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 Suzan Downing on
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I would be mortified to have to endure a short sale for 9 months LOL. I think there are obviously two schools of thought here. I also think just as we need to assess a property for its suitability for FHA financing, we, both on the buyer and seller side, both agent and client, can assess through service professionals usually at no cost, potential issues up-front before the buyer makes a commitment. I agree with the earlier comment that demanding an inspection before lender approval has the potential to diminish your pool of buyers and result in more time on market before obtaining an offer....I think it's a case of 6 of one, a half dozen of the other.
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Absolutely in this market up front. If there is a "defect" that the buyer doesn't like and the lender won't pay from proceeds to cure, I sure as HE LL want to know before I spend countless hours over 60 to 90 days working on getting approval for a sale that the buyer will terminate anyway. This is particularly true when we are racing the foreclosure clock. When I have a buyer/buyers attorney suggest a delayed inspection it is a sign they do not really get it, and should not be looking to buy a short sale in the first place.
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Permalink Reply by Ryan C Sanford on
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Patrick,
I disagree... A contract in most cases will actually get the short sale processs going. A lot of banks still won't do anything until they have a contract. I look at it as if we are moving the deal forward, getting a negotiator, and getting a BPO done for value, etc... Then if the buyer bails on you- move on to the next. I do not tell the bank the deal has failed until I have another offer as I don't want the file to be stopped in it's tracks. I typically have another contract prior to approval, and just switch it out with the bank at that time. If the approval comes in prior, then I let them know at that point, but then I have an "approved price" to go with, which typically will fetch an offer much faster once placed in the remarks on MLS, due to most of the time waiting for the SS to be set up has been exhausted.
Also, look at my previous post about differing markets to add to my insite on this.
Ryan C. SanfordREALTOR®, Associate Broker, CDPERE/MAX CommonwealthThe Ryan Sanford Team 9401 Courthouse Road, Suite 200Chesterfield, VA 23832804-218-3409 mobile804-777-9001 office804-423-2392 e fax
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Permalink Reply by Mike Rizzo on
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I for one am against this. A buyer may end up having to do two inspections. One at the beginning of the process and one once the approval comes in. This may be a 6 month difference in time. The buyer certainly can't hang their hat on their original inspection if 6 months has gone by. I understand concept of having skin in the game, but this is a bit much. If you feel its necessary to have an upfront inspection, a better idea would be to do the inspection up-front, but require reimbursement from the seller if the short sale is not approved, or more than 90 days has gone by. If the seller didn't pay, then the listing agent would reimburse the buyer for the required inspection. By doing it this way everyone has skin in the game. The buyer will stay around for at least 90 days, the seller will do everything they can to get the short sale approved, and the listing agent will be a little more ambitious in getting the approval done. My chosen method in doing short sale listings is to stay in close communications with the buyer's agent to access the level of buyer interest as we go thru the process. (is the buyer looking at other houses, are there any deadlines like a lease expiration coming up for the buyer, has anything changed financially for the buyer that would affect their ability to buy the property, etc etc.) I don't require the inspection up front and doubt I ever will. I don't believe in ruining things for everyone because of the sins of a few. There will always be some unethical people out there that will lie, but for the most part, people are honest and will not intentionally harm the seller.
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Permalink Reply by Ray Singhal Team, CDPE,SFR, CRS on
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I respectfully disagree as we did it this way 5 years ago. No more as many buyers walked for any reason. The listing agent has his own skin already by his hugh time commitment. The PA is stricktly between buyer and seller.
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Run your business as you see fit. I have more success with keeping the buyers informed than by brow-beating them with requirements that would never happen if this weren't a seller's market. I rarely have a buyer walk. Of the ones that have walked, it is usually because their financial circumstances had changed and they couldn't buy a house anywhere. As long as buyers see progress, they will stay with it. If the only updates they get are words like, "its in review and we still don't know yet". If they get that kind of status for several weeks in a row, they aren't likely to stick around. Would you? Worse yet is to never give a status or ignoring the request. You don't have to worry about skin in the game if communication is open and honest.
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Couldnt agree more Mike. Well said. Best of luck to you. Im a cash buyer and after a month of nothing its time to start looking elsewhere. Everything is up front and when communication with the buyer isnt an issue its time to be prepared and start looking elsewhere.
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Permalink Reply by Celeste ODea on
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I would like to know what lien holders are paying for home inspections? They won't pay for home warranties, so why would they pay for a home inspection? Our instructions to selling brokers are that the buyer must do their inspections within the time frame of the contract and not after 3rd party approval. Why do sales fall apart? Because of the result of a home inspection! We want a committed buyer. If the buyer is not willing to do their inspections prior to written approval, they can purchase another home. For a win-win situation, we offer them the opportunity to agree to pay for a warranty. If they agree to pay for a warranty and cover both the buyer and seller, then any items that need repair can be covered under the warranty, and the buyer pays the deductible That way, they can't back out as a result of the home inspection, but that's the only way we would accept an inspection after 3rd party approval.
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I agree with you 100% Celeste. We must get buyer commitment so that then you can pend it in the MLS and no showings.
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We work too hard with getting bank approvals in the first place and then the buyer has the opportunity to walk before closing because they didn't like their home inspection? If we had the right to keep the house in "Active" status during that time, it would be a different story but, in MD, you have to change the status to Contract and now you may have wasted good marketing time because the buyer wasn't really serious enough to spend $300 bucks for an inspection.
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Is 300 bucks too much for you to spend to keep the deal afloat Celeste? Are you that serious about it? I mean if its only 300 bucks for you whats the issue? I have to laugh because a buyer discovers deficiencies in a house that should have been disclosed or discovered you think its reasonable to force them to buy the home? Is that right?
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There is no doubt that a contract gets the ball rolling. We handle backup contracts the same way with the banks if you are fortunate enough to have one before the bank declines it.
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