Home inspections are the most crucial juncture of every residential property transaction. When a Seller and Buyer finalize negotiations on the terms of a purchase and sale agreement, everybody’s happy. As brokers, we explain to our clients that what they’ve accomplished is no more than “agree to try to agree”. The inspection contingency contained in virtually every transaction is where the rubber meets the road i.e., negotiations are truly finalized.
Terms of the basic forms used in real estate today are largely stacked in favor of buyers. There are numerous subjective terms contained in the forms published by the Northwest Multiple Listing Service that provide “easy outs” for buyers.
We understand that it is good to have one cooling off period contingency that allows a buyer to recover from an emotional decision that may not be in their own best interest, allows them to back out at no cost to them. However, sellers suffer inherent costs at the hands of indecisive or insincere buyers when “backing out” becomes a highly leveraged tool for renegotiation.
The most damaging scenario for every seller is when the MLS listing status changes from “Active” to “Sold Subject To Inspection”, then back to “Active”. There is no simple recovery from this event. Virtually every seller will suffer a financial loss as a result, and every buyer and buyer’s broker knows it. Today buyers may terminate a transaction based on the inspection contingency without ever conducting an inspection. In our opinion this is just wrong. It didn’t used to be this way. It wasn’t that long ago that the buyer had to conduct a “professional” inspection. Otherwise the inspection contingency was deemed waived. If the seller agreed to repair/replace/correct deficiencies cited by the buyer’s inspector, the inspection contingency was deemed waived. We wish that it were like this today, and maybe someday it will. In the meantime, we have adopted another solution.
We cannot take credit for creating this solution. That belongs to Mary Lee, fellow Broker at Windermere Bellevue Commons. That is why I refer to this approach as the MLW [“Mary Lee Way”]. Many brokers are resistant to this solution thinking that tinkering with “the system” is beyond the scope of a broker’s job description, if not somehow unethical. We believe they couldn’t be more wrong. Here’s how it works:
- All contingencies are removed from the transaction except for the finance contingency
- Seller provides buyer with a counter-offer that remains “open” for up to 7 days
- Buyer may conduct any and all inspections that buyer desires during the 7 days
- Buyer may accept or counter seller’s counter at any time during the 7 days, including negotiation of inspection items
- Seller may decide to accept an offer from another buyer at any time prior to the first buyer’s acceptance of seller’s counter e.g., seller reserves the right to retract seller’s counter to the first buyer and accept a more desirable offer.
- The MLS status remains “Active” throughout this process. Once completed the status changes to “Pending”. There is no interim “subject to” status changes.
There are a few critical components to this approach:
- The buyer’s broker has to be willing to sit still and listen long enough to understand the process. Not everyone is open-minded about such things, so the seller needs to understand that some offers will simply go away as a result of this type of counter. Our belief is that those are offers that never would have finished the deal anyway. The seller is better off without them.
- The seller must pay for a professional home inspection prior to listing the property for sale. Regardless of the outcome of the inspection, this information is to be readily shared with all agents and buyers interested in the property. It is by this means that buyers make informed buying decision that are more likely to stick because they know what they are buying. It does NOT preclude them from conducting their own inspection
Fearing the unknown, sometimes sellers are reluctant to have their property pre-inspected thinking that what they don’t know won’t hurt them. We counter:
“In negotiating with a buyer, would you prefer that the buyer know more about your house than you do? Because once a buyer has conducted an inspection, and you haven’t, that buyer will most certainly know more about your property than you, and you will be at a marked disadvantage.”
It is unfortunate that our relocation clients are unable to utilize this approach. The large relocation companies are generally not given to innovation. We hope that someday they will, but in the meantime it is business as usual for our relocation clients. We’ll do the best that we can with what the old approach allows, but it is always to everyone’s benefit to conduct a pre-listing inspection. It will put the seller in a better negotiating position and will provide buyers with the ability to make a more informed, and thus sincere, buying decision.
Share this Post