Beating Up the Seller

'Inspections, a two-edged sword. It used to be buyers relied upon their judgement and observations as well as their due diligence (if they did any). I do not normally go out of my way to mention a physical failing on the home or property, but then my buyers are not quite representative of the public; they tend to be more knowledgeable about building. If for instance there is a marginal good roof on a home, I do not feel an obligation to point this out. Not unless I felt the buyer really was unable to tell the difference between worn-out and newer shingles. Then I call it to their attention. An exception to my rule of thumb would be a defect that no one could see. I encountered, for the first time, lead pipes in a property that we currently have for sale. But the pipes were not in the home, but instead in the line from the well to the home, buried, where no one could ever see them until they dug them up. Fortunately, the owner is scrupulously honest and mentioned this to me; otherwise I’d have never known. If I can't tell, the buyers can’t either. So I made sure to mention this in every ad and any information given to prospective buyers.

As we get further and further “advanced” in our civilization, buyers are less and less likely to know so much about building, less able to detect for themselves defects that might have been obvious to their grandfathers. So third party inspections have increasing importance. Banks have long recognized this and began requiring inspections to satisfy themselves that the property they were asked to mortgage did not have unforeseen structural or other difficulties. That’s for homes.

On farms it is different and the buyer is sort of assumed to have a higher level of awareness of these kind of problems. If you are going to run a farm, you had better know enough to tell when a roof is nearing the end of its life. An example that is not well-known in the industry - farm buyers are not required by the State to sign the ubiquitous agency disclosure as they are assumed to know enough to understand these things. Lenders who specialize in farm lending will look at the total package and concentrate less on this kind of minutia. But for house buyers, these things assume greater importance so inspection clauses have now become normal and expected.

What are inspection clauses? Basically, they are a contingency which allows the buyer to have someone (usually hired by the buyer and licensed by the State) who supposedly knows and understands the problems that buildings can have. This person, working within a limited time frame, gives their assessment of a variety of potential issues: water quality and quantify, the function of waste disposal systems, the structural integrity of the home, electrical, heat and plumbing systems. They may inspect for insect damage and take samples to determine if radon gas is present. The buyer gets to choose which things they wish to have inspected or tested and the seller is permitted to refuse to accept any of these, which probably will mean his sale just grew wings to quickly fly away, Or the buyer will assume he is trying to hide something. If you think that of someone, it is best to back away from the sale. While I hate to have to deal with inspections as they just complicate the sale and lessen the chance that there will be a closing, I never deny such requests. The buyer has every right to determine the condition of what he is buying. If the buyer is unusually naive about such things or is trying to buy sight-unseen (always a dumb idea), I will probably suggest third party inspection.

The wording on such contingencies can never be specific enough as in real like, they are fire with gray areas, but generally it is stated that if certain standards are not met, the buyer has the right to withdraw from the contract without penalty. Usually there is a dollar figure used: if the expected cost of remediation is less than, say $1500, the sale can go on as planned. If over this figure, the buyer can back out. Or the seller can take care of the problem on his dollar, not the buyer’s. Since the closing date is looming nearer and nearer when these issues from to the front, most often the seller is willing to take a hit to keep the sale moving forward. And since his family is living there and did not notice problems or feel a need to make corrections, they may be initially hostile to the idea of taking a lower price than agreed-upon. But cooler heads usually prevail and they usually decide to just do with less money rather than to lose their buyer and start the process of selling all over again, only to run into the same problem with the next buyer.

I am into process of selling a 200 year old home, one I own, to a buyer who has never seen it. The home is as nice as I can make it without going crazy and rendering it overpriced for the area. They hired an inspector on their own rather than use one suggested by me or their own agent, then based upon his observations, then hired a contractor to look at a dip in the roof (one which I can document has been there, unchanged, for decades). The contractor gave a green light on this but mentioned the age of the roof (now approaching in 5 or so years the end of its expected life), hoping to get that business in the near future. OK, fair enough. Too often contractors, in my experience, give an alarming report, thinking an out-of-the-area buyer will hire them at an inflated price to make the correction. But what happens when they do this, is the buyer gives up on the sale and you now have a pissed-off homeowner who’ll remember and won’t deal with him in the future. So nobody gets what they initially wanted.

This buyer then called an electrician to examine something the inspector noted. That was an interesting experience. This time, the electrician happened to be someone I know and have dealt with before, and he pulled no punches, coming right out and saying that if he knew he was just inspecting something for a buyer, not a home owner, he would not have come. Too often he has done this, told the buyer what he felt, only to have the buyer use that as leverage on the seller to lower the price - only to find that once they move in they never have the work done anyhow. So, in these situations he charges extra for his inspection service, telling them they can get back the extra money by hiring him to correct it. In my case, he also said if it were his home, he’d leave it alone as it would never cause difficulties.

A day or two later, they had a mason look at the laid stones walls of the basement to examine “cracks” the inspector had noted. Of course there are cracks, there was a crack between every single stone when they were laid in the 1820s and each one is still there today. The mason basically said while there was nothing structural to get worried about, he could parge the walls (cover with cement, forcing it into cracks as he is able) and it would look nice and smooth, more attractive. They would gain a small structural advantage as well as the obviously aesthetic one.

We have not heard from the buyer what their reaction to these 3 extra inspections is. Maybe they will be honest and direct us to go ahead. Or maybe they will try to use this as a wedge to end up with a lower price. However, they may end up disappointed if they try that tact. I don’t play that game. If I feel something he spotted actually needs correction, I’ll do it on my dime and not ask for more, but I won’t drop the price we’d agreed-upon. If they initially liked it enough to pay my price, that’s what I expect them to pay. If they wish to nickel and dime me to gain a few thousand, they had better start to search for another property.

This nickel and diming after buyer and seller had agreed on one figure is increasingly common. When a buyer begins playing this game, the seller has little recourse other than to lose the sale and hope the next buyer is actually OK with the home as it is. Every old home has problems, just like old people do - only they last a lot longer than we do. Any inspector can find something to complain about and they do, if only to show the buyer that they are working for them. They are also usually aware that if they are not reasonable in their recommendations, they won’t get referrals from agents.

We once had the “Inspector from Hell” out, a man from out of the area who was famous among agents as he did not like any home more than a few years old. The one he looked at this time had a steel roof. That was completely unacceptable to him. Shingles are the only thing he liked. (Me, I prefer steel as it far outlasts shingles.) He went on and on, one thing after another.  By the time he was done, the homeowner was nearly in tears and the buyer was so frightened she immediately withdrew from the contract and returned to California. Two weeks later, for another buyer, we had a different inspector there, one who acknowledged that, yes, it was an old home, but went right on to say it was in better than normal condition for one of that age, an assessment I agreed with. And that sale went through.

Sometimes, not often, it is the attorney who causes the problem. There was a Long Island attorney named MacNamara who examined the inspection document (usually they don’t bother to even look at them) and, as attorneys do, started finding fault after fault, getting increasingly agitated. He did not beat around the bush, but told me right out that when he was done, the owner would have $20000 less money than agreed upon in the contract and I’d have half of the commission I expected. Then he started swearing. I’d been doing a lot of listening, not saying much, but that’s when I hung up. Needless to say there was no sale. MacNamara knew the buyers were in financial difficulty, though they’d never missed any payments (yet) and he knew their equity was slightly above $20000; he clearly intended the sellers to walk away without a cent, with just their good name intact, all they’d worked for lost.

Fortunately, most buyers are not like this. I found it interesting that during the COVID-induced flurry of sales, a rare (for us) “sellers market”, that suddenly buyers were not asking for inspection contingencies like they used to. When both parties remain reasonable in their exceptions, we can then broker sales, bring about a “meeting of the minds”. It takes two to tango and when we have them, we can dance.