It's been my practice in the past to have Buyers Agents not do inspections until after the Written Approval has arrived. I know that some other "Superstars" recommend getting the buyers to do inspections earlier, to get some "Skin in the Game". I met with a person from Pillar to Post yesterday. He states that he has been doing inspections for Short Sales, and the lien holders are actually paying for this. Of course, there are documents signed in advance that if the lien holder doesn't pay, they will still get paid. I love the concept of have an advanced inspection, but it's a very expensive endeavor. Anyone using this concept? If yes, how do you end up not paying for this process out of commissions?
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I have only read the last page of this discussion but wanted to give my input. In a perfect world I would really like to say, get the inspection done ahead of time but we just recently had an issue with this in our office that I would like to share. The agent had their buyer do an inspection which cost $350 because the listing agent was requiring it. This was fine, no issues came back but it did come back that the bank would not approve the short sale at the price that the list agent had it at which was also the offer price. Instead, the bank came back $80K higher. Buyer is furious and thinks list agent should pay them back for requiring them to do the inspection. Thoughts on this??
This exact scenario has happened to me with two different buyers. It could be argued that the listing agent didn't know what he/she was doing when helping the seller set the price. Or, he/she did know what they were doing to generate interest in the property by putting an unrealisticly low price on the listing. That being said, your buyer agreed to do the inspection upfront and there obviously weren't any contingencies or discussion of reimbursement if the short sale didn't go thru. Sooooooo, your buyer is stuck. I learned this lesson the hard way. I never advise my client to do an upfront inspection unless its a preapproved HAFA short sale and we see the agreement letter and suggested list price. I also do my own valuation on the property and if it comes back where the list price is too low, then we know there's trouble ahead. Unfortunately, pricing the listing low is a strategy used by agents that should be stopped. In your case, did the listing agent dispute the bank's asking price or just break the bad news to you. If the latter, I'd never show their listings again because they are unethical.
Like my daddy always said 'Just depends on what side of the street you were born'.
Meaning a person is more likely to think what they're likely to think depending on what side they're coming from.
Doesn't make them right, doesn't make them wrong.
Answering your question. No. The sale process is too long, and usually with the deferred maintanence on the property in general it not a benefit to the Buyer to pay the money when problems could further develop with the home. Also in CA the short sale addendum to the contract options the contract timeframes after approval from all lenders and allows cancellation by all parties if an approval is recieved in xx (usually 45 days). Any arrangements for inspections prior to lender approval should IMO be fully outlined in an addendum if its outside the "normal practice" of a real estate transaction unless you don't care/worrry about your deductible on your E and O.
I've had a short sale cancelled by a cash Buyer after appraisal because the home appraised over purchase price (The Buyer paid for it) and the Buyer wanted to renegotiate the price (We had multiple offers and the Seller accepted the best price (which was cash) for the short sale offer. Had two other cash buyers walk because something came up on market they "wanted" more.
Buyers do what Buyers do, Banks do what Banks do, non refundable deposits go to who? I'm sure the bank would want to know what happened to the deposit money from the last contract if money was given to the Seller.
I'm sure we have all met the flaky Buyer or had a "bad" feeling about the Buyer. Communicate with the Buyers agent once in contract on a weekly basis and I think you will close more deals. Time is never your friend in a real estate transaction.
I had Chase agree to a credit of $3000 for documented pest and roof repairs-I was surprised but they were not losing much on the deal.
As a buyer, I for sure was not going to spend any money other than the earnest money deposit when signing the contracts.
Good thing because we are 7months in and still no bank written approval yet (got verbal last week) and lot of things changed during that time (lost negotiator so had to start everything from scratch, new BPO came way higher,seller's wife moved out, 2nd lien holder was causing problems..)
Dealing directly with the listing agent and she saw that we were committed to the purchase. She didnt even ask for the deposit.
She told us we will do all that (inspection,deposit etc..) when she receives the written approval.
That is one very ambitious agent. Representing the buyer and the seller and then fighting with the bank. I personally won't do that as there's too much that can go wrong and ultimately the agent is always blamed. If you have this last much longer, people will start retiring that are involved. 7 months shows some might big patience on your part. Hope it all works out for you. I must be a great house. I totally agree with you not to spend money on an inspection early on.
Yeah this is our dream house, in the exact subdivision we always wanted to live and at a crazy price (only had to go up $5000 on our original offer after the 2nd BPO came up $20k higher than previous one)
I'm way too emotionally attached to it so I hope all that was not for nothing :).
Seller is using a real estate lawyer or whatever its called to deal with the bank but I've been bugging the listing agent so much that she finally called all the parties involved with the bank and they all confirmed to her that it has been approved and to wait for the signed documents.
Hope there are no surprises during inspection but agent told us it came up clean when previous buyer did it (deal fell through)
Every short sale that I have listed, I have asked the Buyer to put a portion of their earnest money in escrow as non-refundable for the first 60 days. I know some now ask for the first 90 days. I have never lost a buyer and they have all done their inspection within 10 days of the Seller accepting the approval notice from the lender. As a Buyer's representative, I would not feel good about my Buyer's paying for an inspection before we know if the short sale will even be approved. Any inspector that a Buyer client of mine has used expect to be paid at the time of the service performed. I have never seen a lender pay for a buyer's inspection. If the Buyer get's an inspection before the approval notice is given, and the lender is going to pay for it, what skin is it that they have in the game?
Kelly, I think that's the best approach for everyone. The buyer to commit to staying around for 60 or 90 days or lose their deposit. Paying for an inspection upfront is too risky, when there are too many things out of the buyer's control that could cause the ss not to be approved.
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