Sellers – You Don’t Have to Read Your Buyer’s Inspection Report

by Steve Crossland, REALTOR in Austin TX on July 17, 2010 · 78 comments

Home InspectionAs the seller of a home, do you have to read the buyer’s inspection report if the buyer presents it to you? No, you don’t.

And if you are a seller represented by the Crossland Team, we advise that you don’t look at or read a buyer’s inspection report because we don’t want you getting stuck with someone else’s inspection report, produced by an inspector you don’t know and didn’t hire, and which you’ll then have to staple to the back of your Seller’s Disclosure notice if that buyer flakes out and terminates the deal. Then all your future prospective buyers will read that report, for better or worse, and it’s best to not let that happen.

Not all Realtors subscribe to this “I don’t want to see it” philosophy. We sometimes catch flak for this from buyer agents who want to leverage inspection report items to gain price reductions during inspection periods, and they sometimes become angry when we inform them that our seller doesn’t need to see or want to see buyer’s inspection report.

Why not just look at the report?

Section 7 of the commonly used TAR Seller’s Disclosure Notice asks sellers:

Within the last 4 years, have you (Seller) received any written inspection reports from persons who regularly provide inspections and who are either licensed inspectors or otherwise permitted by law to perform inspections? lf yes, attach copies and complete the following:

Most Seller’s Disclosures say “No” on Section 7. Once you receive your buyer’s inspection report, and if the deal craters, you have to change section 7 to “Yes” and attach the report you received, whether you agree with the findings or not, and no matter what mis-characterizations and false assumptions the report might contain. This opens a huge can of worms and can affect the answers you must provide in other parts of the Seller Disclosure.

Additionally, you are already under contract for an agreed price, as-is, and there is nothing in your Texas sales contract that requires you to make repairs (unless specifically written in the initial contract) or look at buyer’s inspection. Buyer has an Option Period, usually 7 to 10 days, to examine the property and conduct whatever other due diligence buyer deems appropriate. During this Option Period, the ball is entirely in the buyer’s court. If the buyer does not terminate prior to the end of the Option Period, the deal continues unchanged.

In almost every deal, however, buyers come back and seek a price adjustment based on conditions that were not factored into the agreed contract price. These range from small and reasonable adjustments to hysterical and ridiculous demands. It is the manner and style in which these adjustments are calculated, communicated and resolved that reveal huge differences in real estate agents and how we advise clients and conduct negotiations. Is there a “right” way and a “wrong” way to go about this? I believe there is.

First of all, a buyer purchasing an older 1960s or 1970s home should have already been prepped and warned by the buyer agent that most of the inspection items are going to be flagged as “out of code” and/or “Deficient”. Especially the electrical and plumbing. Expecting otherwise is like hoping your 80 year old grandma would, upon examination, be found to be in the same physical condition as your 21 year old son. That ain’t gonna happen. Thus, the “ugly” inspection report ought to come as no surprise to the properly informed buyer and her agent. It’s always unfortunate when buyers who think they want an older home closer in simply can’t survive the type of inspection reports those homes produce because they are unable or unwilling to view the inspection report in its proper context.

What is the best procedure to address needed repairs?

After inspection, good agents normally contact the listing agent and ask if they have a preference in how repairs are requested. Some agents/sellers actually do ask to see the entire report, and when on the buyer side, we gladly provide it because we think it strengthens our negotiation position.

When I’m asked as a listing agent, I say “just boil your justifiable repair items down to a dollar amount and send over a signed Amendment with the amount in para 12(a)1b (buyer closing costs paid by seller). If we want more detail, we’ll ask for it after we see your amount, but all we need to start with is the amendment without explanation or details”.

We want dollar amounts instead of repair requests because a) lenders don’t like to see repair language in contracts and b) dollar amounts are not subject to opinion or debate as to whether they are completed properly or not. If you agree to $800 in closing costs that’s a whole lot different that trying to agree to “seller to repair and paint rotted wood at rear trim”, or something of that nature. One or two professional trade repairs can be ok, such as “seller to have licensed roofer repair flashing at chimney”. But money is always the easiest and surest approach for both parties if the amount can be agreed upon.

Once I have the Amendment and the amount requested, I’ll call the buyer’s agent and ask for a general overview of what the amount is intended to cure and how it was calculated, in general, so I can communicate that information to the seller. If it’s a small, reasonable amount that the seller is willing to give back, perhaps to replace a water heater we already know is old, or to fix an actual roof leak that we didn’t know about before, we have the seller sign the Amendment and we’re done. Or we’ll counter with a smaller amount, sometimes zero.

If it’s a large amount being requested, we’ll find out more about it, but never do we venture outside the scope of what comprises the specific amount being requested. Almost never do we request or need to see the actual inspection report, unless the seller desires to do so. I’m not saying this never happens, but it should be carefully considered first.

Occasionally an agent, unannounced and with no prior communication about it, sends over the entire inspection report, a letter from the buyer, and/or sometimes a bunch of bids from various vendors to fix things the buyer thinks ought to be fixed for free. This is usually via email attachment. We don’t open the attachments or look at them, but instead respond to the agent saying (I’m paraphrasing for brevity) “we only want to see any proposed Amendment you might be offering, nothing else. We have not and will not look at or review the inspection report or other documents sent. The attachments are being deleted and not viewed”.

This is when some agents get pretty bent out of shape and want to argue, and want to cram the inspection report down the seller’s throat. But there is no upside for our seller to see that information, at all. All we want to know is “does the buyer still want the house and, if so, do you have a proposed Amendment seeking a price adjustment or a specific simple repair that can be performed in one trip by a licensed tradesman?”

Incredibly, some agents and their buyers can’t articulate what they want. I’ve heard more than once a vague sort of response such as “we just want your seller to review the inspection report and tell us what he’s willing to do”. Uh, that’s not how it works. Shame on agents who can’t do better than that, or can’t council buyers into a more effective approach. That’s Realtor/buyer negotiation at its worst. When pressed in that way, I simply tell the agent that the seller is happy to move forward “as is” and that we think the contract price already reflects the property condition and that the buyer is getting a fair deal.

Does the seller have an obligation to offer to make repairs? No. Does the seller have to read letters, look at reports and/or bids? No. Does the seller have to take into consideration the feelings, fears and worries of a buyer? No. Does the seller have a duty to try to “understand where the buyer is coming from?” No.

The seller simply agreed to sell the house, as is, at an agreed price. If issues were encountered during inspection, it won’t come as a surprise to the seller, because every home inspection reveals something, but there is no unwritten agreement that seller will fix anything at all.

It’s the responsibility of the buyer to determine whether or not the property condition is acceptable and, if not, make an offer to change the agreement or terminate the contract. The seller often does want to learn about and know what the buyer’s concerns are, to the degree necessary to negotiate, and we will seek to find out whatever we think we need to know on the listing side, and we will try to make the deal work. But we do so mostly in general terms unless we decide to dive into the buyer’s issues in greater detail.

It’s a poor listing agent, in my opinion, who allows his seller to come into possession of unknown documentation which could harm the sales effort if that buyer decides to bail out and leave the seller holding a potentially egregious and harsh inspection report prepared by an unknown inspector, and/or bloated bids from unknown vendors.

Recently another agent said to me, in trying to force an inspection upon us, “if it’s a licensed Texas Inspector, it’s a valid report and you can’t ignore it”. Yes we can ignore it. It’s your buyer’s inspection report, not ours. And, like Realtors, the quality and experience of inspectors varies greatly, so just because someone is licensed doesn’t mean they know what they’re doing.

I once saw a 70 page inspection report conducted by an inspector who filled every item with scary boilerplate warnings, whether the item was flagged as “Deficient” or not. Why should that inspector’s lazy boilerplate garbage be allowed to become part of my seller’s disclosure to future prospective buyers?

Some inspection reports are intended first and foremost to reduce the liability of the inspector by over-stating every condition and recommending for all major component items that the home be inspected by a licensed Plumber (or Electrician, or HVAC person, or Roofer, etc). As a seller, once you agree to accept and receive such a report, everything in it becomes your “knowledge”of the home, whether it’s the inspector’s guesswork or not, and you have to pass it on to all future prospective buyers whether it’s a garbage report or not.

We don’t think you should subject yourself to this sort of uncontrolled variable. For the same reason you shouldn’t click on unknown internet links because you don’t know the content you are agreeing to receive until the damage is done. As a seller, you shouldn’t allow someone to simply dump “mystery meat” into your sales effort stew. You’re the chef, you decide what ingredients go into your sales effort, and whether you want your Seller Disclosure to include an inspection report, not some random buyer who can flake out and leave you holding his inspection report.

It’s best to simply work with buyers in a more controlled, methodical fashion when negotiating repair issues. You and your listing agent should control the process and flow of information, not the buyer. Make sure you don’t accept or come into possession of written inspection reports that were prepared for the benefit of a buyer instead of you.

{ 78 comments… read them below or add one }

1 Karla Pfennig July 20, 2010 at 7:21 am

I could not agree more. I even had another independent broker call me up for not accepting the inspection report. She yelled for 5 minutes and hung up on me. We ignored the amendment; the buyers bought anyway.

As much as I prefer the option contract (I used to use the Right to Terminate Addendum with the old contract), I think too many agents just use option period as a new negotiation period. “Sure, we will offer full price, we can always get them down during the option period, they won’t want to put the house back on the market”. As a personal investor in real estate, long before I became a broker, even agent, I would give an option for little money when selling. I told them kick the tires, say yes or say no… period. However, it may be time to make the option a bit more expensive; more painful for a buyer to back out for no reason or to keep a buyer from having more than one executed contract at a time.

As real estate professionals, we are collectively not doing our job. We MUST educate people. There are no perfect houses, not new, not old, not even beautifully maintained ones. How many of us have had buyers pitch a fit about things on an inspection and then discover when we represented them in a sale later, nothing had been “fixed”? It is also our duty to point out obvious flaws to our buyers; too many of us are just wanting a sale instead of informing our clients about potential deficiencies.

Karla Pfennig, broker/owner
Pfennig Properties

2 Steve Crossland, Austin REALTOR July 20, 2010 at 8:10 am

Hi Karla,

I agree that the Option Period has morphed into something it was never intended to be, a virtual “free look” at a property. I do think we’d have to have more detailed seller disclosure forms before the market would accept higher Option Fee amounts than the token $100-$250 we commonly see (usually just $100). I was traveling once through Missouri and picked up a flyer from a real estate box in front of a home and was amazed to see the level of detail on the attached Seller’s Disclosure. It told the age of all equipment, last time serviced, etc. Basically a bunch of the stuff that our Texas buyers normally don’t find out until the Inspection.

Nevertheless, assumptions can be made based on age, and the Option Period was never meant to create a second price negotiation.

Steve

3 David July 26, 2010 at 11:53 am

Steve- This is one of your better articles. Why doesn’t TREC require their instructors to cover this ongoing issue in the required MCE courses for licensed agents ?

4 Steve Crossland, Austin REALTOR July 28, 2010 at 9:05 am

Hi David,

> Why doesn’t TREC require their instructors to cover this ongoing issue in the required MCE courses for licensed agents ?

TREC can’t instruct agents how to do business, just on the basic fundamentals to remain in compliance with rules. It’s not against the rules to unilaterally send an inspection to another agent, though it does require permission of the buyer who paid for the inspection.

This sort of training/education should be delivered at the Broker level.
Steve

5 Al Lee August 5, 2010 at 7:31 pm

Steve,

I enjoyed reading this article very much. It was very enlightening. My listing agent in the past never brought up this point to me. Looking back, it would’ve been nice if my old agent was as informed as you are regarding this issue. Well, I know now what to do with this buyer inspection report issue on my future listing of my home sale. Thanks.
BTW, I have a couple of questions regarding property management service. I hope you don’t mind me asking you questions here. If I rent my house and use a property management co. to manage, what happens in a situation that the tenant gets evicted(or moves out at the end of lease) and leaves the property with damages that the deposit is not enough to cover? Do you let the owner pay for the repair and make-ready first, and you go after the tenant with lawsuit or is the lawsuit left for the owner to pursue through an attorney? Does your management agreement spells out how issues like this will be handled?
Also, if I rent out my house due to not being able to sell under the current market condition, what kind of things should I expect at the end of rental? I mean, while the house is in saleable condition now, my guess is the condition after the tenant resides will not be as presentable for an immediate sale. Would I be expect to spend quite a lot of money to make the house in saleable condition after 1 year of renting? I just don’t know in reality if leasing out the house until the market condition change is a proposition that might end up costing me more money later. Thanks.

Al

6 Michael Bullard August 7, 2010 at 9:36 am

Steve,
Great article. I’m a local Realtor and have been reading your stuff for a while now. I am concentrating on commercial now, but I have come across this issue about inspection disclosure on residential and commercial transactions. Let me ask your opinion on this– You say that sometimes when an agent sends over the entire inspection report with bids in attachments without being solicited to do so, you “don’t open the attachments or look at them.” I sparked a lively debate with a lawyer and a room full of realtors about that scenario. I am NOT a lawyer, but as best I can tell, receipt of that information in the form of an attachment is considered knowledge of that information, and has to be disclosed to future. If it ever made it to court, there is no way to prove that you never opened those attachments. So, we need to be careful how that is handled. Have you spoken with anyone on that topic?

7 Steve Crossland, Austin REALTOR August 7, 2010 at 10:00 am

Hi Michael,

I’ve had agents say the same thing – “I sent it to you so you’re owner has received it”. I disagree. One cannot unilaterally impose “knowledge” upon another. To me, it would be like an agent saying “I left a brown envelope on your front porch with a bunch of stuff you have to read”, to which I could respond, “I didn’t open it. It went straight in the trash”.

I think this entire issue needs to be cleaned up because so many agents don’t understand how to do their jobs. I do think if a seller hires his own inspector, that report would definately be required to be disclosed. A sencond hand report that was willingly received and fully reviewed would also have to be disclosed, I think.

But simply having knowledge that a buyer ordered an inspection and that the inspection has some items the buyer doesn’t like does not create a duty for a seller to look at that report.

Steve

8 Garreth Wilcock August 18, 2010 at 7:22 pm

I agree with the sentiment of the article, and that there are ways in which agents negotiate with different tactics and different levels of success, some of which (the email with an inspection report) are somewhat less effective.

That said, I had assumed like Michael that sending an inspection report to the seller’s agent was considered “constructive notice” to the seller. I hadn’t ever considered that not opening the email was an option.

I think I shall start opening fewer emails right away!

9 lenny August 19, 2010 at 5:50 pm

http://www.texasrealtors.com/go/Podcasts/TRU_Episode81.mp3

2nd 1/2 of the mp3 is about the seller/seller’s agent not looking at the buyers inspection report… they say seller is still held as if they have that “knowledge”…

10 Steve Crossland, Austin REALTOR August 19, 2010 at 7:47 pm

Hi Lenny,

Thanks for the link. Interesting. The TAR attorney at first sounds like she disagrees with the premise of this article, but in the second half of the segment, when asked if a buyer can force a seller to read the inspection report, she unequivocally says “no, you can’t force a seller to read the inspection report”, which is exactly what I’ve stated. Then she states essentially the same thing I do, which is that the buyer should NOT try to force the report on the seller but should instead focus on working toward an acceptable amendment, or excercice the option to terminate. I still hold that a buyer does not have the power to force terms and conditions, or amendment language, upon an unwilling seller.

I think the main question remaining is, if said buyer does terminate, is the seller left with “knowledge” of the contents of the unread inspection report. She’s saying that the seller does in fact have knowledge. I was told the opposite by a different TAR attorney. I think the mistake Ms. Levy makes is assuming that the contents of the report are absolute, when we all know that the content are subjective, often unclear, and will vary from inspector to inspector.

I’m sticking with my position, but I will be following up with TAR and will post the result of the follow-up.

Steve

11 JB September 17, 2010 at 1:37 pm

Hi Steve -

Curious as to what the “verdict” was on this. Did you follow up with TAR? Interesting debate….

12 Nija April 29, 2011 at 6:45 pm

Ok, I am a seller that–today, in fact–lost a lot of money because my listing agent did not read this article (we got out of option period 2 hours ago). What is more, I was advised by said agent to get an inspection done on a problem with the house that my agent viewed as seriously problematic and that we and many others viewed as moderately problematic to not problematic at all. It turns out that, according to the inspector, the issue was problematic (no surprise there), and so we took an even bigger price cut. In addition to the lost money for the inspection report that our side stupidly volunteered to the other side, we also found ourselves in an uncomfortable position that cut us off at the knees. Basically, had this sale not gone through, we would have been required to disclose both inspection reports (the buyers’ general report and the report that we got done on the particular problem). Question: do I have the right when listing a property to have my agent sign language to the effect of: “As listing agent, I understand that I am not allowed to receive or read inspection reports regarding this property or transmit them to my clients unless they are specifically requested by said clients. I further understand that I am to communicate this to any potential buyers/buyers’ agents at the moment that an offer is made.”? Can I have a listing agent sign something like that? Is that an unreasonable request? From what I am reading here, it sounds like I very well should. In any case, I sure as heck will next time around.

13 lenny April 30, 2011 at 12:12 pm

As a REALTOR(R) i am very interested in knowing if my seller actually can refuse to look at an inspection report that WAS received via email!!!

14 Steve Crossland, REALTOR in Austin TX April 30, 2011 at 1:27 pm

Hi Lenny,
I guess it gets into legal definitions of “received”. Clearly, a buyer cannot force a seller to read anything, period. That’s indisputable. Then the deal either moves forward or not. If the buyer terminates, then the question becomes one of whether or not a seller must read an unopened email and, if so, whether the subjective and/or inconclusive opinions of an inspector that the seller didn’t hire and doesn’t know must then be treated as “fact” or “knowledge”.

Nija,
You have the right as a client to instruct your agent in any manner you please. The agent has a duty to disclose anything they know about the property, whether you tell them to or not though. In other words, you can’t expect an agent to obey an instruction to conceal pertinent facts and information from a buyer.

It sounds like your agent was operating in what he believed to be the most prudent way because you already know something about the house that he deemed material in nature. Without knowing all the details, it’s impossible to make a judgment about your specific scenario, and it would be improper to do so while you are being represented by another agent. But, in your example, and in any example where a seller knows something in advance of selling a home, the rule of thumb when in doubt is to disclose it.

For example, the house I currently own has a “belly” in the sewer line. I know about it but a buyer or inspector would not detect it during an inspection. I still have to disclose this fact and I would.

Steve

15 Nija April 30, 2011 at 4:07 pm

Thanks for the response. For the record, I would disclose any problem about which I was certain/could pose a problem (like a belly in a sewer line–yikes!). The particular problem we had with this sale was a squeaky floor that we installed about a month ago–so the ‘problem’ was detectable by anyone walking in the house and thus any inspector. I honestly believed it was just because it was a new hardwood floor and that the creaking would subside once it’s worn in a bit. To a large extent I still do believe this, irregardless of the inspector’s report. (We’ve installed floors before, and sometimes they crackle and pop for a few weeks). Of course, when we got it inspected upon the recommendation of our agent, the inspector found that in some places the floor wasn’t completely level (it was off by 1/16 to 1/8 of an inch in some places–oh the horror!). But what floor is perfectly flat? Of course, once you have something in writing, you have to disclose it, which is what we did. The result was that a problem the buyers hadn’t even really cared about (but that their inspector HAD subtly noted in his inspection report) then became a huge problem and a pressure point for any potential future buyer. So, again, we were cut off at the knees.

But, and this is my larger and more general question: what about putting a clause into the contract with the listing agent stating explicitly that he/she does not have the right to accept, read or transmit any inspector’s report or portion of an inspector’s report without prior written consent from us and that he/she will automatically delete any message containing one? We’re investors and so we’ll be buying and selling a lot of houses over the next few years. The reason I am asking is this: It just seems to me that it would be helpful to both us and to any listing agent we might hire to have a signed piece of paper that expressly forbid him/her to view an inspector’s report. It’s not that I wouldn’t trust my listing agent (if I didn’t, I wouldn’t hire him/her). It’s just that, if it were in writing, our agent could then present the signed document to any potential buyer’s agent at the moment an offer was made, and inform him/her that–upon receipt of an inspector’s report–there would be consequences (a smaller commission for the buying agent, the immediate termination of the option period, the obligation on the part of the listing agent to recuse him/herself, or something). This would help a listing agent resist a buyer’s agent who was trying to push the inspector’s report, wouldn’t it?

I know your comments and the article is more geared to agents. But the fact is that, as an investor who is familiar with the system and potential dangers of inspectors’ reports when on the selling end, it just seems to me that we need to have some agency in this and that we should be able to do something to protect ourselves, our investment AND our listing agent.

16 David St. Gemme June 22, 2011 at 4:59 pm

Steve,

Excellent article, “You Don’t Have to See Your Buyer’s Inspection Report.”

I’ve coached my agent to observe your method re this topic.
I do have a question though. Let’s say the buyer comes back with
the one number and it’s, say, $3000. You say that at that point you may
ask the buyer’s agent some general questions.
Please share with me what questions you may ask the buyer’s agent at
that point. I was thinking of having my agent say to the buyer’s agent, at
that point, “Without referring to the inspection at all, give me a list of repairs
that you want my client to pay for with a dollar amount next to each one.”
What do you think?

David

17 Nija June 22, 2011 at 10:32 pm

Re: Steve
It would seem to me that once you start asking questions, you could easily end up in “inspector’s report land” and would have to disclose (even if the buyer’s inspector’s report was bogus–and, let’s face it, sometimes they are). Basically, if you’re going to ask questions when the buyer asks for money off during the option period (and, most likely, he/she will), then you should get the pre-inspection done by someone who you know is a fair and experienced inspector before the listing hits the market. Period. Then, all you have to do is negotiate between the differences in the inspection reports, which would likely not be major.

As a seller/investor (who is, incidentally, taking her real estate exam this weekend), this is going to be my approach the next time I sell a property: Basically, I am going to decide on a number (let’s say a thousand dollars off of the agreed upon price of sale). If the buyer asks for less than that during option period, I’m not asking any questions and will just capitulate. However, if the buyer asks for more than that, I am either A) just going to walk away and take the option money or B) call my own trusted inspector and get my own report done. Which way I go will depend on how urgent it is for me to sell. It will also depend on how long the property is on the market, of course. For example, if I get an offer in the first week, I am just walking away if the buyer asks for more than a thousand dollars and will then just take my husband out to dinner with the option money. If a month goes by and/or there’s been an offer or two that has fallen through, I may go with option B. (Of course, as per my earlier posting, I am going to instruct the buyer’s agent AHEAD of time about how I want to go about repairs, which is to say I DON’T WANT TO SEE THE INSPECTION REPORT–EVER). Whatever the case, in those first few weeks, option period is going to cost any potential buyer 500$ or I am simply not getting into bed with said buyer. (Obviously, all bets are off if the house is on the market for a long time). For hot, newly renovated properties, I really think that one should hold a hard line–both against the inspection report AND against those annoying buyers who make an offer for a price they have no intention of actually paying. Basically, with 500$ of option money plus 300$ for the inspection, only those buyers who are serious about their offer are going to make my property go pending. The yahoos who have been advised by their REALTOR to go in high and then chip away during the option period will think twice. Of course, if during the option period these same buyers still ask for a large sum after paying my (admittedly exorbitant) option fee, then I can take that as a sign that perhaps something went horribly wrong with the renovation. At that point I will know that I need to get an inspection done by my OWN inspector.

Anyway, my next sale is going to be my own personal experiment. Obviously, I wouldn’t try this with a future client. But, after two full-asking price offers in my first week the last time around, I am going to try a more self-confident approach next time I sell and insist that the offer be a REAL offer (and not something to revise during option because my vents aren’t perfectly angled for the pitch of the roof or my azaleas have root rot or whatever).

Note: I may come back from my next sale humbly and with my tale between my legs. But, I am closing (buying) an investment property later this week. It should be on the market in a few months, and I will report back once it hits the market. As an investor and, as of this Saturday (hopefully), a real estate agent who will henceforth be able to represent herself, I am curious to see just how this approach works. It can and may fail miserably but, man, will it be fun!

18 Nija June 22, 2011 at 10:42 pm

I meant RE: David on my last post. And I left out the fact that a ‘to do list’/itemized complaint list, even if you haven’t actually seen the inspector’s report, could be some murky, legal territory you really don’t want to get into. Hence, the suggestion to go with a don’t ask, don’t tell policy.

19 Steve Crossland, REALTOR in Austin TX June 23, 2011 at 8:19 am

Hi David,

> Let’s say the buyer comes back with the one number and it’s, say, $3000. You say that at that point you may ask the buyer’s agent some general questions.

Yes, I’d ask some general questions, like, “how are you coming up with that number?”, and go from there.

It’s not that we want to stick our fingers in our ears, close our eyes and go “la la la la l a”, it’s really, bottom line, about preventing the seller from getting a flaky buyer’s inspection report hung around the neck of our seller.

If the listing is a 1982 house, we all know what sort of stuff that house is going to have flagged on an inspection report. It’s old, probably with some updates, but it’s 1982. I don’t need to see the inspection. I might ask the agent “is it mostly age related and the typical nick-knack stuff, or did the inspector find something major?”

Nija, good luck on your license examine. FYI – I’ve never seen a buyer pay $500 option fee. Well over 50% of option fees are still just $100, even for homes $500K and up. Sometimes we’ll see it at $200-$300, but I’ve never encountered $500 and I wouldn’t let my buyer pay that amount.

Steve

20 Nija June 23, 2011 at 9:57 am

I like the idea of asking “is it mostly age related or did the inspector find something major.” Posing it as a yes/no question might be a good way to go. A detailed list with prices next to each item, however, seems to essentially amount to seeing the report legally. If I were representing a seller and had such a list from a deal that fell through, I would feel obliged to disclose. But, as per Steve’s recommendation, if you just ask if there is anything major, you can then know from that if you want to do your own inspection (or plug your ears and go ‘la, la, la”. Hilarious!).

I agree that 500$ option fee is kind of crazy high but, if there are multiple offers, a buyer might come close to it. I certainly would for a house I really wanted, indeed I just did. Just as an example: there was another, slightly higher bid on the house I am buying this week. When I spoke to the realtor, he said that he wanted to go with us because we were cash buyers but that we had to come up with our price. Basically, I dug my heels in with our offer. At the same time, I gave the realtor my word that I wouldn’t ask for anything off after the inspection unless there was something major. (This is a house from 1958, so we kind of knew what the inspector was going to find). The seller’s realtor and the seller didn’t want to take me at my word until I offered a 400$ option fee. The listing agent was kind of bowled over by it (and advised me to consult with an already practicing realtor. I didn’t). Long story short, the seller went with our offer and took the exorbitant option fee I offered as a sign of good faith. In the end, we did a hydrostatic water test and there was something major with the house–a sizable leak. The seller got their own plumber out, they found the leak and got a bid. The seller is now assuming the repair of the leak (2000$). Our inspection report (which the realtor asked to see without consulting the seller or advising the seller as to the potential liability of seeing it, mind you) ended up acting as leverage. There is no chimney on the fireplace they are advertising, the water heater from 2008 is incorrectly installed, the vents don’t match the pitch of the roof, the windows don’t open, a few windows are broken etc. Obviously, there was also a lot of other little things in addition to these items. When the seller/realtor realized that any other buyer would have asked for a heck of lot more off their initial offer or be turned away, the seller was all too happy to capitulate with the leak.

I recount this because it was a gamble. Granted, I could have lost my 400$ option fee on account of insisting they pay for the leak. At the same time, the fact that I offered so much initially is what put our (somewhat pathetically low) bid to the top of the list. What is more, even in spite of my high option fee, I still had room to maneuver when something major was found.

Basically the seller knew that we had made a lowball offer. However, we had every intention of sticking to it, and our 400$ option money was the proof. The same could not be said for the buyer with whom we were in competition. We stuck to our word, and I like to think that all of the concerned parties are happy with the results. Basically, my frank conversation with the seller’s realtor about my disdain for the two-step negotiation phase was reassuring to the seller.

Again, it is unlikely that I would advise a client to follow my lead on this. But I do think that some buyers would be willing to pay a higher option fee if they really wanted the house. I also think that asking for more option money so that a buyer can differentiate his/her offer from another, similar offer is a completely legitimate request. Offering it could work to the benefit of the buyer. 500$ may be higher than most buyers’ agents will that their clients go. But 300-400$ is something that I think other buyers would seriously consider IF competition for the property were fierce.

Again, we’ll see if my approach works once my next investment property hits the market.

21 Steve Crossland, REALTOR in Austin TX June 23, 2011 at 10:19 am

Hi Nija,

I think you’re over-thinking the Option Fee. It’s not material to the success of the negotiation or the transaction. A seller of a busted deal isn’t going to be any happier about keeping $300 than $100.

Steve

22 lenny June 23, 2011 at 4:46 pm

the $200 difference is not the point… the very “high” option fee will make a typical seller feel better… i think $400++ for option is a very good negotiating tool!

23 Mark Cantu September 4, 2011 at 4:37 am

I just wanted to comment on what a wonderful article and discussion has occurred here. Only way to make this discussion better is to take it to the next level, that is, what happens to the Listing Agent/ Broker who does not comply with the Seller’s Disclosure mandated requirement of attaching an Inspection Report to the Associated Documents after a deal has gone wrong, and the property hits the market again. Also, the situation and the discussion that occurs between Listing Agent and property owner after the both of them have viewed the Inspector’s Report – Not pretty! Only thing I disagree with is the tone of disrespect for licensed Inspectors. As a Buying Agent your inspector could be your lifeline to best assisting your client with the purchase of one of their biggest investments, just because you are a listing agent and you don’t agree with the other side’s inspector, it doesn’t make that inspector less competent.

24 Steve Crossland, REALTOR in Austin TX September 5, 2011 at 9:03 am

Hi Mark,

An agent/Broker has no Disclosure obligations unless they have actual knowledge about a material defect or condition that a seller is refusing to disclose. One of the main points I was making in the original article is that a subjective opinion from an unknown inspector is not “actual knowledge”.

The agent would have to inform the seller of seller’s disclosure obligations, but the actual disclosure is a product of the seller. If the seller doesn’t disclose something that the listing agents knows ought to be disclosed, the listing agent would need to say something about it to the other agent, in writing, to stay above board.

But this would apply only to “actual knowledge”, not guesses or unsubstantiated opinions provided by unknown third parties.

Steve

25 Mark Cantu September 6, 2011 at 5:20 am

Steve, what would happen if the agent sees the inspection report. Current prospective buyer backs out of deal, and then the listing agent never updates or discloses his or her knowledge to the next buyer? Let say, the next buyer purchases the property, and months later major problems occur. The way I understand it, is your saying that the listing agent’s company will not have any liability?

26 Steve Crossland, REALTOR in Austin TX September 6, 2011 at 7:51 am

Mark,

If the agent “sees” it, it’s as if the owner “sees” it. It would be considered “received”. If the buyer backs out, the seller disclosure would have to updated.

If that didn’t happen, and a new buyer complained about something months later, the first question would be:

1) Did you not conduct your own inspection and, if so, why are you not discussing this with your own inspector if you think something was missed?

I’m not trying to convince every agent to do things my way. But the fact is, a seller does NOT have to read or look at a buyer’s inspection report at all. It’s not part of the agreement. It’s not part of the contract. Inspection isn’t even mentioned in the sales contract. So, it is in fact a seller’s right to say “I’m not interested in your inspection report, just send me a final proposed amendment if you want to change the contract before the Option Period ends”.

The discussion about what happens if that buyer and his inspection go away is a different discussion that the one about whether a seller has to look at the report as part of negotiation. The seller does not.

Steve

27 Nija September 6, 2011 at 9:50 am

Hi, Steve

I have a question. You write: “If the agent “sees” it, it’s as if the owner “sees” it. It would be considered “received”. If the buyer backs out, the seller disclosure would have to updated.”

It would seem, though, that this goes against the point in the article and in your follow-up comments that “you can’t force knowledge upon someone,” something that should hold for both agents AND sellers.

Here’s a hypothetical situation. What happens if: the buyer instructs the agent ahead of time that he/she does not want to receive any inspection reports done by buyers. The agent tells the seller over the telephone that he/she has nonetheless received one and opened it (for argument’s sake, let’s say the buyer’s agent forced it upon the selling agent). Upon hearing this news, the seller instructs the agent NOT to send it along. I understand that, in further negotiations, the AGENT would be required to disclose the inspection report. However, in this scenario, would it not be wiser for the listing agent to dissolve the contract, given the reluctance of the seller to see the report and the resulting discrepancy between the agent’s knowledge of the property and the seller’s knowledge of the same?

It just seems to me that, as agents who have a duty of “obedience,” we have a duty to put our clients’ interests and desires ahead of our own. It would thus seem that, in instances where certain types of knowledge (i.e. inspection reports) are considered–rightly or wrongly–undesirable on the part of the seller, we have no choice but to comply with their wishes and protect them from the inspection report that they have pre-emptively expressed a desire not to see–even if this means we must recuse ourselves from the deal.

This all goes back to my previous comments about having a frank discussion about how inspection reports are going to be handled BEFORE listing the property. All of this, however, touches on a larger problem that neither TREC or ABOR adequately address but that you do bring up in your article: many buyers’ agents lack the etiquette to ask the simple question “how do you want to handle repairs/the inspection report” to the listing agent and in turn force knowledge onto listing agents, thereby putting the listing agents in very difficult situations (and their buyers).

28 Steve Crossland, REALTOR in Austin TX September 6, 2011 at 10:30 am

Well, you’re getting into a lot of hypotheticals now. It’s actually me as a listing agent who would have already instructed my seller before we even received an offer that we don’t want to look at a buyer’s inspection report, and I would explain why as the article outlines.

I’m in the middle of an inspection right now on the buyer side of a deal. We are conducting several follow-ups with an electrician, HVAC person, plumber and a pool guy. Once we have all the data and info, we’ll do what I always want buyer agents to do when I’m the listing agent; we’ll prepare a simple addendum with a dollar amount and/or price reduction and not much detail.

If the listing agents wants to know more, I’ll offer to provide the inspection report and bids received. If they just want a verbal summary, I’ll offer it up and we’ll treat the information like layers of an onion. Often, a seller was already expecting inspection issues and the dollar amount seems reasonable and it’s settled with little fanfare.

The dispute with those agents who take a different viewpoint than mine is over the definition of “knowledge of” and “received” and whether a unilateral forcing of the “receipt of knowledge” has occurred when a buyer agent emails unannounced the inspection report as an attachment to the listing agent. Even different attorneys disagree about this.

I hold that I haven’t received it if I don’t actually accept it and view it, and neither has my seller. Others have a different opinion. But this only factors in if the deal craters and we have to decide what to do with that inspection report. No matter what you believe about any of this, a seller still has no obligation to read a buyer’s inspection report as part of the negotiations.

Steve

29 Keith Burrhus March 28, 2012 at 1:49 pm

Steve, thanks for a good conversation. I think you outline a pretty risky way of doing business…maybe splitting some hairs that a court might not split. I respect how you would like for a real estate transaction to go, but let me play some devil’s advocate if you will.

Say I am a buyer agent. I owe duties to the buyer just like you owe to your seller. Buyer inspected, still wants to buy the house, and buyer wants seller to know the entire context for the proposed amendment…what the buyer thinks important and what they don’t. Buyer authorizes agent to send inspection report and amendment all as one pdf to the listing agent. Buyer agent better carry out those wishes. Call this hardball or dirty pool if you wish, but it’s likely in the best interests of the buyer if the seller is “sacked” with the inspection report along with the the seller’s potential burden of having to disclose the report to other buyers. It is very effective leverage for the buyer, and if I don’t use that as buyer’s agent, then I may have some legal liability that I did not perform my duties to my client as diligently as I should have.

Now as the listing agent if you decide that you are going to use the above routine to basically not accept the report, that’s entirely up to you and your seller. But I think you have introduced a significant legal exposure for you, your brokerage, and the seller that can last far beyond the close of the sale. If my buyer goes away and the seller closes with another buyer, your seller might end up with more money in their pocket, but the higher price could well be defending and possibly losing at the court house if subsequent buyer is low on money and calls the tough smart lawyer who is low on money too. They might argue that you and or the seller “actively avoided” new knowledge of the property’s condition.

Most real estate litigation surrounds property condition, and it’s sometimes a messy part of the business to effectively manage that risk, and sometimes it costs our seller client money. But I think most sellers would agree that dealing directly with issues in inspection reports, and coming down on the “full disclosure” side of things is always in their best interests in the long run.

Spoken from a guy who’s been to the court house :-)

Keith

30 Steve Crossland, REALTOR in Austin TX March 28, 2012 at 7:25 pm

Hi Keith,

Thanks for your comment. I’m not swayed or convinced. In fact, if the best negotiating strategy a buyer’s agent has is to try to force a seller to read the buyer’s inspection report, then, in my opinion, that buyer has a crappy agent who lacks effective negotiating skills.

Anyone can send an inspection report over and say “look at this”. To me, that’s unprofessional and lazy. If that’s what the buyer wants to do, then a good buyer’s agent will explain the pros and cons of that approach and remind the buyer that the word “inspection” isn’t even in the contract, and that the seller, in fact, has made no agreement to read the report. Instead, you just need to send an amendment asking for what you want.

I stand by the article, the philosophy and the additional comments I’ve made since posting it. But I do appreciate hearing the various viewpoints and opinions.

Steve

31 Garreth Wilcock March 31, 2012 at 8:19 am

Hey Steve,

Several years after reading this article, I’m referring back to it. The wise approach you discuss here is now part of my approach as a listing agent, and I came back to re-read. You’re blog is like a reference manual for typical situations. Have you ever been approached by someone who wants to make a book from your top articles? I think it would be very useful for new agents to read it!

cheers

Garreth

32 Steve Crossland, REALTOR in Austin TX March 31, 2012 at 8:51 am

Hi Gareth,

Thanks for your comments. You’re very kind.

Yes, Sylvia and others have pestered me to “write a book” of blog articles and real estate anecdotes or “how to” stuff.

Thing is, after researching it I found that nobody makes money from books. It’s a very interesting thing. Unless you’re Hillary Clinton, or Jeremy Lin, or someone with a built-in, automatic name recognition and a reader base waiting, you don’t write a book to make money. The few “nobodies” that do break out with “hit” novels are like lotto winners, extremely rare. Or they are professional writers with a team of writers below them who churn out formulaic fodder for niche audiences (female romance readers, teen readers for example).

For most business people, a book is useful to leverage credibility and an existing business. It’s a tool used to gain exposure through paid (or free) speaking engagements, workshops, radio interviews, TV interviews, etc. that will serve to promote a brand, an idea, or the person (such as a presidential candidate), toward an underlying business goal. But the book itself doesn’t make money, it’s just a vehicle.

Since I’m not seeking any such exposure or ego-driven name recognition, or more real estate business, I would do a project like that only for fun and adventure. Maybe closer to retirement.

But I do appreciate your comment and the suggestion very much.

Steve

33 Chris April 27, 2012 at 8:03 am

Hi Steve,
I had a buyer back out during the option period because of a failed hydrostatic test…I was told by their plumber that we have aged cast iron drain pipes, that he recommends re-routing(House was built in 65). We took the house off the market 6 months ago.
Haven’t had any problems with our drain/sewer system..no foundation problems at all..and we are considering putting the house back on the market…I have an appointment with a different listing agent than our previous 1.
Fantastic old house,great location..everything highly desirable except for the “alleged” drain plumbing issue. Although after researching on the internet pre-1970 homes it apparently is a common issue.
How should I disclose the issue without scaring away potential buyers?
I plan on telling my new listing agent about this and asking his professional advice but any feedback would be appreciated.
Thanks,
Chris

34 Steve Crossland, REALTOR in Austin TX April 27, 2012 at 8:20 am

> How should I disclose the issue without scaring away potential buyers?

Hi Chris,

You will have to disclose the condition and provide whatever supporting documentation you have. Unfortunately, a prudent buyer is not going to just take the house as-is without addressing a leaking drain isse, so it would be best to fix the problem before listing the home.

Good Luck,

Steve

35 Sean May 3, 2012 at 11:19 pm

The spirit of this advice is shady at best. Keith Burrhus’ post above is the only one that matters here. Steve – you are putting your clients at risk for litigation with this approach. I’m a lawyer involved in a sale/purchase now on a million dollar home where the seller is actively refusing to “receive” (to use your words) inspection reports from the very best inspectors in Austin describing details around major issues with the house – foundation, roof, pool settling, etc. The disclosure statement is almost two years old and 4 contracts have been broken on this property in the past 6 months. Sure, the seller is dropping their price but none of the inspection report findings have been added to the disclosure. If a buyer eventually falls for this and buys, the seller and the listing agent could be in a heap of trouble.

36 lenny schwartz May 5, 2012 at 7:12 am

sean- what if the property listing had instructions for submitting an offer and one of the statements was that the buyer agrees not to share any inspections with the seller???

37 Steve Crossland, REALTOR in Austin TX May 5, 2012 at 7:12 am

Hi Sean,

There is nothing “shady” about a seller refusing to allow a buyer to cram an inspection report down his throat. In response to Keith’s post I write ” if the best negotiating strategy a buyer’s agent has is to try to force a seller to read the buyer’s inspection report, then, in my opinion, that buyer has a crappy agent who lacks effective negotiating skills.”

I stick by that.

That said, in the situation you describe. the seller is dumb to stick his head in the sand. But that’s an unusual and rare situation you’re describing and not one the typical seller will ever encounter.

I just had a negotiation last month (we were on the listing side) where the buyer agent tried to make the inspection report an item by item negotiation issue, sent the report unilaterally without asking first, and was asking for a $2,000 reduction in the original contract.

Our response never mentioned or responded to the inspection items at all, but simply negotiated a number. Seller countered with $500 and we didn’t need to look at the inspection report to do that. Buyer Agent got really angry. Kept wanting to discuss the inspection, and I just kept saying. “You asked for $2,000, we countered with $500. Ball is in your court. Seller thinks this is fair”. Agent demanded “Did you read the report”? My response, “you have our counter”.

Eventually a number was found and the final Amendment was completed, which simply added an amount to para 12(a)1b and made no mention of repairs. This is the outcome every good listing agent should be seeking for a seller. Agent said I was “difficult” to work with. My seller disagrees. I represent the seller.

Now, if the buyer had terminated, we would have looked at the inspection report and adjusted the Seller Disclosure accordingly if there was anything not already disclosed in seller’s previous inspection report, which had been provided with the Seller’s Disclosure.

Steve

38 Nija May 5, 2012 at 2:59 pm

I agree wholeheartedly with the approach you took with this recent listing. They asked for something, your seller countered. Basically, a house is worth what a seller is willing to accept and a buyer is willing to pay. Period. The ‘why’ behind the price is immaterial.

I just listed my own property last month (it has now closed). It was on the market for two days, and we had a cash offer–and a bunch of others who wanted in. Since the house was pre-inspected, before we even negotiated the price I basically told the other agent that his client should look over the inspection report very carefully before deciding on a number, because it was the only report I cared to see or discuss. I encouraged him to get his own inspection (which, of course, he did). But I also told him that, after the inspection was done, there was no point on calling me unless it was to end option early or dissolve the contract. I was only interested in doing one round of negotiations and I didn’t want to get nickled and dimed for ridiculous stuff or for stuff that they had already known about when they made their offer (I also asked for a high option fee). He explained to me that that was just not the way that the game was played and that it was normal to always give a little something up after the buyer’s inspection (and that my option request was absurd). I told him that, in that case, his buyer would be throwing away both her option money and her inspection money, and invited him to look at other properties in the area, as we would not be budging on the price once we were under contract. Well, long story short, they initially walked away. However, a day later they came back and made their offer (a slightly lower but still generous option fee included), we negotiated, and they did their inspection. We closed for exactly what we had initially agreed upon, and I didn’t waste a lot of time with back and forthing.

Lesson: if you can convince your sellers to do a pre-inspection with a reputable and reasonable inspector, do it. It just gives them so much more power, even if there are flaws with the house. With a pre-inspection the seller can price their property accordingly, and the buyers can make the offers accordingly as well. You can also justify asking for the higher option fee. The amount of money the seller puts down for the inspection is totally worth the grief, stress, and disappointment they save themselves from later on. Plus, there are A LOT of mediocre inspectors out there, and it’s best to steer clear of ‘em (or at least insulate your clients from them)

39 Michael Bullard June 1, 2012 at 10:09 am

I think it’s a good idea to defer to the experts. Here is a video with a TAR attorney talking about this very subject. http://www.youtube.com/watch?v=04Xi2an1-zg&feature=youtu.be

40 Steve Crossland, REALTOR in Austin TX June 1, 2012 at 10:44 am

Thanks Michael. I saw that today also. I like the how the female attorney put the issue in a nutshell so well.

Remember, my initial article was primarily dealing with the negotiating phase of an Option Period and the fact that a seller has no obligation to look at or consider a buyer’s inspection report as part of that negotiation. That hasn’t changed. We’re working on one right now where the agent send a long laundry list of repairs. Our response to the agent, “boil it down to a number and ask for an amount. We’re not negotiating repairs”.

This video addresses what happens if that deal craters and the seller is stuck with an inspection report that was “received” from a buyer who terminated. Does that former buyer’s inspection report have to be given to subsequent buyers?

The attorney says “no”. But, if the information in the report reveals what would be considered “knowledge” of previously unknown/undisclosed “known material defects”, then the seller would have to disclose those “known” defects by amending the Seller Disclosure, or providing the actual inspection report.

She goes on to say something I very much agree with, which is that it can be difficult to sort out what exactly is a “known material defect”. Then, as lawyers are apt to do, they conclude that the least risky thing for a seller to do is to provide a copy of the report. What they don’t add, is that doing so can be risky as well, and cause more problems.

I was recently stuck with one of these reports and I’m still considering whether or not to file a complaint with TREC against the inspector. His subjective overstated descriptions of problems he wasn’t even sure about, and which were later determined to be completely wrong, scared the first buyer away, and scared subsequent buyers away. It was a 68 page inspection report. A complete piece of garbage.

When I had a contractor come look at the issues the inspector raised with the deck and supposedly faulty a beam, he literally rolled his eyes and muttered something unflattering about real estate inspectors in general. In short, that inspection so completely overstated ordinary and common issues that it ultimately plagued the sales effort and caused a lower sales price, even after I obtained rebuttal opinions and bids to refute the inspection findings.

Steve

41 lenny schwartz June 1, 2012 at 1:46 pm

i still do not know what to do!… i almost lost a listing sale because the buyers inspector said the septic tank HAD to be replaced. 2 different septic companies said that the ingrown roots needed trimmed and the small area of the tank sealed and that was that ($175) … very common… they couldnt believe the inspector made those comments — if we had lost the buyers then would we have had to disclose the original report???… even though we had 2 other reports – i would think most buyers would be freaked out by the replacement report…
.
could i make a comment in paragraph 11 that buyers can choose to have an inspection done and agree to keep the report to themselves?… if the buyers mention a report item… are we then eternally stuck having to disclose that someone had made a comment???

42 Jason November 20, 2012 at 12:04 pm

Hi Steve,
How do you feel about seller’s getting their own pre-inspection?
Thank you,
Jason Palos

43 Steve Crossland, REALTOR in Austin TX November 30, 2012 at 9:55 am

Hi Lenny,
> if we had lost the buyers then would we have had to disclose the original report???… even though we had 2 other reports – i would think most buyers would be freaked out by the replacement report…

Yes, unfortunately, you’d have to disclose the information in the report (not necessarily the report itself) but could also provide the offsetting opinions/reports.

Jason, Pre-inspections are not commonly used in our market, and we don’t generally recommend them. We have sold some homes to buyers which had been pre-inspected by the sellers, and in each case, there were additional items discovered by our buyer’s inspector that were not noted on the seller’s pre-inspection. Sort of defeats the purpose.

But in some instances, such as a home in very poor condition which may have multiple deal-breaker issues, I think it’s a good idea to identify those and get them out on the table before the initial offer is accepted so that it’s less likely to derail the deal during the Option Period.

Steve

44 sandy March 5, 2013 at 9:28 am

Hi Steve: Thanks so much for this post. We are in the process at this very moment, of negotiating the sale of our home. Using your advice, we told our agent not to accept a inspection report from the buyer’s agent under any circumstances. She was not happy about it. They had a ten-day period for the inspection and it was due to us by midnight last night. We were told by the buyer’s agent via our agent several times that they found no major issues with the house during the inspection beyond small items such as “leaky faucets.” Last night at 11:30 pm we were sent a request a $12,000 reduction in the price of our home due to the home inspection. We live in a historic neighborhood. Our house is 100 years old but has been completely redone. It is in very good condition. We put $75,000 in it since we purchased it in 2006. New kitchen, baths, plumbing, electric, windows, etc. The roof is old but we just had it evaluated and were told it should last another five years. How would you respond to this? Our agent is pressuring us to let her see the report. We do not want to do that based on your advice. Thanks so much!!

45 Steve Crossland, REALTOR in Austin TX March 5, 2013 at 9:54 am

Hi Sandy,

I would just work with your agent to get to a dollar amount acceptable to both you and the buyer. That means you’d counter the $12K with something between $0.00 and $12K. But I think most agents agree that it’s best to negotiate a dollar amount, not the actual repairs.

If the buyer terminates, you could get stuck with the inspection report anyway. But there are a lot of factors to consider which we can’t get into here. I can’t really say more than that since you have an agent and are in a deal. But you could also read the following:
http://crosslandteam.com/blog/2008/09/04/repair-negotiations-what-is-reasonable/

Good luck,

Steve

46 Kate McQueen May 22, 2013 at 4:16 pm

I completely agree with your position! I have a listing that was on the market two days. Prior to my taking the listing, the sellers had been listed with another agent for over 200 days and had two buyers walk away during the option period. In both cases, their listing agent EMAILED the inspection reports to the sellers. BOTH inspections had been performed by the SAME inspector. And in BOTH cases the buyers tried to use the inspection report as a sellers’ punch list and became ridiculous with their demands.

I posted a blog similar to this on Active Rain a couple years ago, and it started a storm of comment. It seems agents are split on this matter. But the truth is, there’s no need to FORCE an inspection report on a seller. If you have repair requests, put them in an amendment and retain the buyers’ inspection report as a private document. In many cases inspectors don’t appreciate their report being passed around. In my blog post, I was actually accused along with my seller of “hiding something.” Really? If I were hiding something would I have posted a public blog? If the seller has been forthright with disclosures and is willing to work with a buyer on requested repairs and/or allowances, the idea of forcing an inspection on the listing agent and their client is simply an emotional need on the part of buyers’ agents. It’s a pointless “I gotcha” desire that leads to harm for the seller. I will not have it.

On the other hand, if the seller wants to see it, they should be forewarned about the potential consequences. If the buyers are willing to share it, then go with it. Otherwise, DO NOT send me an inspection report! It is the PROPERTY of the buyer.

47 wait June 4, 2013 at 6:04 pm

Be careful, The law in Texas may have defined “actual knowledge” differently. But generally, the legal definition is “[d]irect and clear knowledge, as distinguished from constructive knowledge” or “[k]nowledge of such information as would lead a reasonable person to inquire further. see. Black’s [constructive knowledge is knowledge that one using reasonable care or diligence should have, and therefore that is attributed by law to a given person.”

Here, you are saying that a deal may fall through because the inspection report showed. Not having the seller read the report may not remove the burden of the seller through you their agent having “actual knowledge.” You then go on to discuss the age of the property should have them assume that some things will be replaced. That same logic could be applied to you selling a house with old electrical and plumbing. If the age of the home would give you a reasonable idea of old plumbing and electrical, your argument would mean you have to disclose it.

I am not saying that you are absolutely wrong. But be careful and make sure that your disclaimer meshes with Texas contract law. Best of luck.

48 Steve Crossland, REALTOR in Austin TX June 4, 2013 at 7:22 pm

Hi “wait”,

Good comments and points taken.

In reality, buyer behavior varies dramatically as do the inspection reports produced by inspectors. Some buyers walk away from a deal over issues that they knew, or should have known had their agent prepped them properly, are normal for the age of the house and the neighborhood.

Some inspectors, thinking more about themselves and their own liability than they are the buyer, overstate every shortcoming of the home and warn the buyer in very strong terms to have everything followed up with additional vendors (plumbers, roofers, electrician, HVAC) inspectors. These inspection reports could be “Exhibit A” in “How to Write a Bulletproof, Liability Free Inspection Report” at an inspector’s convention workshop.

I personally think such inspectors should be shamed out of the business because they are not serving the buyer at all. And I don’t want my seller stuck with the worthless inspection report they produced because it’s complete rubbish.

With the seller’s market Austin is currently experiencing, buyers can’t bargain for much at all anyway. So trying to shove an inspection report at a seller who has 5 more buyers waiting to jump in is a really dumb strategy.

Steve

49 Glenda August 5, 2013 at 3:49 pm

I noticed you only negotiate $ amounts in lieu of repairs, and this works for cash and conventional loans, but how would you handle FHA required repairs in negotiations?

50 lenny August 5, 2013 at 5:27 pm

glenda… with an FHA buyer i ALWAYS explain that they should NOT “roll” in the maximum seller contribution — so they CAN(if) increase $ in paragraph 12 for option period re-negotiations — i have also had many lenders state NEVER put repairs in writing — also it is always easy to REDUCE the contract price to “compensate” to buyer… BUT i find it best to explain UPFRONT to the buyer that that is just as equal compensation if needed since its sometimes hard for the buyer to feel a price reduction is “fair”

51 Jay Robbins August 9, 2013 at 2:02 pm

Great conversation here. Thanks for that.

Your recommendation to not read the report is so that your sellers don’t ‘get stuck’ with a report they don’t like, TAR Legal FAQ clearly disagrees. They say you/the seller have the knowledge of what’s in the report whether you read the report or not.

From TAR Legal FAQ at https://www.texasrealtors.com/MR/Legal/FAQs/Disclosures/PriorInspectionReports.cfm

Prior inspection reports
On behalf of my buyer, I attached the inspection report the buyer paid for to an amendment for repairs and submitted that to the seller’s agent. The seller and the seller’s agent refused to open the report or negotiate for any repairs. What can the buyer do in this situation? (updated Sept. 24, 2010)
A broker or seller who receives an inspection report is charged with knowledge of the information in the report even if the broker or seller does not open the report. While sellers and listing agents should review inspection reports they receive on the property, a buyer and/or buyer’s representative can’t force them to do that. Additionally, there is no requirement that sellers agree to or even consider amendments requiring the seller to perform repairs to the property. Buyers should have inspections performed and negotiate any repairs during the buyer’s option period. If the buyer is not satisfied with the information in the inspection report or cannot get the seller to agree to requested repairs, the buyer can exercise his right to terminate the contract.

Let’s say the buyer in the above scenario chose to terminate the contract. What obligations does the seller have to subsequent buyers to disclose information in the prior inspection report the seller disagrees with? (updated Sept. 24, 2010)
A broker or seller who receives an inspection report is charged with knowledge of the information in the report. This is true even if the broker or seller does not open the report or disagrees with the information contained in the report. If an inspection report reveals material defects, the seller and the broker are obliged to disclose those defects to subsequent potential buyers.

The seller and broker may choose to disclose the defects orally, but that may be imprudent since no record of the disclosure would exist; summarize the defects in some written communication to the subsequent purchaser, but that may create a risk that some important information may be edited out. The seller and broker should provide a copy of the report to the subsequent potential purchaser along with the seller’s disclosure notice, thereby providing all of the information the seller and broker have with regard to any know defects. If the seller strongly believes the information in the inspection report is incorrect, the seller could have another inspection performed. If this is done, the seller should provide both reports to subsequent buyers.

The TAR Seller’s Disclosure Notice (TAR 1406) asks the seller to identify and attach copies of previous inspection reports. TAR’s notice cautions the buyer against relying on previous reports as a reflection of the current condition of property and suggests that the buyer employ an inspector of the buyer’s choice to inspect the property.

52 Steve Crossland, REALTOR in Austin TX August 9, 2013 at 2:18 pm

Jay,

You’re mixing the topics. As has been covered here, and as is the title of the blog post, a seller does not have to read a buyer’s inspection report, period. This cannot be argued.

Now, if after refusing to have the report read by the seller, the buyer stupidly terminates and cancels in a huff, likely due to poor representation by a lousy agent who doesn’t know how to properly negotiate repair issues, then the seller may in fact be “stuck” with the inspection report, but it depends on whether it was delivered and how, and other variables specific to each situation

Thanks for your input though.

Steve

53 Jackie D'Elia August 28, 2013 at 9:52 am

A question I have asked several other brokers about with differrent answers. My question is: ” If the listing agent receives an email containing the inspection report and does not open it, is it still considered received by the seller?” I’ve heard two different view points on this. One says, if you delete the email without opening it, the seller has not received it. The other says if the listing agent opens the report, then it is considered received by the seller, since the agent opened it and the agent represents the seller.

Thoughts?

54 Michael April 2, 2014 at 6:36 pm

Thanks for the great article! I am attempting to sell my own home without the assistance of a listing agent and it’s details like these that a newbie like me would never even think of. I hope the rest of your posts are just as informative. TX again.

55 Vanessa April 14, 2014 at 6:18 pm

After reading this blog, I understand all too well about reading a buyer’s inspection report. My agent was notified by buyer’s agent that our house has roof issues etc. Needless to say, the buyers backed out of the deal and paid their $200.00 option fee to do so. We were so stupid to acquire the report thinking the roof needed to be replace, but the roof was inspected by a roofing company and found to be fine. The whole inspection report had multiple deficiencies marked and several included electrical issues. So, we hired a licensed electrician to investigate and fix what needed to be fixed costing $285.00. Recently, a 2nd offer came in, about $17,000 below asking. That was too low and we countered, but by then they had received the other buyer’s inspection report and backed out of the deal. This has turned into a big problem for us. This inspector the original buyers hired cost $1000.00. The house is only 8 years old and yet it makes it seem as if has so much issues. We don’t know what to do now and really worried that the house will never sell due to this report. What should we do now?

56 Jubi Headley May 24, 2014 at 10:06 am

Great article – and one I wished I’d read before I put my house on the market. (It’s currently in the option period – originally supposed to end last night at midnight, but I which I agreed to extend because someone on the buyer’s side woke up yesterday morning and suddenly realized they needed a termite inspection).

Seems to me that for some of those commenting on your article, the issues of knowledge and disclosure is getting confused with the issue of receipt of the report. The TAR Seller’s Disclosure Notice, asks, in exactly this language, “Within the last four years, have you (Seller) received any written inspection reports from from persons who regularly provide inspections and who are either licensed as inspectors or otherwise permitted by law to perform inspections?” I am not a lawyer, but if you delete and refuse to open the inspection report, it seems to, as you maintain, that there is an argument to be made that you have not “received” it.

This is different I think from knowledge of issues with the home, and disclosure of said issues. Let’s say that, rather than “receive” a report, a prospective buyer’s agent tells you that her/his inspection found issues A, B, and C, and the buyer wants $20,000 off the list price. Seller gets bids and finds out that it will only cost $8,000 to do, and counters either that Seller will simply make the repairs, or offers the $12,000 price reduction. Buyer isn’t satisfied and walks away. If the buyer completes the work, there’s no place on the Seller’s Disclosure Notice that requires a seller to list items that have actually been repaired (other than foundation work). And if they choose not to, in most cases disclosure of defects on the Seller’s Disclosure Notice simply requires the seller to check a box, rather than (and I wholeheartedly concur with you on this point) insert the needlessly terrifying language in your typical home inspection report.

So as I read it, it’s possible to disclose defects without receiving – or having to provide – an actual copy of an inspection report from a buyer’s inspector when the deal didn’t go through.

57 Jubi Headley May 24, 2014 at 10:08 am

Addendum to previous comment – the Seller’s Disclosure Notice also asks about previous roof and structural repairs. But I think my point still holds.

58 Amanda Thomas June 16, 2014 at 5:09 am

Steve, you may want to revisit this blog post for timeliness of information. Although this may have been a strategy for handling an unwanted burden of disclosure in the past, TAR has more recently addressed the matter in their September 2013 post titled, Does a Seller have to Disclose an Inspection Report He Didn’t Read?

Answer: A broker or seller who receives an inspection report is charged with knowledge of the information in the report. This is true even if the broker or seller does not open the report. If an inspection report reveals material defects, the seller and the broker are obliged to disclose those defects to subsequent potential buyers.

https://www.texasrealestate.com/advice-for-texas-realtors/article/does-a-seller-have-to-disclose-an-inspection-report-he-didnt-read

59 Steve Crossland, REALTOR in Austin TX June 16, 2014 at 6:16 am

Hi Amanda,

Thanks for your comment. The initial point of the article remains true – a buyer cannot, during the option period, force a seller to read his inspection report, period. A seller still does not have to read an inspection report forced on him by a buyer as a buyer negotiating strategy.

That has not changed regardless of what TAR says. That was the main point of the article.

If, the deal falls apart, and the seller has received an inspection report, whether it was read at the time or or not, then yes, he’s stuck with it and its contents and must decide if it contains information that represents to him “knowledge of a material defect”, and amend the seller disclosure accordingly.

I continue to believe it’s a despicable, lazy negotiating tactic for Realtors who unilaterally send buyer’s inspection report to a listing agent, saying “read this”, under the assumption that it gives their buyer negotiating leverage. The reasons I believe that are more clearly spelled out in the original article.

Thanks for you comment and the link.

Steve

60 Amanda Thomas June 16, 2014 at 7:22 am

Thank you, Steve. I agree that the Seller cannot be forced to read the inspection report.

However, the spirit of the original post, coupled with thread commentary and some bold statements arguing proposed definitions of ‘receipt’ and ‘knowledge’, could be misleading to consumers (and agents) for this topic.

The article states, “we advise that you don’t look at or read a buyer’s inspection report because we don’t want you getting stuck with someone else’s inspection report.” This incorrectly conveys the idea that refusing to read a report exonerates the seller from disclosure liability, which is untrue by today’s standards. Leaving it hanging out there that way seems a bit irresponsible.

What is the point of a Seller refusing to read a report when they are charged with knowledge of the information regardless of having read it? Even when a Seller hasn’t “received” (by any definition) a report, disclosure obligations for any new information STILL apply.

I think the premise of this argument is flawed. If a seller is disinclined to make any repairs or further negotiate with a Buyer, reading an inspection report changes nothing between that Seller and that Buyer.

Future potential repercussions of having read an inspection report, as described in this article, are also unnecessarily ‘frightening’ and may influence readers to act in ways that could be deemed as deceptive, opening seller parties up to liability.

It is never fun to lose a buyer or have a transaction go sideways. But, it’s time to tell an updated story about disclosure requirements in Texas. An inspection report on file — marked up to refute errors, document qualified repairs, or openly disclose items the Seller will not address — can be a tremendous gift in a listing agent’s marketing toolbox.

61 David Kilbourne June 16, 2014 at 8:10 am

I agree with Steve, and like I said over a year ago, this is one of the best discussions I have read on Steve’s site. Finally: Assume seller provided with the facts Steve mentioned above at the time the property is being listed for sale; the seller then pays a inspector, engineer, etc. to simply complete reports at the seller’s expense. These reports are attached to the Seller’s Disclosure. When a deal falls thru because of “despicable, lazy, negotiating tactics”; the seller well likely prevail if any further entanglements ensue because the seller’s intent to describe and sell their property was genuinely honest.

62 Don't Agree June 16, 2014 at 11:59 pm

Let us all look at this from another standpoint:

Buyer gets inspection report that is 50 pages long.
Many items are small and easily corrected requiring little money or time.
There are a few mid-range problems that in total might cost a few hundred to repair and perhaps the hiring of a professional.
Then there are one or two items that are large enough it would cause most any buyer to think twice.

So, Buyer decides to negotiate. They really must have the major problems rectified. Would like the mid-range ones done as well and in good faith have decided they will tackle the small items.themselves once they are in the house.

However, for whatever reason the negotiations break down -in my experience usually because the Seller is unwilling to realize items do need rectified and that some buyers just are not willing to purchase a home where the sellers are uncooperative and clearly haven’t kept up the home to high enough standards if the long list of small problems is any indication.

So, as the Sellers agent, in this.scenario, I have only the knowledge of those specific mid-range and larger problems with the house and I am now required to acknowledge those problems.

The Seller usually in these circumstances ends up repairing the larger problem after the loss of the sale because they realize any other inspector will notice the same. Or they drop the price and figure the next buyer will be told the price reflects the problems.

However, my issue as a selling agent is that the mid-range and smaller problems identified in the first report are more likely than not to be identified in any subsequent inspections.

And once a buyer starts to see little problems it shows neglect. And buyers begin to wonder what other problems the house has if sellers couldn’t even be bothered to repair something so small and easy.

But because we have all refused to even look at the inspection report we aren’t able to tell our clients what little annoying but easily fixed problems have been identified and should be repaired if we hope the next buyer will think the house is well cared for.

I think it is a disservice to our client to do this. We are in effect making it harder for them to sell the house by being ignorant.

We all know that Sellers think their house is the best on the market but Buyers are not stupid, and when we approach this issue from the standpoint that “if this sale falls through we don’t want to know the problems” it just leads to frustration for everyone because the Sellers and their agent don’t see the big picture. They don’t see that there truly is more wrong with the house than the handful of items in the addendum.

So I think as a Sellers agent it is better for my client to read the entire report and realize that most buyers are being very conservative with the requests that they are making. And that should this sale fall through they can bet at least 75% of these same problems will show up in the next inspection and for sake of everyone they are better to negotiate now and if not to at least make an effort to repair the little items that were freely offered on the withdrawn Buyers Property Inspection Report.

How anyone thinks sticking your head in the sand is helpful to Seller is beyond me, when the major items are most surely what was on the addendum anyway and you have now been told and must disclose. Just keeping the other smaller items from your eyesight won’t make.them go away and will only cause the next buyer to look harder.

I think this shiftiness regarding disclosures and agents aiding and abetting lies by ommision is ultimately going to bite some of you in the butt if it already hasn’t with lost sales and lower selling prices and commisions.

No house is perfect and it is rare a buyer doesn’t understand that but many Sellers don’t understand that it is foolish to disregard the “opinion” of an inspection report because you are scared you might have to disclose it.

Fix it and Sell it. Don’t hide it.

63 David Kilbourne June 18, 2014 at 10:19 am

Once again, there are no perfect houses. This is a fact, not opinion, and I think everyone agrees on this. IF the listing agent did their job and priced the home with the defects already considered; as the seller got an unbiased inspection and/or engineer report and attached it to the sellers’ disclosure, then Steve’s points are valid. Most folks commenting here have not taken the time to read the entire blog, or they are unable for whatever reason to understand Steve’s very valid points. I entirely disagree with the previous comment entitled “Don’t agree” as it is based on the false assumption that ALL engineers and inspectors will all have the same opinion on whether or not a defect is a defect.

64 I Disagree June 18, 2014 at 1:01 pm

What is a defect is a defect to the person who thinks it is.

But a fact is a fact whether you think it is a defect or warrants fixing or no.

That GFCI is not working =Fact
The water flow is below x gallons a minute= Fact
That roof had a leak = Fact
There is signs of water in basement= facts

It all comes down to dueling interpretations of what has been repaired, can be repaired, what is a deal breaker etc…

Why hide these facts when they will come up again in an inspection if you are able to easily fix them before your next buyers offer?

No, home buyer is ever going to trust an inspector who works for a home seller or even another home buyer. Why would they? But they will find almost all the same “defects” and the more they find the more leverage they have in negotiations.

David, inspectors aren’t perfect but they are all trained to nitpick a home to death. They know who has hired them and the end game. Even if they are totally independent from the real estate business they still believe the more they appear to find wrong the more their client thinks they are getting service for money.

So yes every little tiny defect will be noted by ten different inspectors. What it all comes down to is whether their client cares about them. And most buyers In my experience will point out at least a few they must must absolutely have repaired.

But if the home seller didn’t know from the first failed sale what is likely to come up then they are always playing catch up.

And you can bet buyers agents know why the previous sale fell through. If they know it wasn’t financing then it is likely inspection, appraisal or the home sellers being difficult.

At least if they are ready with a great response on inspection details that is a plus for them.

And no one is saying you have to (not even state.regs) that you have to list every single defect every single inspector ever saw in your house. But at least now you would have a good idea of what inspectors are nitpicking and have an appropriate answer for it. Consider it a freebie and use it to your advantage.

An answer you didn’t come up with while emotional with a deadline looming can do wonders during the next negotiation.

65 Amanda Thomas June 18, 2014 at 1:17 pm

Steve, All;

Respectfully, the advice provided in this article is in direct contradiction to TAR’s direction on the matter, and following this advice places both listing agents and and their seller clients on a very slippery slope. Further, it is misleading to consumers and agents who stumble across this information and buy into an antiquated strategy that no longer serves current standards of practice.

David K — the article does not predicate that a Seller will have an inspection of his own to staple to a seller’s disclosure prior to a buyer performing due diligence.

Steve wrote: [Occasionally an agent sends over the entire inspection report usually via email attachment. We don’t open the attachments or look at them, but instead respond to the agent saying “we only want to see any proposed Amendment you might be offering, nothing else. We have not and will not look at or review the inspection report or other documents sent. The attachments are being deleted and not viewed... There is no upside for our seller to see that information, at all.] — Seems like the Seller’s rights are being trampled on by his own agent.

There is upside to the seller reviewing the information contained in an inspection report. Sellers deserve the opportunity to know what they could be held liable for in terms of future disclosure requirements, as well as a chance to refute inaccurate claims or erroneous reports about the property condition. If the SELLER does not want to read the report, no one can force him to. But if his agent robs him of the opportunity, that is a gross disservice.

Source:

“A broker or seller who receives an inspection report is charged with knowledge of the information in the report. This is true even if the broker or seller does not open the report. If an inspection report reveals material defects, the seller and the broker are obliged to disclose those defects to subsequent potential buyers.” (see https://www.texasrealestate.com/advice-for-texas-realtors/article/does-a-seller-have-to-disclose-an-inspection-report-he-didnt-read)

66 Steve Crossland, REALTOR in Austin TX June 20, 2014 at 10:00 am

To the disagreer “I disagree”, your comments don’t seem based in actual on the ground experience. For example, inspection reports don’t report “gallons of water per minute” flow. A pressure test is done and in fact most homes in Austin have too much water pressure, causing the inspector to suggest a pressure reduction valve be installed. If one is never installed, ever, it’s highly unlikely that anything bad would ever happen. Much of an inspection report is like that – useless bits of information that cause some buyers to overreact. We look mainly for things that change the value of a home, or represent and unknown future expense/hassle or risk. The small stuff such as missing GFI, no drain loop in the dishwasher line, and other code upgrade items, should be considered normal and expected to any knowledgeable buyer/agent.

Those of us who sell 40-50 houses a year have a pretty good handle on how the inspection process plays into a transaction, and the problems that happen when buyers and their agents don’t have a realistic understanding of the process. Having a Seller read an inspection never helps the transaction.

I did actually just have an agent send an inspection report to me unilaterally, which I didn’t look at, read or forward to the seller. Instead I told her to send an amendment asking for what the buyer wants. Buyer wanted $550. Seller agreed without even asking what it was for. Done. That we never looked at or read the inspection doesn’t matter. The amendment simply states seller will pay $550 of buyers closing costs, which is the same as buyer getting $550 cash at close.

Now, for Amanda, if that buyer flakes out and the deal falls apart, we then will look at the inspection report to make sure it doesn’t contain anything that triggers an amendment to the seller’s disclosure or further investigation. But **during the transaction**, reading it serves no purpose in the example I just provided. In some circumstances it might, but usually not.

Steve

67 Amanda Thomas June 20, 2014 at 10:20 am

Steve, I do deeply admire your willingness to let conversation flow unfiltered. To this transparent approach, you have my sincere kudos and abiding respect.

So now readers are to understand (if they make it this far down the line in reading the comments) that the reply to buyer’s agents stating you will delete the inspection report is not representative of your actual actions… Why bother with this language at all?

We find that reading inspection reports during the transaction serves well to clarify understanding of issues being requested, as well as to refute them, if needed. If the entire report is a stinker, it is easier to make that case by pointing out multiple errors, rather than hanging an argument on 1 point of disagreement.

While in a perfect world, the agent on the other side would have a correct understanding of the inspector’s words, competency, literacy, and ethics do tend to vary by agent. If someone says there is a $8k problem requests a price modification, you can bet that we won’t be ‘taking someone’s word’ for it. ;-)

So, while you might suggest an extraction might better serve this same purpose, we would suggest that the gift of a free inspection report — to FULLY LEVERAGE in case the buyer on the table gets sideways during the deal — is a GIFT that will strengthen the seller’s position and bring Buyer #2 peace of mind regarding the seller’s integrity. :-)

68 Steve Crossland, REALTOR in Austin TX June 20, 2014 at 10:39 am

Hi Amanda,

I think you are splitting hairs and not understanding that there are two distinct time periods being discussed. 1) During the transaction/negotiation and 2) After a deal has collapsed.

During transaction/negotiation, a seller absolutely has no requirement to read or consider a buyer’s inspection report, period. That is absolute, has never changed, and will never change in Texas. Are there specific circumstances where it might in fact be best for a seller to go ahead and have a look? Sure. But that’s an exception.

If a transaction collapses and a seller/agent has in possession a previously unread inspection report, it should be looked at because they are now “stuck” with it, regardless of whether it’s garbage or not.

You seem to want me to rewrite the article to state things the way you think they need to be stated. There is nothing misleading or confusing about this blog post. The comments are part of the blog article and readers can available themselves of all these opinions and make their own decisions depending on their specific circumstances and the advice they receive from their agent.

Plus, anyone who takes something they read on the internet as “Gospel”, has bigger problems. My opinions and best practices are just that, one guy’s opinion. Responsible people owe themselves the duty to dig deeper if it’s a matter or great importance to them.

Steve

69 Ashley July 2, 2014 at 8:56 am

Steve- I am a buyer currently on the market to purchase a home and your entire position on this is deplorable.

My husband and I have been through the wringer on a home that from all external appearances LOOKED great. However, upon receiving our inspection report, we were informed that out of the 2 HVAC units in the home, 1 completely did not work and both were over 7 years past their rec. lifespan. The water heater was also about 10 years past its prime, the roof would have to be replaced within the next 12 mons-2 years and was already missing some shingles causing leaking problems. Two out of the 4 bathrooms had significant leaks and the back yard privacy fence was missing an entire chunk_ AND there is mold in the crawl space. The small little issues (water pressure, leaky dishwasher seal, cabinet not sitting flush etc…) we have no issues handling on our own. The seller agreed to REPAIR the HVAC rather than replace and we said adios and he lost our deal (this was for an over 300k home so we expected the big things to be in a better condition than they turned out to be). If you honestly believe the next potential buyer for the home isn’t going to balk at these major issues as well, you’re completely wrong. We didn’t even address in the amendment a large portion of the other minor issues- only included the MAJOR issues. However- we did submit the entire report in full to the seller (and receipt was acknowledged). In this instance, I am certain that once he realizes the full reason that we walked from the sale, he will take the steps to fix these issues for future buyers. Your commentary here is the reason why people find real estate to be a shady business.

70 Steve Crossland, REALTOR in Austin TX July 2, 2014 at 12:48 pm

Hi Ashley,

Thanks for your comments. The reason your deal didn’t work was because of property condition issues which I assume were a) Not noticed by you at first b) Not known/disclosed by the seller.

The topic of this blog article would not have changed your outcome. If your comment is that the seller should have to report the findings of your inspection to the next buyer, I agree. But that is separate from your decision to walk away.

Much of what you listed should have been observable by you and your agent. We always look at the water heater, HVAC and other components and decide before making an offer if those items might be near end of life. Roof age is disclosed on seller disclosure but not the age of anything else.

I think a lot of inspection issues could be avoided of Texas required sellers to disclose the age and last date services of major mechanical components. But that’s another topic.

Steve

71 John D July 7, 2014 at 11:00 am

So what I hear is you are trying to get over on the buyer. The report is there to catch things that are being hidden by the seller or are missed by both parties. It makes perfect sense as the buyer to hire someone to find issues. Its not as if there is a relationship between the buyer and the inspector ahead of time. This is just bad practice in my opinion Its being sneaky and unethical.

72 Steve Crossland, REALTOR in Austin TX July 7, 2014 at 11:32 am

Hi John, thanks for your comment.

You are “hearing” wrong. Nobody is trying to “get over” on a buyer. This is about Sellers and whether or not a buyer can force feed, cram an inspection report down a seller’s throat as a negotiating tactic during the Option/Inspection Period.

The answer is “no”, a seller absolutely does not have to read a buyer’s inspection report as part of repair negotiations. That hasn’t changed and probably never will change. Same as buying a used car. You can tell the seller about all the stuff your mechanic found wrong, but he doesn’t have to listen, and you don’t have to buy.

Some sellers may want to listen, and may want to see the inspection report, and that’s fine, but they do not have to. We advise our sellers not to, because we are not negotiating repairs, we’re negotiating a dollar amount and nothing more. The specifics are not necessary unless it’s a major structural/mechanical defect. Other agents do it differently, but this is how we advise our clients. See article and earlier comments.

A seller also does not have to make any repairs or provide any price adjustment, period. The ball is entirely in a buyer’s court to determine, based on buyer’s inspection, if they still want the house, or if they only want it with a price adjustment or repair concession.

If the buyer walks away, the seller is stuck with the report if it was received. It may be an accurate reflection of property condition issues, or it might be complete garbage, as so many inspection reports are. This is due to so many inspectors more concerned about their own liability than informing a buyer, so they over-report issues, add rediculous amounts of boilerplate warnings, or vaguely state “have licensed {vendor} provide further evaluation”.

I’m surprised this article continues to generate so much interest and emotion. I think a lot of the new comments are being made without first reading through the entire thread because we keep rehashing the same thing over and over.

Steve

73 Jubi Headley July 7, 2014 at 11:56 am

Since the one perspective I have not seen in the comments to this post is the perspective of the seller, I thought I’d add my two cents. I recently (last month) sold my home in June. I was fully aware that my midcentury ranch, built in 1958, was not perfect. It would necessarily have some issues that would show up on an inspection report. The HVAC, for example, was more than 10 years old. But I had no intention of fixing anything – I’d repaired as much as I could before the sale. I expected to negotiate a dollar figure with any prospective buyer to compensate for the costs of repairs. I don’t need to see the inspection report to engage in that process. Nor do I see how taking that position makes a seller unethical.

In my case buyer’s agent, rather than send me a dollar figure, sent me a list of repairs. Well, not exactly – rather than say something like “fix the leaking faucet,” her list referred to sections of the inspection report (“Section II, Item #3 – repair”). There probably were about 20 items. I wasn’t planning to get estimates for each and every single thing – so I took Steve’s advice, sort of. Rather than ask for a dollar figure, I offered a dollar figure to the buyer in lieu of repairs, which she accepted without negotiation. I’m happy with what I offered, and she’s (I’m assuming) happy with what she got. Where’s the lack of ethics in that? How would my reading the buyer’s inspection report have improved that process?

One last point – sellers, in most cases, aren’t home inspectors. Common sense tells us that our 60-year old home will have some issues that show up in home inspection. However, not disclosing something doesn’t mean we’re trying to hide anything. It means that we can’t look at a pipe and tell whether a fitting is up to code (something I discovered when replacing the water heater). It also means codes can change regularly (as I discovered when installing electric for my new kitchen peninsula).

If every home inspector were equally trained and equally observant, whether or not the seller reads the home inspection would be a moot point. So I guess either we need to train home inspectors better, or we need to change the law so sellers get home inspections before listing the home for sale. Whether or not you agree with Steve’s premise in this post, in every home sale/transaction the buyer still has the option to have an inspection conducted, and if it’s a good one, the buyer still has all the information s/he needs to make an informed decision.

74 David K July 7, 2014 at 6:51 pm

I agree with Steve and Jubi. I have been a licensed REALTOR (active/inactive) since 1982.
I have owned rental properties and sold three homes I lived in. I am not a licensed inspector.
I have run across many “doctored” buyer inspection reports performed by inspectors that were done by either relatives of the buyer or friends with the buyer. I have also seen cases where engineers were called in to assess a home’s cracked slab. Both licensed engineers (the seller’s and the buyer’s ) were licensed, educated, and ethical…..but guess what—they were also human beings. Everyone on the planet has the right to their own OPINION. Many of the buyers I have dealt with somehow believe that if the engineer says it is a problem then it is. My point is that opinions are just opinions; educated or not. Steve’s original post rings true to me because it boils down to what the buyer wants to pay for the home in its “as-is” condition.

75 David Anderson July 9, 2014 at 3:15 pm

Steve – has anything CHANGED (legally) SINCE YOUR ARTICLE DATED 07/17/2010?
I, too, have an older home (1938 ranch house located in a rural county that only codifies drive entrances, wells, and septic systems) that I am trying to sell and had a contract fall through today. Apparently, some nimrod inspector shredded our house. I am an engineer and know that certain things (electrical & plumbing) won’t meet modern ‘city’ codes but what we have is perfectly ‘ok,’ is sound, works fine, and is not hazardous. Toilets flush, grandfathered septic works flawlessly, there are no roof leaks, no structural problems, and we even have GF electrical plugs where they’re supposed to be. My agent, however, keeps trying to cram the inspection report down my throat and multiple times I have told him ‘NO.’ In fact, he says that the report now has to become part of my disclosure. So, has any point of law changed in the past four years that would support his statement?

76 Steve Crossland, REALTOR in Austin TX July 10, 2014 at 6:26 am

Hi David,

Now that your contract fell through, and your agent has possession of the inspection report, you are in fact stuck with it, regardless of whether the inspector is a nimrod or not.

You must now either amend your seller’s disclosure to include any new information that represents a “material defect” alledged by the inspection, or simply attach the inspection report to your seller disclosure.

It would be a good idea to go through the report, clean up the “low hanging fruit” by making the repairs and marking up the inspection to say so, and getting another opinion on any findings with which you disagree.

This is exactly the scenario which is best to avoid – getting stuck with a 3rd party inspection report from an inspector you did not hire and don’t know – but you can’t put the genie back in the bottle. It’s not that you have anything to hide, it’s just that you didn’t hire the inspector, don’t know the inspector, and may not agree with his findings, yet his opinions and written report are now inseparable from your home and disclosure requirements because of how it was handled by the Realtors involved.

The irony is that the inspection report is useless to any prudent future buyer. Only an idiot buyer would rely on an inspection report prepared by someone he/she didn’t hire. Therefore your next buyer will almost certainly obtain a new inspection report which will contain differences from the one you have, marking some of the failed items from the first as ok and vice versa. You have the same option but it becomes tail chasing at that point, so it’s best to go with what you have unless there are glaring inaccuracies you can refute.

Good luck.

Steve

77 Danny August 26, 2014 at 8:16 pm

As a buyer currently going through the process, i have to say, is it any wonder you all have a horrible reputation. Conviniently “not reading the report” sounds like conviniently defrauding someone and should land both sellers and their realtor in jail. Disgusting – and even more disturbing with the number of people hailing this as “great”. You should all be ashamed of yourselves…

78 Steve Crossland, REALTOR in Austin TX August 27, 2014 at 10:39 am

Hi Danny, what “process” are you currently going through as a buyer? Is a seller refusing to read your inspection report?

Our reputation is stellar, so I’m not sure what that comment means.

Steve

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