When Should The Buyer Have The Inspections Done?
Good morning Superstars.
We have a great discussion going on about Home Inspections and when to do them. Check it out.
Here are my thoughts:
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?
As a short sale listing agent, having the inspection done asap is not the real issue. The real issue is the inspection contingency. 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 deposit. Make sure you get a good deposit at time of contract.
If the Buyer is still not agreeable you could negotiate the contract allowing the Seller to continue to market the property and accept a better offer if one comes in. Give the Buyer a First Right of Refusal.
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.
There is nothing worse than a Buyer using the inspection contingent to get out of a deal after we have worked for months to receive the Short Sale approval.
Comment
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Comment by Wendy Rulnick on December 7, 2012 at 3:31am
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Clayton - Thank you. You are also a true professional. Much of the success of a closing - short sale or otherwise - has to do with the agents on both sides. If you know and trust the agent you are working with - it makes a huge difference. None of us can control our clients. If someone wants to default, buyer or seller, there is only so much we can do.
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Comment by Clayton Bonjean on December 7, 2012 at 3:25am
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Also, I am fully aware that you two are the best in the industry and I have 100% respect for what you are doing. Short Sale Superstars Training has been a major contributor to my success in Real Estate. I have also done a few deals with Wendy and she is a true professional. This argument just hits close to home with me and I feel I can be good contributor to the other side of this argument.
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Some buyers actually want to inspect up front.
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On another note: If your short sale listing is pre-approved (HAFA, cooperative, etc). You could convince me to inspect up front
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It really boils down to each of us operating on different sides of the transaction. So I doubt we will every fully agree on this issue. My thinking is based on my own system. Many times these short sales do not go through and it is my goal to retain the client and keep them happy. Also,I do not like escrow disputes (complete waste of time, in my opinion). However, there are many things that I do to prevent buyers from walking like:
1. Explaining that short sales will probably take 6 Months to a year. "Under Promise and Over Deliver"
2. Never put two short sale properties under contract when the buyer can only close one. That is true waste of time and It does not seem ethical.
3. Good communication throughout the process.
4. Negotiate a good price so buyers don't jump to a better deal.
Bryant, I would rather do the inspection up front than risk doing an inspection without the AS IS contract being contingent on it. I could really have egg on my face with that one. Also, is the deposit the only issue, or will that also create a "Specific Performance" issue, if the buyer fails to perform? I know all markets are different and inspections up front on short sales are the norm in many markets; but honestly, I do not see it that way in our Market, "Emerald Coast"...Just being honest. If an agent firmly requires this, they may lose some good buyers. I have had this argument a few times and I think there are good points on both sides.
For example, what if you had a short sale that has very little activity, Say you are on the market for 120 days with no offers. Ok, then I submit a cash offer with proof of funds on the standard addendum with deposit and inspection period is to start upon approval. If am firm, wouldn't it be best for the client to get this offer working with the lender? I really think you have to evaluate each property, each buyer, and each situation.
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Comment by Bryant Tutas on December 7, 2012 at 12:37am
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Clayton. Which is why we have no problem if the buyer does the inspection after approval. BUT the contract will not be contingent upon it. As long as the contingency is removed they can do the inspection whenever they want.
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Bryant - Excellent opinion on buyer inspections.
Clayton - Good points. I have many buyer agents (me being mostly on the listing side) who WANT the buyer inspection done right away to not waste anyone's time. I ask for it, but only PUSH for asap inspection if there are suspected problems with the house. I don't often seeing buyers faking "unacceptable" home inspection to drop out of the short sale anymore. I have seen them drop out for nothing, though! Then they lose their deposit, of course.
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Hi Bryant - Great Post! I am going to play the devils advocate on this one. I have done a lot of short sales and about 70% of the time, I am on the buyers side. To me, the view on this argument really depends on what side of the transaction I am on. If I am representing a buyer, I always require that the home inspection time line start upon the approval letter. I can definitely understand a listing agent wanting different but let me explain my side.
1. Inspections cost money - If I have one of my clients invest $400 in WDO and a Home inspection and the deal goes south, I may lose that client. They are definitely going to be more upset when the short sale does not go through.
2. In many cases short sale approval can take 6 months. Most short sales are occupied and a lot can happen in 6 months. So really, we would need to pay an inspector again to come out and re-inspect the property. This really is not ideal.
3. On most short sales, the seller can cancel if he is unhappy with the lenders response. So to make the buyer bound and allow the seller the ability to walk does not seem fair to all parties. It makes sense if you are representing the seller but you really have to put on your buyer's agent hat and sympathize a little.
I have had a few situations where the listing agents have required the inspection to start on the effective date and I advised the buyer to not do the deal. In both situations, after explaining our position and why, the listing agent had their client sign off on the contract. In both of these situations, my buyer performed.
I definitely do not want to waste my time or anyone else's. I think you should evaluate every situation differently. For example, If a seasoned agent submits a cash offer but wants the inspection to start at approval…I would probably advise accepting. It is definitely better than an offer with a financing contingency and an inspection period starting upon the effective date from a short sale rookie, in my opinion.
I hope the listing agents don't bash me to hard for this comment.
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