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.
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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.
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.
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!
Wow! there's really a lack of ability to see nuance!
THIS IS ALWAYS RIGHT!
Really!? Paint with that broad of a brush?
In our area (also Northern Chicago Metro) a short sale falls through half of the time. Two buyers, one sale.
Well, if almost half of your contracts don't close why should buyers plunk down their money up front. If the sale is pre-approved (hafa, pfs, has a short sale agreement the lender will still honor), then great, I'd encourage my clients to do the home inspection up front.
If there's two loans, listing agent has closed two short sales (but is now a short sale expert), and there's a sherrif sale set five months away, I'm going to advise my buyer to wait and see if the short sale is approved (if they decide to move forward at all).
For all of the millions of deals that fall somewhere in between, I'm going to go over the likely advantages and disadvantages with my client and leave my broad brush for painting my garage.
Haha Jim. Even in cases in which the short sale is pre-approved, I would be upset if my inspection found something majorly wrong with the property because now we have to wait and see who is willing to compensate for the difference in perceived value for the property.Will the lender lower their net so we can close before the buyer's rate lock expires? Will the brokers contribute to this? Can I squeeze anything from the seller?
Smitty makes a great point about having a buyer's agent come in lower than their original offer. Even then, I expect Smitty to tell me what is wrong with the property and how much will it costs.
Satar, here is where you make my point.
If your buyer makes an offer and finds a bad roof, bad heating, septic issues, etc., I would NOT want the buyer to go forward without LOWERING their price $20,000-$30,000 and providing me with the appropriate inspection and contract estimate so when the BPO is done, I can hand those right over. Once a lender can see exactly why the offer is SUPPORTED by inspections, contract estimates, etc., then I have almost a 100% better shot at getting my sale approve.
Again, once approval is issued, we can just close. No need to go back and forth with the lender.
Why would I waste a seller's time for 3 months if a buyer was not ready to close and may run into issues after approval?
I have always advocated that the inspections be done upfront, however, I put the burden on the listing agent and/or seller. Since I 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.
What's your take on title reports? Do you do them at the time of listing or do you wait till you find an interested buyer and put that costs and burden on them too?
If you're a buyer's agent, you don't negotiate with the seller's lender. The burden of inspection typically ALWAYS goes with the buyer. Things that the seller is usually responsible for in a sale many times in a distressed situation become the responsibility of the buyer, inspections, sewar inspections, fire inspections, CO's, etc. - However inspections are historically the responsibility of the buyer and unless the seller in a short sale has excess funds, which many don't, then that responsibility still remains the buyers.
*I* pull title, the minute the property goes under contract. I know exactly where the issues lie up front so I have clear to close when approval is issued.
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."
Wait. .....
...um...so you agree with me?
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