MANAGING THE BUYER'S HOME INSPECTION IS ONE OF THE MOST IMPORTANT DUTY OF A BUYER'S AGENT, Chapter 6 of 8

* * * *  HARD CORE REAL ESTATE TALK * * * *

LENN IS PAID FOR WHAT SHE KNOWS, NOT FOR WHAT SHE DOES!

Reference is made to the recent posts of Gary Bolen and comments thereto by Bob Stewart about agents getting the message out describing [justifying] the services provided to home buyers.   

Specifically, Bob Stewart suggested that we write about the duties outlined in my post of November 11, 2006:

1.  Make the appointment
2.  Show the home
3.  Provide the required disclosures
4.  Write the contract and escrow
5.  Manage financing for the buyer
6.  Manage inspections
7.  Manage the title work
8.  Schedule the settlement and manage settlement services

Today's chapter describes the Buyer's Agent's duties in the home and other inspections when selling FSBO listings. 

THE BUYER'S AGENT'S ROLE IN THE HOME INSPECTION
The importance of home inspections and other inspections cannot be understated, for most homes.
Most real estate is sold "as is".  "As is" literally means, "what you see is what you get."  

WRONG!!  That is precisely what many FSBO Sellers believe and it is not right.  Yes, what you see is
what you get, as long as:

The Seller has disclosed any known defects that would have caused the buyer to refuse to buy that house if
the defects were known by the buyer. 
The appliances, heating and cooling, plumbing, electrical systems are in operating condition. 
The foundation is sound and the house does not have water penetration from above or below or in between.
The structure of the house, windows, doors, roof, garage, etc. are all in operating condition.

Sound complicated?  Evaluating a whole house is, indeed, complicated.  While the owner believes that the house is being sold "as is", the Contract of Sale contains a paragraph providing that, at settlement, the house will be
conveyed - vacant, clear of trash and debris, broom clean and in substantially the same condition as existed on the Date of Contract Acceptance. 

That's not all.  The contract also states, and the Seller has agreed that "all electrical, heating, air conditioning,
plumbing (including well and septic), and any other mechanical systems and related equipment, appliances and
smoke detector(s) included in this Contract shall be in working condition."  Since most home buyers are not competent to test and evaluate the operating condition of the various systems in a house and their agent is not qualified as a home inspector, a home inspector will be hired to perform a whole house inspection.  Or, the buyers may elect to only have the mechanical systems inspected.  As long as the Seller agrees in the Contract that specific components of the house will be in operating condition, there will be a contingency whereby the buyer, on receipt of an inspection report, (A), request that the Seller make repairs, replacement of the defective system(s), or (B), void the Contract.  The Buyer's Earnest Money Deposit will be refunded.  With FSBO Sellers, we require that the Seller sign a Release of Earnest Money as a condition of the contract.  FSBO Sellers often believe that they can tie up a Buyer's earnest money and will do so if a contract falls apart.  It is even often done to cause harm to a buyer.  There is only one way to protect the Buyer's Earnest Money and that is to have a Release of Earnest Money in the file and/or, have very small Earnest Money Deposits with a Buyer that understands the risks.  As the Trust Agents for the Earnest Money, some states provide a statutory process for returning the Buyer's Earnest Money, but the pre-signed Release is far better.

"AS IS" Contracts.  It is possible and sometimes advantageous to the Buyer to buy a house "as is" with the mutual agreement in the Contract of Sale that the property condition paragraph be deleted and the contract accepted by the Buyer and Seller without a home inspection contingency.  Home buyers with experience owning a home may be completely comfortable buying a home, even one with known defects, without a home inspection, if the price is right. 

BUYER'S AGENTS DUTIES IN A FSBO PURCHASE WITH A HOME INSPECTION.   If the Buyer knows a home
inspector or gets a recommendation for a home inspector, or simply goes to the Yellow Pages or Internet to fine a home inspector, fine with us.  An experienced Buyer's Agent should be able to evaluate the quality of the home inspection and if it is inadequate, advise the Buyer.  If the Buyer asks for a home inspector recommendation, we are happy to arrange the home inspection with a known, skilled home inspector.  We are the Buyer's Broker and if the Buyer asks for a home inspection referral, we recommend inspectors known to be thorough and who produce a report at the end of the inspection.  The Buyers Agents may also be familiar with well and septic testing resources and will schedule these inspections for a time within the inspection contingency period. 

WHAT RECORDS DOES THE SELLER HAVE? It's important to request that the Seller provide the Buyer with any
maintenance, warranty, repair, permits, improvement records in their possession.  If the Seller has owned the house for 20 years and the addition on the back of the house is 5 years old, they should have records from a home improvement company or permits from home owner performed improvements.  Permits are required for any structural, electrical, plumbing improvements to a house and without proper permits and county inspections, the Buyer has no way of knowing that the improvements meet the Building Code.  This can cause many problems in the future and a Buyer's Agent should know to obtain proof of the safety of any homeimprovements.

THE BUYER'S AGENT attends the home inspection and, while not participating in any testing, is available to observe any defects found so that they can describe accurately the defect and request for repair, replacement or monetary compensation for the defect.  When the home inspector writes the inspection report, the Buyer's Agent and the Buyer consult about the value of any recommended repairs or replacements and prepares a Home Inspection Report to be delivered to the Seller within the time limit included in the home inspection contingency. If the Seller does not respond to the Home Inspection Report within the time required in the Home Inspection Contingency, get ready for settlement.  This is a difficult concept for many Buyers and Buyer's Agents. 

However, the terms and conditions for responses are clear in the Contract and unless a Contract requires a signature of acceptance or rejection, most contingencies are self executing and no further action is needed or recommended.  It is clear from the below clause that the ignoring the Notices results in their acceptance.  If the Seller doesn't not understand the meaning of these clauses, they should be advised to seek legal advice or hire an agent to help them.  We do not interpret the Contract of Sale for a Listing agent and we do not interpret the Contract of Sale for an unreprestented FSBO Seller. 

"Failure of either party to respond within 3 Days after Delivery of Notice from the other party will result in acceptance by both parties of the terms of the most recent Notice." 

WE DO NOT REVIEW THE HOME INSPECTION REPORT WITH THE SELLER.  We would not review the Home Inspection Report with a Listing Agent and since the Seller is representing themselves, we do not review it with the Seller.  If the Seller has any questions about the Home Inspection Notice, we refer them to the Contract of Sale.  They always have the freedom to obtain an attorney review or hire an agent to represent them or advise them about the details of the Home Inspection Contingency.  However, we can negotiate the home inspection repairs with the Seller.  Negotiating price, home inspection matters, etc., are part of the duties of a Buyer's Agent.  If the Seller counters or refuses to make repairs or replacements requested in the Home Inspection Report, we accept their offer and present it to our Buyer.  In general, this process is successful as long as defects are not structural or would be very expensive, such as Polypropylene water pipes, roof replacement, serious electrical safety matters or water penetration, heating or cooling systems, etc.  If the home
inspection reveals structural defects, serious water penetration, the Buyer is usually going to void the Contract.  When faced with expensive repairs or replacement, the Seller often becomes angry and refuses to do anything.  At this time, it's up to the Buyer to decide whether or not they wish to take the house as it is with the known defects.  The important thing to note here is that the Buyer does, indeed, know of the defects and takes the house with full knowledge of the cost of repairs to themselves after settlement.  If the price of the house was favorable to the Buyer, this often makes sense. 

When representing a Buyer in a FSBO purchase, the Buyer's Agent must communicate signature needs to the Seller quickly.  Many FSBO purchases fall apart because, with only one agent involved, dates can be missed and contingencies not removed timely.   

We will deal with the seller honestly and truthfully.

We will advocate for our buyer/client.