The primary reason why a buyer backs out of a contract is due to the buyer discovering something out about the property that they did not know about prior to making the offer... This can enhance the cold feet that they may be having, giving them a reason to back out.
In addition, prior to removing contingencies, the buyer can come back and negotiate the contract again based upon something they discovered on a pest inspection or a property inspection or even a roof report making the seller nutty with all the requests even though they may have wanted to sell as is. This usually means a reduction in the price or possible credits at close of escrow to make the buyer happy.
When writing an offer in our area, you know that if the listing has pre-inspections, it is going to be a smooth transaction and a very knowledgeable agent. When the listing has no inspections, you sometimes think twice about the property...
Here in Silicon Valley, California... Most agents to all inspections prior to listing homes on the MLS. The five MUST haves are:
•1. Pest Inspection. This is to discover all section one and two items about the house and the cost to fix.
•2. Property Inspection. This is to have another set of eyes go over the house to discover things that the seller may have missed and have them disclosed to the buyer.
•3. Roof Inspection. This is to see how long the roof will last, and if it is leaking
•4. Chimney Inspection. This to see about the structural integrity of the chimney and see if it needs repairs.
•5. Environmental/Geological/Tax Status report. This report it to see about man-made contaminants around the property, Mother Nature items (fire, flood, earthquake, liquefaction, dam inundation etc...)
•6. Additional inspections can be; Structural report, septic/sewer, pool/spa, well tests, radon, mold, feng shui, etc...
To a lot of people, this list seems too much... Here are the reasons why you should consider doing this...
•1. The buyer tries to negotiate again prior to removal of contingencies, so if you have disclosed all the damage and cost to fix... AND have them sign all the documents and turn in with the offer, it makes it harder for the buyer to negotiate later since they knew all about the issues.
•2. You do not have to wait for the buyer to do their own inspections, and wonder if there is any damage that they are going to find.
•3. Most transactions fall out due to something that they buyer discovers during the contingency phase of the contract. If they know about everything prior to making an offer, then you can greatly reduce the probability that the transaction will fall through.
•4. All inspections that the buyer orders and performs (in most states) follow the property. So if the buyer backs out, those disclosures then need to be given to the next buyer.
•5. If there is section one work to be done, you can consider taking care of it prior to listing and be able to advertise it as a home with section one work complete.
What are your thoughts? Do you do this in your area? Are there reasons why you should NOT do this? I would love to hear your ideas.
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