Strategy In Brief

Spectrum of Uses: Moderate

The Problem

The buyer’s agent, while in escrow to purchase, discovered that improvements were not as represented. The buyer did not wish to complete the purchase but cancellation became a problem.

The Reason

The elderly seller died from the stress of this transaction gone wrong. The seller’s beneficiaries to the estate did not want to return the buyer’s deposit.

The Solution

The buyer’s agent discovered a black swan that produced the necessary leverage that the buyer needed to cancel expeditiously. Verifying receipts with work product avoided a $17,000 mistake.

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$37,000 for a $560,000 home.

In this strange and tragic case, Carol, a middle-aged unmarried mother wished to purchase a condo in San Diego, California. The location and floor plan were perfect for her needs. Her agent, Helen, moved swiftly to put the condo under contract. Then things got really strange.

He Passed Away While the Home was in Escrow

Though sad and regretful when we lose a loved one, we rarely plan for it. In this case, it was an 84 year old man named George, who lived alone. George planned to move closer to his children so he put his home on the market. Helen, the buyer’s agent, showed Carol the condo. 

Carol loved the home. Her offer was accepted and she was happy. Inspections began, good faith deposit was put into an escrow account, and everything seemed to be going well. 

When she met the seller, Helen saw that nearly all of George’s personal articles have been removed and yet the owner was still living there. The seller’s agent had instructed George to move all of his possessions from his home except a chair and box of personal effects – before the transaction was confirmed to move forward! 

Now things get strange. The seller’s agent represented that she had numerous improvements made (at the seller’s expense) to support the price of the condo.

Inspections proceeded on schedule per contract. However, the inspector turned up some disturbing issues. A new deck have been constructed at the back of the condo, ostensibly to replace an old deck suffering from wood rot. 

Shoddy workmanship on this new deck raised Helen’s suspicions. She asked the seller’s agent who had performed this work, which neither met building code standards nor was acceptable for use. The seller’s agent proudly produced receipts for work performed in excess of $17,000!

Having been a home builder in her own right and also involved in many remodeling and repair projects over the years, Helen quickly recognized deeper issues.

The value of the home and improvements fell significantly below the agreed upon price. By rights of the contract, the buyer may cancel upon completion of inspections. Carol was very disappointed but she had to let the home go. That night, George tragically suffered a heart attack and died. 

What Now?

What do you do when the seller is no longer available in this case for good? How can you complete the transaction or the cancellation? It is a conundrum.

Helen, our tenacious buyer’s agent, went to work. She chased down the party who had the control of the property through the former owner’s will to determine the beneficiaries of the estate. The beneficiaries, George’s three adult children, now had control of the property.

When Helen nonchalantly asked the seller’s agent about the work, the seller’s agent said that she had brokered the work and produced a receipt for $17,000. Helen knew that this work would not cost anywhere near $17,000 to perform nor was this work properly carried out – a case elder abuse- and Helen knew it.

The Buyer Could Not Accept

As the new owners, the children were anxious to move forward to close escrow and complete the purchase. Given the state of the repairs, however, the buyer could not move forward. Helen advised Carol to cancel the escrow. She suspected that if this is the tip of the iceberg, it would not be in her client’s best interest to proceed.

The Buyer’s Agent had a Problem

The beneficiaries (and new owners) weren’t happy about this cancellation and decided they would just keep the good faith deposit money of the buyer, 3% of the purchase price. Besides lacking legal grounds to keep this money, the beneficiaries probably did not fully appreciate the bigger picture.

Helen needed leverage to free her client from this transaction expediently so that Carol could find and purchase another home. Helen understood the contract’s conditions inside and out. She knew her client was fully within her rights to demand cancellation and press this point further if needed. It was needed. 

The Art & Science of Negotiating: The Black Swan

A black swan, popularized by the author Nassim Taleb in The Black Swan: The Impact of the Highly Improbable, is an “unknown unknown” that can appear at any time. Because black swans are by their nature “unexpected” you can miss them if you’re not always on the look-out. Black swans are important in negotiations because they can dramatically change a deal.

It’s easy to miss a black swan because our minds normally function to verify our current view of the world – our framing. Black swans appear outside of our frame of reality so they may actually appear invisible simply because they don’t fit!

Carol had already been dealt one black swan with the death of the seller. Her agent, Helen, had discovered a second one -elder abuse – and now it was time to play that card.

Mischief Managed

Helen, the buyer’s agent, had to play this one carefully or she risked having Carol, her client, pulled deeper into the fray. At this point, the beneficiaries and their agent did not fully appreciate their contractual obligations and they weren’t cooperating. The seller’s agent dug in and was obstructing due process.

Given that Helen knew the seller’s agent had defrauded her client, Helen no longer felt that the seller’s agent could remain party to legitimate negotiation. Time to play the black swan, not with the seller’s agent but with the new owners. 

This was a powder keg. The new owners had just lost their father. Consequently, they obstructed the cancellation and refund of deposit. Now, they would discover that their father had been defrauded by his agent. Helen chose her moment and her words shrewdly and carefully. Timing, experience, and tact prevailed.

The next day, Carol’s “good faith deposit” was released from escrow and neither the sellers nor the seller’s agent were heard from again.

Price Negotiator

Seller’s Agent AQ:  93 = 100 x [(560,000-17,000-20,000)/560,000]

The Seller’s agent AQ: 100x [(sold price/market value)] 

The Seller’s agent acted criminally in the amount of $17,000, costing the seller at least this much, convincing the seller to move his possessions out of his residence to put additional pressure on him to move forward. 

The real tragedy is that George, the seller, died of a heart attack on the night the buyer cancelled. By law, the beneficiaries now needed to disclose a death in the home before putting it back on the market, costing them an additional $20,000 discount off the sales price.

How much did his agent really cost him?


Buyer’s Agent AQ:  103 = 100 x [(560,000+15,000)/560,000]

The Buyer’s agent recovered her client’s deposit money $15,000, but also her time. She also prevented her from purchasing a property of dubious circumstances and condition.

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