Real estate contracts of sale have included a Due Diligence contingency, and a Termination Fee, for four years now. Yet the Termination Fee still generates a lot of confusion for buyers and agents.
Joan Herlong, owner/CEO of Herlong Sotheby’s International Realty says, “The termination fee is an indication of commitment. Buyers want a low termination fee, so they can back out if they find something they like better, or if the seller won’t agree to do all requested repairs. Sellers want a high termination fee, because they want a ‘done deal.'”
What is the standard termination fee in a real estate purchase contract?
Herlong says: “It depends. A buyer agent recently presented an offer in a competitive situation, with only a $500 termination fee. The list price was well over $1.5 million, and it had been inspected at seller expense. The agent man-splained that “500 bucks is standard.’ That may be true among starter homes, but that doesn’t work in a high-end transaction. Needless to say, his buyers didn’t get the house.”
How does a buyer determine the right Termination Fee amount to include in their offer?
“It’s NOT one-size-fits-all,” says Herlong. “The more information a buyer has before they even make an offer makes them more likely to include a healthy Termination Fee. Sellers who put the burden on buyers to determine the true condition of their house also create higher risk of a failed contract.”
What steps can a seller take to secure a high termination fee, and a contract that sticks?
“The most important step,” says Herlong, “is to choose a Realtor who’s primarily a listing agent. You can simply throw a dart at our agent roster and you’ll make an excellent decision. We have a proven pro-seller strategy, that also benefits potential buyers.”
