Special offer

What is difficult for buyers might ultimately harm sellers.

By
Real Estate Agent with Compass

Tug of warThe regional sales contract in the Northern Virginia real estate market is changing January 1, 2012.   There are two BIG changes in it, both designed to help "protect" sellers, which I think will ultimately harm them because more buyers will walk away from contracts if sellers refuse to fix deficiencies.  I have written about this before - "What is Normal Anyway?"  Today I will again focus on the major changes to Paragraph 7.

Paragraph 7 is has been stripped down to the bone.  Nothing has to be in "normal working order" anymore, and buyers choose as of "contract date,""inspection date," or "other" that they will take the house in that condition.  The seller is not obligated to make sure anything works.  So the only protection the buyer now has is the "void" option in the home inspection contingency.  This has always been the case, except now the seller does warrant that some basic systems will work.

As of now, until December 31, 2011, the same paragraph reads all "heating, cooling, appliances, plumbing and electrical" must be in "normal working order."   The brain trust at NVAR and GCAAR who made the change felt it was causing too much confusion as to what "normal" means, and causing too much trouble for sellers to make all of these repairs, so they ripped the whole thing out.  They also felt buyers had too much weight in the contract, and wanted to give the seller more protection.

If you choose "inspection date" and find that things are broken in the inspection, the seller is not obligated to fix them, and again, your leverage is in the home inspection contingency and the threat of "walking away" or voiding the contract within the contingency deadline.  If you choose "contract date" how do you prove the condition on that date?  It will become a game of he said she said or pre-contract inspections.

I think they have replaced one piece of complicated language with another set of complicated scenarios that will cause more problems than haggling over what "normal" means ever did.  And this does not even touch the changes to the financing contingency, but that is for another blog.

So what's a Northern Virginia Home Buyer in 2012 to do?   Well first of all, make sure your Realtor knows the new contract.   Second of all, get a really good home inspection with a very good report.   Home Inspections are now going to be more like "study periods" to find out if the home is in acceptable condition.  If you find out it is not, your recourse is to ask the seller to fix it or you will walk away.  Again, this is not drastically different when it comes to things like the roof, wet basements, decks, siding, paint, walls, wood, tiles, flooring and dozens of other parts of the house that were not covered in paragraph 7.  But it does change that obligation from the seller to have plumbing, heating, cooling, electrical and appliances working, which let's admit, gives a great peace of mind to the buyer that the house is not going to become unlivable and a money pit upon move-in. 

One exclusive buyer's agent mentioned that it was similar to making all houses sell in the same condition as a foreclosure.  That is a perspective it seems no one on this committee thought of when they made these changes.

"Buyer Beware" is more true than ever before in Northern Virginia home buying.   But I think this could possibly ultimately harm sellers too, if not managed correctly by the listing agent.   Sellers should not feel emboldened by this change to shun requests for repairs.  There is little desparation among buyers to purchase a home right now.  The housing market crash left a very negative impression, and few buyers will over pay for a home these days, even here in Northern Virginia, where the market is strong compared to most of the rest of the country.

With interest rates are at historic lows, as well as inventory levels, we should have a market with heavy buyer activity, multiple offers and price escalation, but that is not the case (read here for the latest market stats).    If buyers are scared to buy houses, that is ultimately going to be bad for sellers.   If you are thinking of selling your home in Northern Virginia  in 2012, don't think this makes every contract a slam dunk for you.  Buyers will walk away based on inspections if you don't convey the house in proper, working condition that reflects the strong prices we have here.    

If you are thinking of buying a home in Northern Virgina, give me a call.  I am a staunch advocate for both my buyers and sellers, and know the contract well and how to lead each party through the various complications set forth in the current contract and the new one in January, 2012.

 

Comments (9)

David Gibson CNE, 719-304-4684 ~ Colorado Springs Relocation
Colorado Real Estate Advisers LLC - Colorado Springs, CO
Relocation, Luxury & Lifestyle residential

Coral I’m guessing there is a lawyer involved:) Well I do understand that a word like “normal” is problematic. I hope it gets worked out. We all have enough problems without the contract causing more.

Dec 16, 2011 01:20 AM
Coral Gundlach
Compass - Arlington, VA
Real Lives. Not Just Real Estate.

I agree "normal" is difficult, but it's been in there for ages and it is what buyers are used to.  I think the committee must have been 99% lawyers and few active, practicing realtors who work evenly with both buyers and sellers like myself.   They took out normal but gave us confusion on determining the condition date and no language on how to determine it.

Dec 16, 2011 02:41 AM
Jay Markanich
Jay Markanich Real Estate Inspections, LLC - Bristow, VA
Home Inspector - servicing all Northern Virginia

First of all, I think everyone understands what normal means.  Second, now they have language which says, in effect, you are on your own.  Good luck!  So, the dishwasher breaks between the home inspection and the final walk through.  Bummer!  You are on your own.

Aren't these the same kind of people who double counted stuff to make the market look better than it really was?

Dec 16, 2011 04:06 AM
Chris Ann Cleland
Long and Foster Real Estate - Gainesville, VA
Associate Broker, Bristow, VA

Great post on the subject.  As someone who has been selling Short Sales in as-is condition for three to four years now, it's going to be business as usual. 

Dec 16, 2011 04:21 AM
Coral Gundlach
Compass - Arlington, VA
Real Lives. Not Just Real Estate.

Jay, Actually, sellers disagree over what "normal" is vs. what an inspector thinks.   Slow drains and toilets are "normal" to a seller who has lived with it for 20 years and some inspectors come in and say this is NOT and buyers expect a repair.

Chris Ann - Guess so.  And that further's my buyer agent's point who I quoted above.   We will now market all listings like distressed properties.   Not good for high dollar areas.  Buyers aren't going to go for it, unless it is a very low priced listing for the comps. 

Dec 16, 2011 06:57 AM
Jay Markanich
Jay Markanich Real Estate Inspections, LLC - Bristow, VA
Home Inspector - servicing all Northern Virginia

Wouldn't the word "slow" define abnormality?      ;>)

Dec 16, 2011 10:07 AM
Coral Gundlach
Compass - Arlington, VA
Real Lives. Not Just Real Estate.

Jay, not if it's always been that way.  Normal is subjective.  

Dec 16, 2011 10:16 AM
Jay Markanich
Jay Markanich Real Estate Inspections, LLC - Bristow, VA
Home Inspector - servicing all Northern Virginia

I hear you.  But this could go on and on.  What if the fridge never got colder than 45F and the freezer 28F?  "It's always been that way..."  That would be a fun blog post - a side by side video of a "regular" drain versus the one that has "always been this way, which must therefore be normal" drain.

Can you imagine a realtor whipping a phone out of her purse with that video post on it at the settlement table!?

Did I just make you laugh?

Dec 16, 2011 09:06 PM
Coral Gundlach
Compass - Arlington, VA
Real Lives. Not Just Real Estate.

Jay, we've just proven "normal" is hard to agree upon!  LOL.

Dec 17, 2011 12:00 AM