Inspections 'for informational purposes'
The Wheel Estate Cam: Episode 18
By Frank Borges LLosa, Friday, April 2, 2010.
Episode 18: Beware when buyers request home inspections "for informational purposes only," says Frank LLosa of Frankly Realty, as it is not straightforward and may just be an attempt to renegotiate price or provide a loophole for buyers to step out of a purchase contract.
He likened it to a "wolf in sheep's clothing," and said it would be preferable to perform a "real" home inspection.
"Let's get to the crux of it: The buyer wants to make sure the house is not falling off the earth, and the seller doesn't want to be nickel-and-dimed with, 'This lightbulb needs to be changed' and this nit-picky stuff," he contends.
"Why not put in the contract exactly what the expectations are?"
The use of the "for informational purposes only" phrase can breed distrust among agents, he said, over the actual intent of the inspection.
Watch past episodes of the Wheel Estate Cam.
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Submitted by John Green on April 2, 2010 - 4:06pm.
This has largely been handled in our market by including a standard paragraph in the contract that if the aggregate amount of inspections (not including waste water or pest) totals less than X, the buyer agrees to accept. If greater than X, buyer has the choice to accept or walk away. But....if buyer chooses to walk away, seller can keep contract in force by agreeing to either reimburse buyer at closing, or complete repairs/replacements (properly, of course) in excess of X prior to closing.
Submitted by Lexie Longstreet on April 4, 2010 - 5:40am.
The NC contract has an out for inspections and buyers use it all the time. Getting a contract is only the first step in a long process to get to the closing table. Tom's comment above would be a welcome change here.
Submitted by Barrett Powell on April 4, 2010 - 9:05am.
Actually in North Carolina we have two alternatives; 1 and 2, respectively. Alternative 1 is the traditional Offer with repair contingencies and negotiations.
Alternative 2, and a better option in my opinion, is basically an "Option To Purchase" where the buyer has a predefined time frame to investigate the property and decide if they want to purchase or not. There is no repairs contingency or haggling back and forth on repairs or their cost.
In alternative 2, the buyer pays an "Option Fee" that is non-fundable. The seller keeps the fee whether the buyer purchases or not. There can still be earnest monies involved in Alternative 2 that can be returned if the buyer exercises their right to terminate the contract "for any reason" prior to the expiration of the option time.
Barrett Powell, Owner/Broker/Consultant
Southern Advantage Companies
RSA Software & Consulting
288 East Street, PO Box 1427
Pittsboro, North Carolina 27312
http://www.REMAXChatham.com
http://wbarrettpowell.wordpress.com
barrett.powell - Skype
wbarrettpowell@gmail.com
Submitted by Barrett Powell on April 4, 2010 - 9:07am.
In the answer above I stated "In alternative 2, the buyer pays an "Option Fee" that is non-fundable."
It shoud have been "non-refundable" instead of "non-fundable".
Sorry for the confusion.
Barrett Powell, Owner/Broker/Consultant
Southern Advantage Companies
RSA Software & Consulting
288 East Street, PO Box 1427
Pittsboro, North Carolina 27312
http://www.REMAXChatham.com
http://wbarrettpowell.wordpress.com
barrett.powell - Skype
wbarrettpowell@gmail.com
Submitted by Frank LLosa on April 8, 2010 - 8:26pm.
Tom,
We really should have something like that. Instead we are left to make it up on our own... and we aren't supposed to be writing legal contracts.
The crazy thing about Virginia is the buyer can actually do the inspection and walk for NO reason! Yeah, no "first right to cure" for the seller. It really is nuts.
Frank
Submitted by Frank LLosa on April 8, 2010 - 8:28pm.
Lexie,
We always have to manage our client's expectations right!
They can get really excited when it is under contract, while in our eyes we see it only as a step in the right direction.
So one might say "why not fill in all the loop holes?" I guess the push back is that if buyer's have a right to walk, they are more willing to put the offer in in the first place.
Kinda like new condos or timeshares. The salesperson loves to say "oh well you have 5 days to think it over, just sign now to reserve what you have."
Frank
Submitted by Frank LLosa on April 8, 2010 - 8:31pm.
Barrett,
Very interesting. Thanks for sharing. I really like that idea of a non refundable fee. Otherwise the seller loses money giving the buyer a chance to look it over.
One thing you said was the "for any reason prior to the expiration of the option time." In Virginia, after the buyer does the inspection, they can walk for "no reason." Isn't that crazy?
Frank
Submitted by Babs Jamieson on April 9, 2010 - 6:30am.
Frank,
Obviously, you are a real estate agent, a salesman, and your goal is to close a sale. However, you have to keep in mind that it is a buyer-beware world out there in real estate land. Sellers hide problems from buyers, and buyers should have the right to back out of a contract if they choose to do so, without incurring fees.
We have bought many homes over the years, and not once have we been required to pay a fee just to be able to have the right to inspect a property. Non-refundable fees? That is crazy. I would not touch a property if part of the deal included non-refundable fees just to have the right to make sure the property was represented fairly and honestly, by BOTH the seller and his agent.
We just purchased a condo in Washington, DC. When we said we wanted to do an inspection, our agent told us that an inspection really wasn't necessary, that condo inspections used to be rare, and maybe about only about 50% of condo buyers inspect now! It was only because we have bought many properties in the past and have learned the hard way that we knew that an inspection was necessary. By doing an inspection, we found problems with the condo, problems which had been plastered and painted over by the buyer. Moisture was found behind the walls and even the condo association claimed that there couldn't be a problem because there was no pipe behind the wall. Well, low and behold, when the wall was removed, there was a leaking pipe which had been leaking for a long time....and which explained why the area had been plastered over and repainted to make it look problem-free by the seller (instead of making the appropriate repairs to fix the problem). Electrical fixtures were bad. Heaters weren't working, along with many other problems which the disclosure statement did not disclose. Luckily, the inspection report enabled us to feel more comfortable about closing the deal and getting a better price from a buyer who should have disclosed the problems and repaired them in the first place, but instead chose to waste OUR time and money by not doing so. And yes, we had the right to walk if we had decided to do so after finding out about the problems, for whatever reason we chose to use to walk away from the deal. Buyers have the right to be comfortable with their decisions.
Furthermore, and all of you real estate agents out there know this, even an inspector misses things and is not held responsible if he does. Once the contract is signed and closing takes place, you agents walk away with your money and the buyer is stuck with the undisclosed/undiscovered defects to deal with at his own expense.
Your comment about non-refundable fees, "Otherwise the seller loses money giving the buyer the chance to look it over" is ludicrous. A buyer should have the right to look over any property before buying WITHOUT having to pay additional fees. What about potential buyers losing money?We buyers have to pay the cost of inspections and don't get OUR money back when we "pull out of the deal" because we are not comfortable with what the inspections have disclosed about the property. In my opinion, the cost of the inspection should be refunded to the potential buyer BY THE SELLER when problems with the property are found which should have been disclosed to the buyer BY THE SELLER in the first place. If a seller claims not to have known about the problems, then a buyer should be wary of doing business with that seller, because there may be many other problems with the property that the seller "claims" not to know about and which could come back to bite the buyer someday if the deal goes through.
Real estate agents should not be in the business if they do not encourage the buyer to ALWAYS have a property inspected before going through with the deal. I am disappointed with you, Frank. Non-refundable fees? Unfair for buyers to walk away? Sellers losing money? You can't be serious! Until this point, I thought you were one of the rare real estate professionals who seemed to try to do business fairly and honestly, by looking out for the interests of both the seller AND the buyer.
Babs
Submitted by Mark Bazzetta on April 16, 2010 - 6:28pm.
Babs,
I completely agree with EVERYTHING you have stated above. As an agent in Chicago I always recommend having an inspection done, whether my clients are purchasing a 1BR high-rise or a 3BR stand-alone townhome. My clients expect my interests to be aligned with their best interests, and they are. If we as agents/brokers lose our clients' trust by not doing right by them, we are no better than the used car lot down the street.
Regards,
Mark Bazzetta
mark@markbazzetta.com
Re/Max Edge
Chicago, IL