When this deal transpired, home sales in Hampton Roads were extremely “hot” with accepted offers happening almost immediately because of a limited inventory of homes available. I had a home listed for sale where we received several offers within a couple of days of listing it. After presenting and discussing all offers with the client, it was hard not to accept the one willing to offer $9,000 over the asking price! Even better – the buyer’s offer was also written to forego a home inspection AND forego the “usual” seller’s 1% cap for appraisal and/or termite-moisture inspection issues – both standard items of a purchase agreement by the buyer.
In other words, the way the contract was written, the buyer was purchasing the home as-is without asking for the normal costs that are usually the home seller’s expected obligation in a real estate transaction!
Of course, discussions with the seller to address repair issues before listing were covered. The home definitely showed as being well-maintained with several noticeable upgrades the seller recently performed like new windows, flooring and a freshly painted interior. We determined the roof was at the end of its life. We discussed the strong possibility that it may come back as an appraisal-required repair, so the seller went ahead and did so before we listed it.
During the due diligence period after an offer is accepted is when a termite-moisture inspection and a home appraisal are initiated. A 1% cap clause in the home purchase agreement contract requires the seller to cover appraisal-required and termite-moisture repairs up to 1% of the home’s sales price. Both are critical parts of the home purchase agreement process – and for good reason. Both cover common unforeseen repair expenses that arise during the process of a home sale. What is going on underneath a house are typically “out-of-sight/out-of-mind” issues. How often does anyone really crawl up under their house, right? It’s common knowledge that if there is to be a hidden cost to a home sale transaction, this is a primary area where one would be. For appraisal-required repairs, some mortgage loan programs will not approve a loan to proceed until repairs found during the appraiser’s inspection are made.
It’s amazing when theory doesn’t play well with reality. What could go wrong?
Well, of course, the termite/moisture inspection revealed several issues that needed to be addressed to the tune of $2700.00 of repair work. Considering the attractiveness of the offer, the seller agreed to split the cost with the buyer even though they weren’t obligated to do so.
Oh, but it gets better. Right after we worked this out, the termite-moisture company comes back to say they made an estimate mistake and repairs would actually be $3500.00 and were not willing to deviate from that new estimate. Here’s where the buyer’s agent attempts to draw the line and demands that the seller cover the difference.
As the seller’s agent looking out for my client’s best interest, unfortunately we also drew the line by simply reiterating the details from that agent’s submitted contract.
It’s hard to say what the buyer’s circumstance was to make such an offer as it most certainly guaranteed that it would be accepted. It appears that the buyer’s agent was taking a gamble that, based on the well-maintained “appearance” of the home, the underneath of the house was probably in good shape, as well. By overlooking a primary home sale process repair issue that commonly arises, it ended up costing either the buyer or the buyer’s agent a lot of additional money to get the deal to closing.
The buyer agent’s experience should have drawn the line on the extent of conceding on these inspections and repairs. Gambling on this left them vulnerable to pay for expenses that would normally be paid for by a seller.
Obviously, this offer was an unbelievable deal for my seller. But, it left the buyer with little recourse when these expensive repair issues arose. Throwing caution to the wind on removing all responsibility for these critical inspection and repair aspects of a home sale is never a good thing.