Why not have the buyer do inspections prior to submitting to the lender?
I am the listing agent on a property that has many problems. I knew that once we got to inspections after the lender approval, it would reveal a failing septic system along with a pest report that would show the termite's were holding hands to keep parts of the structure upright. When I listed the property, I discussed with the seller the short sale process and what usually happens at this point that either the buyer accepts the condition, backs out or I have to renegoitiatefor a credit with the lender.
We received 2 offers on the property and as we reviewed the contract seller says point blank, "I don't want to wait around for inspections and have them cancel in the end." So we countered the highest offer that they were to complete inspections within 10 days of acceptance and they would deposit $5000 into escrow. They did their inspections and decided not to proceed without ordering any formal reports. The lower offer came in with an even lower offer and seller countered with the same terms. They signed it without any questions. But when it came time to remove contingencies, they balked. Partially stunned I reminded them of the what they signed. They eventually came around got the formal reports they wanted and they removed the contingencies today. Bad news is the septic is failing and the pest report is a major document...and the good news is we a submitting at the agreed price and all sorts of written documentation describing the condition of the house.
So my question is why don't we do it like this more often? In my opinion the buyer's are better off knowing up front what the condition is instead of waiting forever only to decide to back away. It saves everyone time and once we get approval, we don't go through a time consuming renegotiation.
Replies to This Discussion
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Permalink Reply by Satar Naghshineh on
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Sorry for the confusion, it should have read: "I have always advocated that the inspections be done upfront, however, I put the burden on the listing agent and/or seller. Since I, as the listing agent, have one shot with the foreclosing lender, I need as much information as possible upfront about the property so I can better negotiate with the buyer and the seller's lender."
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I agree that an inspection be done upfront, but by the listing agent and/or seller, not by the buyer.
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Permalink Reply by William "Andy" Alford on
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Property condition at time of ratification may be far different than property condition when the short sale approval arrives one month, three months, or six months or more later. There are also more reasons than grains of sand at the beach why a short sale might not ever get third party approval.
As much as I'd like to get the inspection out of the way as a short sale listing agent, I wouldn't want my short sale buyer clients to do any inspections prior to third party approval. Radon test, home inspection, well test, and septic inspection (if properly done with pump out) could run $600-$1,000.
It also wouldn't be fun explaining my buyer representation to our state regulators if my buyer clients complained that they suffered financially because we wrote an offer where inspections were done before third party approval.
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Permalink Reply by Kevin - Greenville, SC on
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Property condition at time of ratification may be far different than property condition when the short sale approval arrives one month, three months, or six months or more later. - EXACTLY!
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Permalink Reply by Keri Sweetland on
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If I take a listing that I suspect has issues, I immediately get a contractor out there to give me estimates and take pictures to go with the estimate. This is critical in negotiating the value and during the BPO process. Once I know what it's going to take to make this happen, I make sure the seller fills out the seller disclosure and that we get it executed from the buyers. I pretty much know what will and will not fly on a financed deal and if it needs to be addressed with the buyer's lender up front. Otherwise, the seller's disclosure and contractors bids provides full disclosure. While I wouldn't require a buyer to get the inspection done up front I would insist on a 5 day inspection period and encourage it up front. If I've don't all my due diligence on the listing end most of the time this isn't an issue at the end.
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