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 Team Musser on
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In my experience, I ALWAYS do inspections up front, regardless of which side I am on. I do not want to represent a buyer for 60 days + only to find out the home has a fatal flaw, and by then we have wasted so much time, or, worse, if the there is a cost to fix the problem, I will want to do a purchase price reduction addendum with the documentation from the inspector and bids for the repair to renegotiate the price before the seller's lender accepts the offered price. If I have the seller, no way am I going to work up an approval, get my seller two months closer to foreclosure, and get a price approved that might be invalid due to the condition of the property.
Lastly, is someone is not willing to invest a few hundred dollars in their due dilligence, I am not willing to invest my time.
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Permalink Reply by Todd Foust on
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I agree. Some people seem to be pretty hard and fast in their "I always" "I require" "You should never" opinions on this. I also don't understand where agents get the notion that their personal definition of "significant" skin in the game directly translates to anybody elses definition.Its not your money, you don't get to determine what is suitable "skin" anymore than a buyer gets to determine your listing commission.
While I can understand a listing agent not wanting to waste their time or risk their clients foreclosure, many don't seem to consider the unknowns to the buyers/ buyers agents. Many times, we don't know you are competent (although everybody claims to be an expert on ss) and we don't know jack about your clients situation. Its fair to say that its none of our business, this is true, but its a bit to ask of a buyer to blindly trust a situation hinging very sharply on both your competence and your clients situation/flexibility. On the other hand, say it's different:
1) We've worked together?.........less of a problem, we can speak of of your competence and/or
2) You will share some info about your client with their permission about things such as (willingness to sign promissory note, willingness to contribute cash, strategic default or real hardship)......... thanks, we can evaluate the risk/reward and make a choice.
Hard and fast rules are for physics, not transactions. When we advise our clients to comply with demands like this by putting any amount of money on the line (even if $300 is insignificant risk to you) AND we have little credible info, WE are the ones at risk for breaking fiduciary. Paying for an inspection up front presents risk, and if a listing agent and seller won't clue us in a little and/or we have zero transactional history, it isn't too much to ask a listing agent or seller to back up their request with reimbursement to the buyer if:
1) The transaction never gets approved because of listing agent incompetence or sellers inflexibility and
2) The buyer will put a non-refundable deposit down in the event they bail out early or reject previously agreeable termsSomething to this effect holds all parties accountable and makes all parties consider consequences for their actions or lack thereof. I see a lot of instances where requests like these are hardly coming from the seller. They are more the listing agents "way of doing business" that's been recommended as "protective of their interests" without any explanation of risk or potential collateral damage to the buyer. Its fine to make recommendations and have your own formula, but sellers should be given all the info, (including the buyers perspective of incompetent agents, unreasonable short sellers, and their time as also worth something) and really left to decide. I'm sure most everybody here would do that, that's not where my problem is, its with the imbecile listing agents who, instead of staying light and negotiating, adopt these ideas as rules just to keep them from doing what they hate most...working through issues and thinking. And because of them, we have to tread even more cautiously when dealing with unknowns. Some buyers will take the risk, some won't. I really can't blame either when information can be so limited.
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Permalink Reply by Barbara Lebrecht on
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Good post!
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Permalink Reply by RoJane Maybee on
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I have all inspections done at mutual acceptance between buyer and seller.! If they want the property, that is just what they have to do. We get over 99% of our short sales closed, so with that said -- they feel confident to go forward with it and it is nice to KNOW then if there is a deal breaker in store !!!!
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Permalink Reply by Mike Rizzo on
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What do you advise the seller to do if something doesn't work after you get the approval and the inspection was done upfront?
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The same thing you tell the buyer after months of heart felt waiting and being at the mercy of various forms of incompetence when the bank rejects the offer because the matter wasnt handled properly.
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Not what I meant by the question. Do you tell the seller that he has to fix the problem that came up post inspection and after approval?
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The only things that will verify the condition of the property are inspections or communication between the seller, sellers agent, the bank and the buyer that can all more or less agree the property is "distressed" AS IS or needs work. To me AS IS means very little. If the object of the exercise is selling the property the sellers agent has to work a little harder to reach that understanding with the lender and be truthful and honest in communication. Representing the seller is all well and good but honest and fair to all is listed in the by laws too.
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How to tell a seller to fix a $ 10K roof? If they had 10K they probably wouldnt be in the mess. If you have a serious buyer and I am I know the difference between a new roof etc and some repairs. But what good does that do if the sellers agent wont communicate with the lender? I ask for a third party limited authorization to talk to the lender. Im a buyer they have an interest in selling. Its as easy as that. If Im not comfortable with the agents involved particularly the sellers agent Ill push whatever issues are important. The seller needs to know the deal. Getting to the cruxt of the matter early on eliminates a lot of problems. The issue isnt the house its the debt forgiveness and maybe incentives. Why string a seller along and waste a lot of time. You either want the house or not. It has issues and they need to be addressed. The problems are there you cant just ignore them unless you want to and accept it as is. If you want to do that dont inspect dont put it in the contract just accept it as it is.
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Permalink Reply by Joseph Alfe on
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If an inspection reveals a minor deficiency, well....this is why the buyers are getting it at a discount. If the inspection reveals a major issue, then we have the buyer get an estimate from a licensed contractor, and we then submit the inspection and estimate along with a renegotiated contract to the lender. If the lender sees major issues they can and will approve a lower contract price. Use the inspection report as a tool.
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There is no way one inspection reveals the condition of the home. Its not the purpose of the inspection nor is an appraisal based on comps. An interior inspector can not evaluate a roof or a septic problem. A distressed property is a distressed property and the only person who can advise the bank is the sellers agent. If it is in the best interest of the seller to move the property thats what needs done and communicated to the buyer and the bank. Its waste of time to negotiate or wait and see over the obvious when the seller is not receiving any tangible benefit per se. Some SSA specify the bank has the right to approve the contract. The contract not the sale. I put in a contingency the bank does that. If I have a sellers agent that doesnt want to honor that contingency I ask myself why and is this person likely to push to get the deal done? When I have a sellers agent who does not want to communicate with me or the bank especially after I talk to the bank Im more inclined to walk. All I have to do is ask the bank if they are aware of the condition of the property. If they say no I ask why not? Why lead a bank on for months if they dont know the condition of the property? Sometimes notes are sold in a bunch and the new holder just doesnt know.
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Let see this has happen to my Buyers during a short sale...
"Uncooperative" Seller
IRS, tax, mechanics, and HOA liens showing up on the second prelim
Seller Filing for Bankruptcy
Seller not fully disclosing material issues with the property.
Seller not signing approval letter.
Seller asking for money outside transaction.
Seller asking for money to move out.
Seller stripping the house (removing fixtures).
Seller damaging the house during contract (Water damage).
Seller turning off power prior to inspections.
Had lender (OCWEN) deny Seller hardship.
Had BOA first lender change approval amount after HUD submitted, deal now needs $5K negotiation and reduced approval to this Friday.
I guess its a matter of which is lower your E/O deductible or the cost of the inspections whether as an agent you want to be involved with pre sale inspections. Good luck, all in.....
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