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 Ryan C Sanford on
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I believe it all depends on your market and what is customary in your area and how common short sales are. In a strong market such as Washington DC I think you can dictate whatever you want to in a contract, but If you have tons of inventory and no one else is requiring an inpection prior to approval on other competing listings, then you may be hendering a sale. Here in Richmond, I can most likely do it either way, our market is fairly strong, but I chose not to in anyway try to not have a buyer not write on a property, and I have a great reputation and track record for getting short sales done. I'd hate to see one of my competitors with no SS track record, try requiring an inspection upfront, because they most likely will never get a contract on their listing. Short sales have enough stigma here due to the obvious slow timeframes and the uncertainties. I feel if someone waits for at least 60 days (and this is the contract), then the buyer wants the home and is committed.
On the other side of the coin: If I am writing an offer on a short sale, I will advise my clients not to get into a contract that requires them to do any inspections prior to approval. Of course I look every home over thouroughly upfront, and address any potential concerns to be corrected in the offer, just as I would do with any non-short sale.
Ryan C. SanfordREALTOR®, Associate Broker, CDPERE/MAX CommonwealthThe Ryan Sanford Team9401 Courthouse Road, Suite 200Chesterfield,VA 23832804-218-3409 mobile804-777-9001 office804-423-2392 e fax
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Permalink Reply by Ray Singhal Team, CDPE,SFR, CRS on
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As Ryan said, it is dictated by market conditions. In our market in South Florida, the inventory is reduced to half of what it was at this time in 2012. The market is floodded by cash buyers and investors. Our local paper this morning has a full page article how the market is transforming to what it was in 2000-2001,
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Permalink Reply by Bill Dobbins on
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As a listing agent we insist that a buyer have an inspection and delivery earnest money (1%) prior to submission for bank approval. The inspection contingency is removed prior to approval. There have been too many buyer's agents that have their buyer submit offers on a number (I know of one that did 7 at the same time) of properties. When they deliver earnest money, have and remove the inspection contingency prior to submission for approval 90-95% of them wait for approval. If an inspection prior to listing we have an inspection company here (Minneapolis-St. Paul, MN) that will do it and charge $99.
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I like your approach even better Bill. Which company do you use for pre-listing inspection for $99.
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I would not recommend a prelisting inspection for several reasons: 1. the buyers will most likely not go with a seller's inspection report. 2. having a seller pay for an inspection when they are most likely in a financial hardship, and the deal may not even get to closing 3. What if you uncover issue(s) that their inspector wouldn't find, or if the buyer's choose to not do an inspection. Here we have to disclose all material defects. 4. Most importantly!: the future liability for the seller(s) and you, the agent, should something be missed on a prelist inspection and then buyer(s) relied on this to purchase the home. I would not be able to sleep at night with the potential for lawsuits this would pose.
Bill, I suspect in MN the market is much slower, because for a decent home inspection, median her is in the $300 $400 range. I would be scared of what would be inspecting a home for $99 here in Richmond, VA... A thorough inspection takes every bit of 3 hours for a 2000 SFT home.
Ryan C. SanfordREALTOR®, Associate Broker, CDPERE/MAX CommonwealthThe Ryan Sanford Team9401 Courthouse Road, Suite 200Chesterfield, VA 23832804-218-3409 mobile804-777-9001 office804-423-2392 e fax
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Inspecta Homes and some other national inpsection companies as part of a warranty total cost $250-350 inspection is $99 of it all paid at closing. If the buyer or seller doesn't cover it I will. Inspectors get paid at closing. I want to know about any issues ahead of time. In the event it doesn't close I will pay the $99 to the inspection company.
If we are the listing agent we owe our duty to the seller and should only do what is in their best interest.
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Permalink Reply by Carlos Rivera on
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Sounds like a good approach, but when representing a buyer, I just cannot see how I can recomend paying for the inspection without any guarantee the bank will approve the sale in the first place! I suppose at $99, it sounds like a reasonable expense given the uncertainty. But If the offer does not meet the investors' desired net, they simply won't approve. Maybe if it is a HAFA approved short sale, and the bank has already completed a BPO and perhaps even pre-negotiated the list price with the seller, then maybe I would recommend to my buyer. By the way, great tip on the pre-list inspection - I am in he Twin Cities as well and will be checking into it.
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Permalink Reply by Kim Eisen on
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We always request that buyer get inspection done after seller signed and before we submit to bank. There is never the 'perfect' scenerio, yet having the inspection off the plate of contingencies does have it's benefits, even for the buyer because if something needs attention, we can address it, now rather than later. At first, we did have buyers' agents balking at the request, but now it seems more common place in our market. I doubt lien holders will actually pay for it, but I suppose it never hurts to ask, although not sure how you would justify it to the lien holder. Has anyone done that?
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In our experience, lien holders do not pay for inspections. No justification for it either.
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Permalink Reply by Joyce Hathaway on
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I handle alot of short sales in Florida and have my sellers demand the inspection contingence be removed with a standard time of full executed contract with the buyer.....I also require all of my buyers to do a inspection on any short sale being purchased.....Sure there is a risk of the deal not closing (but that is with all deals) but the fact of the matter why in the world would you what 2 to 9 months to house of dreams only find out at the last possible moment that there is something wrong that is not acceptable to you...from a seller side why would you wait all the time and loss the deal over something you might have taken care of ....but now you are moving out everyones emotions are high....not a good for this to happen in my experience....thanks for sharing...Joyce
Joyce Hathaway
Team Brevard
RE/MAX Absolute
321 591 7809
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Joyce you are so very right. Have only 1 solid buyer and get the SS approved. Our success rate with this approache has been close to 100% now.
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Permalink Reply by Barbara Lebrecht on
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When should you do an inspection? That depends. I typically advise buyer's to wait until we have the full short sale approval to move forward with inspections. I am in a market where inventory is low and as-is sales are normal protocol. Have I ever done an inspection prior to approval???...Yes. I do what is in the best interest of my client and each transaction is different. A $100 pest inspection right of the bat, may save my client a useless 5 month wait for approval. However, I am not sure how comfortable I would be suggesting an inspection when a time frame is unknown. A property can change in the time frame it takes for approval and when making a decision on a purchase, the client should be aware of current conditions.
As far as the note holder paying for inspections....I have not seen this done directly. Every once in a while...if there are seller concessions to closing costs and the buyer's lender allows it, I have seen an inspection fee or warranty reimbursed. You have to be careful about this, because if it shows up on the HUD and is listed as an inspection, chances are the buyer's lender will want to see it and that can cause a lot of problems.
As far as the appraisal goes, I have the loan officer order it as soon as I get the approval from the LISTING AGENT This may sound crazy...but in my market, the appraisal is what holds the deal up. If the listing agent gives me the verbal that I should be getting the approval letter soon (and I am confidant in the transaction), I will have the loan disclosures and appraisal ordered by the loan officer to speed up the escrow process. In my local market, escrow is delayed due to the financing, not the inspections.
Good Luck out there and a successful 2013 to all!
Barb Lebrecht
Broker, HomeBuyer's Assistance
CA DRE #1377028
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