Sellers – You Don’t Have to Read Your Buyer’s Inspection Report
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”.
(Clarification: This doesn’t mean the seller hasn’t legally “received” the report or won’t be stuck with it if buyer terminates, but the buyer in fact cannot force a seller to read it during negotiation of the existing contract. See reader comments below.)
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.