When to do Inspections?
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?
Replies to This Discussion
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Permalink Reply by Wayne Brooks on
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I doubt lien holders are paying for inspections, knowingly. Sorry, but this seems like a come on, getting someone else to agree to pay for the inspection, in the event the lien holder doesn't pay(99% chance). Guess I'm just a cynic. And yes, we insist on inspections up front, on the buyer's dime if they're using a service.
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I have never seen a third party inspection on a HUD so it smelled bad to me also. I had done extra appraisals, even had contractor quotes submitted, but this one seemed a little far fetched. Thanks.
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Permalink Reply by Jill Ford on
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It seems to me that if inspections are done early enough in the process, the ultimate offer price can reflect the need for a new roof, etc, where if it turns up after approval, the deal is likely to die on the vine, because the lender/investor is not likely to give a damn about a new roof etc.
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Permalink Reply by Bill Gassett on
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Any listing agent that allows a home inspection post approval is not representing clients best interests PERIOD!
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Permalink Reply by Drew Ludlow on
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I agree with Mary Ellen and respectfully disagree with Bill. What Mary Ellen did not mention is that in NC, our addendum also states that all contracts are unilaterally terminable by the Seller at any point before acceptance by the lienholder. So, why should the Buyer have skin in the game if he can lose out on the property at a later point if a better offer comes in? And in our market, there are plenty of other non short sale opportunities. Placing demands on a Buyer will only pin-ball them to another listing. We do what we can to get people in the door.
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I just closed an FHA PFS where the negotiator prompted me to have the buyer proceed with inspections prior to official written approval. After the buyer had paid for home inspections and appraisal, it was discovered that the loss mitigation dept had closed the short sale weeks earlier (that's a long story) By the grace of God, helpful suggestions from the great superstars on this website and possibly the fact the buyer had skin in the game, I was able to get the short sale reopened and approved within days, but because of this experience I would never have the buyer put any money out prior to approval. I have seen a lot of stupid things in the course of a short sale and wouldn't want it on my conscience or as a matter of liability; this last time it worked out but the next time it might not.
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Permalink Reply by Ray Singhal Team, CDPE,SFR, CRS on
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We insist in our SS addendum in the MLS that inspection be done within 5 days of the offer acceptance by the owner/seller. This way the buyer knows what he is getting. Once an offer is accepted by the buyer and the seller, the only contingency allowed is 3rd party lender approval and the buyer being able to get the financing from his/her mortage company. In the case of cash buyers, seller's lender approval is the only contingency. We represent the seller and believe that if the buyer is not willing risk a few hundred dollars to be spent on inspection, you do not have a serious buyers. We have been doing it for 5-6 years and have had no issues. Try it!
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I did try it and though I do appreciate your point of view, I personally would likely wait for the approval in the future before requiring the buyer to pay for inspections and appraisal. I am seeing more and more short sales that aren't such a bargain to appeal to the type of buyer who could stomach losing $1000 (home inspeciton and appraisal) if the sale goes south. Other terms can be stipulated in the short sale addendum to obligate a buyer within reason without putting them at risk of losing $400 to $1000 dollars, which can be a lot to the average home buyer looking at modestly priced homes. I think if you can't get the job done within a reasonable amount of time relative to the average time for a short sale, then the buyer should be able to opt out. What is a reasonable amount of time...that would be something to agree upon based on the circumstances of the short sale.
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Appraisal is for sure after lender approval but inspection asap after acceptance. Believe me Suzan, we represent the seller and this is not only fair to both parties, but is in the best interest of the seller. Also, since we work with only 1 buyer at a time, we want to be sure that the buyer is solid and fully committed and will wait for 60-90 days for lender approval. If the buyer agent is not pleased with it, then he should look for another home for his client. Very rarely anybody objects to it now. In return, we pend it in the MLS with no more showings. It works..
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Permalink Reply by Elaine Cooper on
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Buyers agent should make sure that inspection is current. Not done 2/3 months ago. Things change. Inspections are not warranties. Ssa in calif states time frames not to begin until approval in hand. What about representing the buyer here ?
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Short sales are the Wild West and the rules of the game change with every deal ! And even if u have buyer do inspection at time of offer acceptance buyer can still walk once approval is received.
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Permalink Reply by Kelly W. Maynard on
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Why not just ask the Buyer to put a portion of their earnest money deposit in escrow, as non-refundable for the first 60 or 90 days? If on day 61 or 91 there is no hope of an approval they can get their earnest money back and find something else. I ask this from the Buyer for all my short sale listings. I have never lost a Buyer, not once. As a Buyer's agent I suggest my Buyer do this regardless if the listing agent asks for it. It shows my Buyer is serious and is willing to wait. I think it is best to have the Buyer do their inspection within the 10 day inspection period once the Approval Notice is accepted by the Seller.
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