Thursday, February 25, 2016

When the deal falls through......

Your buyer competes with 6, 8 10 other buyers on a property and becomes the successful purchaser.  Yipppeeeeeee, everyone is so excited and you're ready to move forward.   Escrow is opened, buyer works with lender to get all documentation in, appraisal is ordered,  home inspection is ordered.  Home inspection will be done fairly quickly, because more than likely, your buyer limited the inspection time period so his or her offer would be more competitive, right?  Then comes the home inspection.  Home inspector does a nice thorough job and buyer shows up toward the end of the inspection so inspector can give an "overview" of what has been found.  Actual hard copy of the inspection follows either that same day or the next.

That's when the stress starts.  Buyer's eyebrows start going up........beads of sweat start forming on buyer's  brow as the home inspector goes thru items he's found.  What does it mean when he says "pressure relief values empty into kitchen sink instead of under the house"...???   How problematic is it when he says stove vents don't go all the way thru the roof, but instead vent directly into the attic?
Is it a problem if rodent droppings are found scattered throughout the attic?  And what about the electrical wires that aren't in conduit, but instead are hanging under the house and not secured as they should be?  More than likely,  a number of items like this will be discovered.  Unless the house is a brand new house,  "stuff" shows up.  Some can be catastrophic, others are simply "maintenance" items.  A good home inspector will explain the difference between the two and tell you which ones may be  deal breakers and which ones won't.  And,  it also depends upon how handy you are or how much money you have to correct those items.

What home inspections are NOT,  are not golden opportunities for buyers to renegotiate a radical drop in sales price in order to make said corrections. Though that may happen.   Our contracts now say that the properties are purchased in their "as is" condition unless otherwise negotiated between buyer and seller.  What inspections are meant to do,  is enlighten the buyer are to exactly what they're buying....what the condition of that property is.    Seller's complete a TDS (Transfer Disclosure Statement)  and provide it to the buyer and on that form and, if they're honest about it,  should disclose whether there is anything that may or may not affect the desirability or material value of that property.  They can't disclose what they don't know or what they don't see or what they aren't aware of,  so a home inspection can and does disclose things that indeed "may" affect the desirability or value of the property.  That is why it is absolutely prudent for a buyer to have those inspections, which include but are not limited to whole house,  roof, sewer, electrical or anything else buyer wants to have inspected during the inspection time frame stipulated in the contract.

Then,  once buyer has gotten the verbal "overview" from the inspector and has cautiously perused the written report,  it's time to sit down with his or her agent and either 1) draft the Contingency Removal or 2) prepare the Request for Repairs.    The seller will respond in any number of ways in order to try to reach a successful conclusion.  The seller may agree to complete all the repairs requested,  may agree to complete "some" of the repairs and not others,  may reduce the price or may offer the buyer a "credit" toward closing costs (being most lenders will not allow a credit in escrow for any repairs).

If an amicable resolution is reached, everyone is happy and escrow proceeds to close as scheduled.
If no resolution is reached,  with buyer and seller not able to reach agree,  depending upon a number of legal factors, a Cancellation of Contract is submitted.  This is not always a bad thing.  Sometimes the work called for overwhelms a buyer but seems minor to a seller.  But, in my opinion,  if a sale is going to "go south" and die,  it's always better for that to happen early in the escrow as opposed to just before it's scheduled to record.

Bottom line though,  is to make sure buyer has any inspections they desire, within the stipulated contractual time period.  At the end of those inspections, buyers will know pretty much all there is to know about the property and can make educated decisions and, hopefully,  be thrilled with their new purchase....and buyers and sellers come away satisfied and happy.   That is everyone's goal.

( * The opinion expressed in my blog is solely my own through my 38 years of real estate experience. I do not give legal advice and always recommend my clients seek legal counsel if further clarification is requested.)  

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