Ask Phyllis: a blog series of frequently asked real estate questions.
My Realtor fired me
Dear Phyllis,
I recently made an offer on a La Crescenta house that I really liked. The seller accepted, and we opened escrow. I completed my inspections and then hired a contractor to estimate the cost of remodeling the bathrooms and converting the carport into a garage.
I knew the house needed updating. However, I wanted to know what those improvements would actually cost. Unfortunately, the contractor’s estimate shocked me. The renovations would cost far more than I expected. As a result, I canceled the purchase.
My Realtor was extremely frustrated. In fact, this was the second escrow I had canceled. My Realtor ultimately fired me and said I was wasting their time. I feel terrible. However, I did not want to buy a house that no longer made financial sense. Was I wrong to cancel? SL
Dear SL,
I understand why you canceled. However, because this was your second canceled escrow, the situation becomes more complicated. Buyers have inspection and contingency periods for a reason. These periods give you time to investigate the property, obtain estimates, and decide whether you want to move forward.
In your case, the contractor gave you information you did not have when you made your offer. Remodeling costs can rise quickly. Permits, labor, materials, demolition, plumbing and electrical work can each add thousands of dollars to a project.
You may also have underestimated the cost of the improvements you wanted to make. Your Realtor had a legitimate reason to feel frustrated as well. Realtors typically do not get paid simply because they write an offer, open escrow or spend weeks working with a buyer. In most cases, they receive their commission only when the transaction successfully closes.
Two canceled escrows can leave a Realtor with a significant investment of time and resources without any compensation. Your Realtor apparently decided that continuing the relationship no longer made sense.
Hopefully, this experience has given you a better understanding of remodeling costs. Before submitting an offer, try to obtain a ballpark estimate from a contractor. After reviewing the general inspection report, the contractor should be able to provide an educated estimate of potential repair costs. If the seller accepts your offer, you can then arrange for the contractor to visit the property and prepare a more detailed estimate.
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