March 25th, 2022 4:04 PM by Linda Holley
I recently attended a training class on Florida real estate contracts taught by Attorney Maury Azerad, the in-house attorney with Fine Properties.
Financing clauses in Florida contracts. Mr. Azerad says that cash buyers may select “cash” on the contract form--but that does not mean that they can’t get a mortgage. It means that there is no way out if they can’t get a mortgage.
Mr. Azerad explains that getting a mortgage offers protection for buyers through appraisals and inspections. If a home is under contract by a cash buyer and it has an old roof that is still in “working condition,” (not leaking) a cash buyer can’t get out of the deal. If the home was under contract by a buyer getting a mortgage, a lender probably won’t finance the home, so the buyer can get out of the deal and get his/her deposit back.
Perhaps I’m a bit jaded, but I’m very often on the other end of the spectrum putting in offers for buyers getting financing. We are consistently outbid by cash buyers who can close in 10+ days. It’s enough to make me think about jumping off the Skyway Bridge. But no. The pendulum will swing back to a buyer’s market where sellers are luring people into their homes with champagne, open houses, and buyers looking at 20 homes before making a decision. Buyers’ agents will start negotiating again and there will be appraisals with no surprises, no escalation clauses, and easy closings. One can hope, anyway.
I’ve done some independent research today on what drives buyers to overbid in auctions. People experience psychological effects in bidding wars—whether it’s eBay, a car auction, or home-buying. Cash is king in multiple offer transactions, but that can be a double-edge sword. Yes, the cash offer with quick closing in real estate almost always wins, but how many times have you heard that you can win the battle and lose the war? This blog has previously discussed extra protections for buyers getting mortgages and their ability to terminate their contracts and get their deposits returned. However, multiple offers seem to be exciting and submitting the “highest and best” is difficult for some to resist. In any auction situation, buyers are placed under unique psychological conditions, and they might spend more than they intended in the first place.
Scarcity makes humans overvalue things we think will run out. We panic. Consensus is a powerful persuasion tool in bidding according to Medius.* Retirees are moving down to Florida from the northeast. Our snowbirds, or winter residents, are in competition as they bid on their dream—their retirement home—everything they’ve wanted and worked for--is getting away and won’t be there tomorrow. What a dreadful thought! These emotional decisions reinforce bad buying behavior, and contribute to price wars and homes being sold considerably above market value.
Can you walk into a casino and not drop a quarter in the one-armed bandit or walk by a Black Jack table and not sit down? Must admit that I can’t, so I understand the psychological effects of gambling and multiple offers. One night, many years ago, I was sitting at a Black Jack table in Las Vegas after my co-workers had left hours before. The dealer said, “Ma’am, we have more money and time than you do.” I didn't listen; at 7:00 a.m., I walked out of the casino to catch my ride to the airport. Reality set in as the bright desert sun hit me in the face with only a nickel in my pocket.
People with cash to spend...beware and be smart! A bidding war is a gamble, so listen to your Realtor and don't overbid.
Call Linda Holley, Realtor, GRI, SRES, Fine Properties, Sarasota,
941-914-4914 LindaHRealtor.com “The best move of your life.”
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