Let The Buyer Find Repair Issues When They Have Their Own Home Inspection

Charita, I too was directed to your blog by Barbara's, and while I tend to agree with you generally, you are missing something. 

Barbara, your arguments are reasonable and budget minded clients (and there are plenty of those) would tend to take your advice. But I have to question are your clients best served by that advice.

Here's what neither of you are thinking about:

Why is a buyer having an inspection done? What is the legal imperative?

They are exercising their right to do due diligence on the home, so that should they need to seek redress in the courts at a future point they will have the right to do so. Effectively maintaining their right to sue the sellers if they ever need to.

Period.

If immediate issues are found then it is a surprise, seemingly to all, and it has to be dealt with, negotiated for or otherwise resolved.

Sometimes the sale collapses or brakes down at this point. The inspector didn't cause the problem, but of course it isn't the first time, nor will it be the last time, the news bearer is blamed (figuratively of course). It is stressful. Your hard work could be for nothing. It has happened. And it stings.

Charita’s position is to be proactive, check first and move forward without worry, no risk.

Bardara is saying there may be nothing, so why spend. The odds favour this, but her clients are exposed to some risk.

They are both reacting to the risk of there being immediate issues, but immediate issues are not why an inspector is hired. The due diligence legal requirement is.

Full disclosure does not come into play only after an inspection. It is always in play. Full disclosure is the law, period. You are obligated to disclose everything known or suspected and you must look. You are not allowed to turn a blind eye, ignore symptoms and pretend not to know. You are even required to report past problems that have been corrected, no matter what their nature or how effective the correction has been.

Caveat emptor (Let the buyer beware.) This is not law! Although once a common attitude, it is no longer legal in the building-housing construction industry as well as home renovation, property improvements and real estate transactions.

In fact courts treat this behavior on the part of professionals in the real estate and building industry as an offence, a kind of white-collar crime. No you won’t be in handcuffs, but you will be paying a lawyer for your defense.

You, as a property seller, are not allowed to cover a problem and sell the property to get rid of it.

There is one exception. Make it known. Tell all, upfront, before offers are made. Full disclosure of known, suspected, or past problems and defects with a history of corrective repairs. Full disclosure gets you off the hook. So why wouldn’t you? Don’t you think it’s in the sellers’ interest?

One final thing you should know; there is no time limit, forward or backward. Forward – doesn’t matter when an issue shows up, past sellers are liable, in some cases even through estate succession transitions.

Backward – liability responsibility extends back from the immediate seller though prior sellers, even as far as the original builder. Only the dead get to duck the issue. (If there is real justice though, it might get hot for some.)

Even if both inspections are done on the same property, it is but a fraction of 1% of that properties’ value/selling price.

They protect the interests of both the seller and the buyer. Neither should be “on the hook”.

Legal fees make inspection cost look like peanuts. This is the general thrust of the judicial interpretations we are seeing. Yes there are as many variations, opinions, and exceptions as there are different courts. Probably more.

Lawyers will handle it for you, but consider the price.

I’ve posted this here, as I’m interested in this aspect of the discussion:

http://activerain.com/blogsview/2096968/charita-vs-barbara-22-to-45-or-is-it-

Charita - As I'm reading the comments on your post, I really liked how many Realtors/agents supported the pre-inspection.  My question is, after the pre-inspection are all of you Realtors/agents making sure the sellers include the findings on the TDS? 

I also agree with Roberty that buyers need to do their due diligence in having their own independent inspection.  However, I ask again, when the buyer notifies you of property conditions and defects and decides to walk because your seller won't repair and/or renegotiate, do you include what you now know about the property on the TDS for the next buyer?

My take on it Donne (#24) is as follows;

-the sellers have the pre-listing inspection done, then list the property after deciding what repairs or improvements to do, if any.

- they and their agent price and show the home, with a summary of the inspection being provided with any handouts taken away by prospective buyers. The full report should be displayed openly and available for visitors to read and review.

Now when a potential buyer makes an offer they'll have had all the known facts prior to making their offer. Everything has been declared.

Now the buyers should have an inspection (they may opt not to, but that is of course legally not advisable). it is not likely that the buyer's inspection will find any issues, but should there be one it won't be a major big ticket item.

So settlement negotiations are less stressful. Information has been shared from the beginning. Much less chance of the sale crashing at this point now.

To answer your question about what you've learned in a situation where a buyer walks;

Yes, declare the information, don't ignore it. If you don't have documentation, get your own inspection to provide a written report that documents everything.

Then use it as I outlined above to get interested buyers to closing.

I disagree.  Sellers don't lose a sale when the buyer's home inspection reveals a defect.  Sellers lose sales when the sellers refuse to make repairs pursuant to a home inspection contingency.

Sellers can have a pre-listing inspection for their own information.  That's all it's worth and often worth the money. 

Buyer's need their own inspection because it isn't the seller's job to protect the interests of the buyer. 

In a perfect world, good maintenance would eliminate the need for either inspections, but as long as many sellers have the belief that "if it's good enough for me, it's good enough for them", .. . . .

Charita, you put up a good argument and I agree with certain circumstances. If you are getting top dollar for the home then it should be in tip top shape. If you are selling a fixer upper or maybe an antique home then there will always be issues.

Personally, I encourage pre-listing inspections whenever possible. This gives the seller an option of fixing what they can and disclosing the rest.

A great, healthy debate with good points on both sides.  Ultimately it is up to each party to do what they feel is right for them.

"He agreed right off the bat and the buyer STILL walked anyway."

1.  It is not unusual for buyers to use the Home Inspection Contingency to walk.  In my area, a buyer can walk "pursuant to paragraph _____ of the home inspection contingency" without giving a reason or produce the home inspection report. 

Same thing with HOA or condo docs.  They have 3-5 days to walk without giving a reason. 

2.  In the case of a rehabbed property, a buyer may believe that the defects discovered may represent a pattern of defects that were not discovered.

I would suspect that #1 was what happened.

WOW -- this is a good debate.  As someone that doesn't take listings, I have seen the inspection reports left on the kitchen counter in the seller's home that have had the inspection done.  This conversation comes up when that occurs:  You still need to get the home inspected, I tell the buyers.  We can't assume that all the defects were caught, or corrected.  If I saw the home inspection report, I think it's great the sellers went to that length to be pro-active in their home sale.  But, when representing the buyers I can't suggest to them that they rely on the inspection report.  I think if a seller has not done some deferred maintenance in a LONG while, having an inspection is a good idea.  Too many things that come up on the buyer's inspection report can be a turn off.  Good debate!!

Interesting debate indeed.  I have never had a seller willing to do a pre-listing inspection so it's hard for me to relate.  Most of the sellers I'm working with right now are short, so. . . 

This certainly was a great discussion!    I feel very strongly that if there are suspected problems, seller should get an inspector or an appropriate contractor in to check it out.   If not, then have the buyer's inspection find things and address them if they come up.    Usually my buyers will negotiate about problems as they are revealed.