Yesterday I received a counter offer on a property where the seller demanded the inspection period be shortened to five days. Just in case I thought it a fluke, today I ran across a listing on an REO with the notation “5 day inspection period is non-negotiable.”
Echoes of 2005 …
Here’s the basic issue. If buyers uses the Arizona Association of REALTORS’ Residential Resale Purchase Contract, they are asking for a 10-day inspection period during which the buyer can complete their due diligence. (An inspection period is a function of the contract, there’s no law requiring it.)
Due diligence usually means hiring a professional home inspector to check for issues and a termite inspector to check for critters and other wood-related issues such as dry rot. But that’s not all that the contract says a buyer ought to review:
From the contract:
6a. Inspection Peroid: Buyer’s Inspection Period shall be ten (10) days or _____ days [JPD: buyer can voluntarily shorten] after Contract acceptance. During the Inspection Period, Buyer, at Buyer’s expense, shall (i) conduct all desired physical, environmental, and other types of inspections and investigations to determine the value and condition of the Premises; (ii) make inquiries and consult government agencies, lenders, incusrance agents, architects, and other appropriate persons and entities concerning the suitability of the Premises and the surrounding area; (iii) investigate applicable building, zoning, fire, health and safety codes to determine any potential hazards, violations or defects in the Premises; and (iv) verify any material multiple listing service (“MLS”) information. …
Tall task for five days. And here’s where a five-day inspection is impractical.
Let’s say the home inspector finds evidence of a leaky roof. What they normally would do is recommend the buyer get a roofer out to the house to determine the extent of the issue. At the same time, the buyer might also want to get a quote to see what the replacement cost might be.
Even if the home inspection takes place on the first possible day (and this is assuming the seller left the utilities on, which is another ongoing battle in the world of bank owned homes), that leaves the buyer only four days to get the roofer scheduled. Maybe that’s not a problem. But let’s say there’s an air conditioning issue uncovered in July. Good luck finding an a/c guy available on that short of notice.
So what’s the point of a five day inspection period? First, the bank doesn’t really care if you complete your due diligence or not. And given the short supply of bank owned homes, they can afford to be that arrogant. They just want you to buy the house and take your chances.
This seems like a good time to remind you that if you call the listing agent looking for a deal, the listing agent represents the seller – don’t expect to hear why having a five day inspection period is a really bad idea.
Not to say that I always will be able to get you a longer inspection period if the bank’s truly adamant about it. (Like I said yesterday, I’m honest about these things. No sense promising what’s impossible to consistently deliver.) Many times, your only choice is to deal with what they give you or move on to another house. But if nothing else, I’ll have made you aware that you’re taking one hell of a risk in acceeding to such a clause and what the ramifications may be.
[tags]Phoenix real estate[/tags]