In Texas, we are apparently very unique among other states in that a buyer of real estate can purchase an unrestricted right to terminate the contract. This is known as an option period and is typically granted for 7-10 for a nominal amount of money, such as a few hundred dollars. The buyer can terminate the contract for any reason whatsoever, and can exercise that right anytime up until 11:59 pm on the final day of the option period. Should they decide to exercise this right, then they are only out the fees negotiated for the option and any inspection fees paid.
When a house goes under contract, especially in a hot seller's market like Austin's, sellers will attempt to negotiate as short of an option period as possible. Typically a buyer will request a seven day option period, however, it is not uncommon for a seller to accept an offer with a three-day option period. With a very tight option period, it can become very challenging for the buyers to do their due diligence. At the minimum a buyer needs to have a home inspected, and possibly to have specific contractors provide estimates for repairs if there are any. Because of these time constraints, I believe it is important for a seller to have their homes pre-inspected before listing.
First, it identifies all the deficiencies in a home that a seller may or may not be aware of. The seller can identify these problems and can do one of a few options before listing. The first option is to adjust the price of the home in order to account for the repairs. They can also offer the buyer a credit towards closing costs. Lastly, they can receive estimates from contractors and make the repairs before listing. While a seller making repairs are usually for savvy sellers, regardless of which option they decide to go with, they will have significantly increased their negotiating position. Additionally, and I want to heavily disclose that I am not a lawyer, I believe that they have potentially reduced their exposure to liability by doing so.
Should the seller decide to make the repairs themselves, there are a few things that are possible outside of the scope of a contract that are not due to changes in the contract. In the 2014 version of the one-to-four family resale contract in Texas that is effective as of June 1st, 2014, the Texas Real Estate Commission changed the language used for repairs on our resale contracts. There is explicit language in the contract stating that any repairs must be made by either a licensed professional, or someone that is in the commercial business of that nature. The seller is no longer allowed to make the repairs requested once under contract, nor is a handyman, unless they are either a licensed contractor or are in the construction business. In Texas, we require HVAC, plumbers, electricians, general contractors, and septic contractors to be licensed by the State. Any repairs made that are negotiated between the buyer and seller the receipts and other supporting documents have to be submitted to the buyer as evidence of these repairs.
By doing the repairs outside of the scope of the contract, they are free to do the repairs, or to hire a handyman that can go through the "punch list" of items on the inspection report and fix them. They are also able to have multiple estimates for major repairs, which is difficult if not impossible to do during repair negotiations. It is possible for the seller to net themselves more money than by granting a repair allowance to the buyer.
When a buyer negotiates repairs, they will attempt to negotiate as high as possible for the major repairs. A buyer's agent may also purposely use contractors that are known to provide high estimates as a means of extracting more repair dollars from the seller. Should the seller decide to go this route, documents would still need to be provided to the buyer proving that these items were repaired.
Buyer's, and buyers agents love to work with sellers that have had their homes pre-inspected because there are not any secrets. With a pre-existing inspection report, the buyer's agent is empowered to schedule the appropriate contractors immediately. There isn't any lag between the creation of the report and the scheduling specific contractors. Everyone can be out on the same day and the seller is less inconvenienced.
Finally, I believe it is important to have a home pre-inspected is because I believe it significantly reduces the odds of a buyer backing out the contract. Many buyer's particularly first-time home buyers are very afraid of an extensive list of repairs. For these buyers, if there are many so called "poison pills" in an inspection report, they will simply end the contract and move on. Had a home been pre-inspected in the first place, a buyer like this would never have made an offer on it in the first place.