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 Bill Sloss on
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Cliff cant tell you how much I appreciate your perspective.
Tried to buy a SS and the sellers agent would not provide a disclosure. House was vacant for 3 years and said she didnt have to. House was distressed and tried to get her to involve the bank right away and wouldnt. Note was sold I found out to whom before she did.
Found out a 12 x 26' addition was added not to code. Govt said I buy Im responsible. She tried to pass off an addendum neither confiming or denying the code violations and tried to get me to assume responsibility for any repairs. All without involving the bank.
Finally wouldnt accept any offer until I signed a hold harmless for the sellers agent or the seller absolving them of any legal liability. Her E&O are the least of her problems. This is as close to fraud as you can get and Im just warming up.
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Permalink Reply by Nate Gerard on
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If the defect in the home was major, the up front inspection would have caught it - roof, mechanicals, non-working appliance. If it is minor or something major happens between inspection and approval I ask the same thing I would if the bank countered on price. Do you still feel it is a good deal? If not, you can either go back to the bank and reopen the approval process or you can walk away... that is if the seller has no ability to fix it.
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Permalink Reply by Joseph Alfe on
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Why would any agent EVER allow a post inspection approval? What is the benefit? Would you allow a normal deal to allow a buyer to do an inspection right before close? When you leave these contingencies open, there really is no contract and the buyer can walk away at will.
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Permalink Reply by Mike Rizzo on
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Because inspections are only good for a point in time, not good for the months it takes to get the short sale approved. If the inspections came with a guarantee than getting the inspection done upfront and accepting the property as-is would be acceptable. If you guarantee that the short sale will be approved, meaning the buyer wouldn't be out $400 because the transaction never consummates, then maybe. Just have a problem signing off on a property's inspection and not have possession for months into the future.
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The purpose of the inspection is to identify issues. Who would want to close on a property without knowing?
Thats why contracts have contingencies and are agreed on by both parties. If you dont understand what and inspection does, assuming its a good one and they take time, then you need to change agents or get a better understanding of real estate.
Contracts are based on good faith by both parties. When I detect bad faith on the other side I know the contract and am gone.
Want to make me happy? Be fair and honest. Communicate.
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Permalink Reply by Isabelle Javier on
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I'm very confident closing all my short sales. I've closed every short sale transaction since my first one back in 1996. I request 3% cash to be deposited in escrow within 3 days of a Seller accepting an offer....and that's how I know I have a committed Buyer. But before my client and I accept the offer, I make a lot of calls to the Buyer's mortgage broker, and his agent, to feel them out and make sure that "this is the one!” and that they are fully underwritten or desktop underwritten. With that said, I never expect a Buyer to pay for appraisals or inspections before they receive a bank written approval, unless we are on a very tight time frame or there are so many competing offers that the Buyer offers to do so willingly. I still will not allow all contingencies removed up front either. It makes me very uncomfortable to have a Buyer do so as I believe every Buyer is entitled to their inspections. That's my opinion.
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For what its worth Im a buyer. Bid on a BOA SS on a very distressed property and the note was abruptly sold. It was obvious the new holder didnt know the actual condition or history of the property. The sellers agent would not do anything to make that known. It was wait wait wait. So you have a note holder evaluating a deal not knowing what the condition of the property was and it was further deteriorating as it had not been lived in for years and had roof and wood damage. I wanted an inspection immediately to advise the note holder and was refused by the sellers agent. There were incentives on the table and a foreclosure looming. I walked as I have neither the time nor interest to deal with such utter nonsense. And with all due respect to Bill's comments What are you trying to hide? Who would spend possibly several hundred dollars or allow a client to spend that money without an approval? I think if the note holders were properly informed of the condition early on you wouldnt have so many short sale problems. Frankly its all in the contract language anyway and the better one is at drafting the offer the easier it should be. Lets be serious its the banks deal and all the seller is doing is signing off in most cases. Why not get the condition and possible issues out of the way ASAP sellers agents so your prospective buyers dont walk or keep looking? That means sellers agents get the banks attention right away not weeks into the deal waiting around. It serves no purpose to wait then get an approval then an inspection and a bad inspection and have an uninformed buyer walk or build the sellers hopes or find out the bank wont negotiate based on the condition while the property further deteriorates (roof leaks).
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Permalink Reply by RoJane Maybee on
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I completely concur! I have in the listing that doing an inspection at mutual acceptance between buyer and seller must be part of the contract -- currently at 99% short sale closure rate in 5 years! It works and you have no "after approval" surprises! If the buyer is apprehensive to spend the money up front -- I would seek a more committed buyer -- certainly they are out there!
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Permalink Reply by Bryant Tutas on
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Here are some thoughts that may help with this.
First there are advantages to the buyer doing the inspection promptly. The main one being that If there are issues with the property the price can be adjusted PRIOR to the short sale being submitted to the lender. Secondly why would a buyer want to wait several months to do an inspection only to find out the property won't work for them?
Secondly, having the inspection done asap is not the issue so much as having the inspection contingency removed form the contract. If it's a good buyer and they truly just do not want to spend money on the inspection before the approval then just write the contract and remove the inspection contingency. This way the buyer can do the inspection later but if they cancel over it they lose their EMD. Then make sure you hit them up for a good deposit.
If the buyer is still not agreeable then you could negotiate the contract allowing the seller to continue to market the property and accept a better offer if one comes in.
Basically you need to make sure the buyer understands that the seller needs them to commit to the deal. If the buyer won't commit then certainly the seller shouldn't
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Im sorry but I disagree with you. If a suitable inspection is an aspect of the contract pursuant to the sale and the inspection is not suitable the contract is voidable. All monies should be returned as the seller can not perform their end of the contract. Im sure you know you can make it a contingency but a smart buyer would never sign it. Is your issue money or good faith? If its good faith what % do you want down? Ill give it to you but Im not signing my rights away nor should anyone else. EMD should be returned unless the buyer walks for extracontractual reasons and that should be in the contract as well.
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Permalink Reply by William J Archambault Jr on
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I wounder who the commentators represent!
If you represent a home buyer would you really waste time waiting on the seller's lender to save a few hunderd dollars? Or would you explain it to your buyer and get the inspections early? Who do you represent?
All that time only to find that the house won't pass inspection or appraise! Who do you represent?
If you represent the seller I suggest you counter requiring all the buyer's inspections be completed with in ten days! If there is a problem you might still have time to find another buyer or submit an amended offer to your lender before foreclosure.
Who do you represent?
Bill
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Permalink Reply by Kim Eisen on
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It is a condunrum sometimes. Yes, there are incompetent agents whether there is a short sale or not. If you've experienced it, you'll probably agree with Bill's S great post, very thoughtful. Although, it's funny that when the inspection is done prior to bank written approval, I've never had that buyer walk and we closed. I think it gives the buyer a level of 'knowing' during this sometimes stressful process. Is there a 'right' way? Obviously, it can be argued for each side. If I was a buyer, I'd want to do the inspection right away so I know what I'm buying.
An addition to the PA might be a clause allowing a 'walk thru' inspection after written approval to make sure nothing had significantly changed from previous inspection - not an opt-out walk thru, but a true 'significant change' from previous inspection clause.
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