. As our industry rapidly changes because of shifts in technology and a society that expects near instant results, it will be a challenge to reconcile divergent perspectives in future ethical debates.
Jeff Stewart, CCIM
Stanberry & Associates, REALTORS