When Should The Home Inspection Be Completed In A Short Sale?

Real Estate Agent with RE/MAX 4000 FA100032580

I recently completed and earned the Short Sales and Foreclosures Resource designation.  I think the points concerning the home inspection are worth posting:

  • As per contract.  If the contract calls for the home inspection to be done in five business days after the contract has been executed, the five days would start from the time of signing by the buyer and seller not from the time of the lender approval.
  • The buyer would not be able to negotiate any costs or repairs if the home inspection was completed after lender's approval.  The lender's approval is based on a definite dollar amount to be realized at the closing and they do not allow for further negotiations.
  • Most often, a short sale will be an as-is transaction, and the seller doesn't have the money to make the repairs nor will the lender make repairs.  That said, the buyer still has the right to know what "as-is means and withdraw the offer or reduce the offer based on the home inspection.
  • The listing agent needs to protect the seller.  Allowing a buyer to wait until after the lender's approval to do the home inspection thereby giving the buyer the ability to walk away that late in the transaction may force the seller into a foreclosure sale because the seller would not have enough time to find another buyer.
  • Although the approval process takes quite some time, typically lender's approval will provide only days, sometimes as few as five, for buyers to close, which does not give most buyers sufficient time to order a property inspection.


  • Recommend that clients have appropriate property inspections performed.  If buyers refuse, request that they acknowledge in writing that you recommended the inspection and they declined to do so.  In addition, send an e-mail confirming the buyer's wishes regarding the inspection.

Please see additional article "Short Sale Myths And The Truth"

Comments (4)

June Piper-Brandon
Coldwell Banker Realty - Columbia, MD
Creating Generational Wealth Through Homeownership

Sandra, this is great information and I will be sure to remember it. 

Mar 31, 2010 03:05 PM
Leslie Ebersole
Swanepoel T3 Group - Saint Charles, IL
I help brokers build businesses they love.

I can't imagine a lender giving 5 days to close upon approval. It takes 5 days of the HUD being still for the buyer's lender to finish a loan. I have 3 or 4 SS designations and I find that classroom information is helpful but not gospel. Depends on the house, but I'm not wasting money on an inspection until I have some assurance that the lender and all junior lien holders can be satisfied. As a listing agent, of course I've pushed for early inspection, but a savvy buyer's agent usually refuses.

Mar 31, 2010 03:35 PM
David Saks
Memphis, TN
Broker / Industry Analyst

The fourth point, allowing the inspection after approval, is an eye catcher. The LA has to play life guard here and do some sentry duty.

Mar 31, 2010 04:22 PM
Sandra Mathewson
RE/MAX 4000 - Grand Junction, CO

Leslie, I agree that I have not heard of the lender giving an approval and expecting a COE within 5 days.  I just related what was printed in the materials.  Yes, it is information not gospel!

June, glad you liked the information.

Yes, David add "life guard" to our list of services!

Mar 31, 2010 04:42 PM