Negotiations can be stressful, especially when it comes to home inspections. Buyers want everything repaired from a leaking pipe, to the installation of a new roof, to a burned out light bulb. And sellers don’t want to fix anything because they believe the buyer is already getting the home at a discount. But none of these negotiations matter if we don’t have them in the time frame as stated in the Agreement of Sale.
It is becoming more and more common that inspections aren’t being negotiated in the proper time frame. But why? Well it isn’t just a single offender. Sometimes, especially in the height of the busy season or around certain holidays, inspections aren’t being performed until late in the contingency period which can leave very little time to negotiate. Sometimes inspections can yield all sorts of issues; and if the buyer has a laundry list of items they want repaired, it can take several days to come to a final agreement. But sometimes, and more commonly whether we forget because we’re busy or just not aware from the start, agents are not seeing to it that inspection negotiations are being fulfilled in time. However, it is our responsibility as agents, whether representing the buyer or the seller, to make sure that these negotiations happen in the specified time frame.
So what is that time frame? First, let’s start with the inspection contingency itself.
The Agreement of Sale states in paragraph 13(A) that the contingency period for inspections is, if not specified, 10 days from the date the Agreement of Sale is executed. During this time the buyer must, according to paragraph 12(C), complete any and all elected inspections, as well as obtain an inspection report which is to be copied and provided to the seller in its entirety and either accept the property as it is, terminate the agreement or provide the seller with a written corrective proposal. Should the buyer find the results of the inspection unsatisfactory and submit a proposal to the seller, buyer and seller have, per paragraph 13(B)(3)(a), 5 days from the end of the inspection period, again, unless specified otherwise, to negotiate what actions are to be taken as a result of the inspection. It is easy to assume that if buyer and seller do not come to an agreement that the negotiation period automatically extends, but this is not the case. And this is where agents are finding themselves in trouble. If buyer and seller fail to come to a mutual agreement within the negotiation period, or if the seller fails to respond to the buyer’s proposal within 2 days following the negotiation period, buyer can accept the property with the information stated in the report and agree to the release as stated in paragraph 28 or terminate the agreement with written notice to the seller with all deposit monies returned to buyer.
So what can we as agents do to make sure we stay on top of these negotiations?
First, we need to make sure we fully understand and are aware of exactly when the negotiation period starts and when it ends by taking the time to read the terms of the agreement. It’s easy to want to just look at what types of inspections are being performed and not look at when they need to be completed and negotiated. It’s also important to communicate with the other agent and make sure they are aware and that both of you are on the same page. But we also need to make our clients aware and set that expectation early so that they understand as well. The best time to do that is when presenting an offer or writing an offer to submit. Once you know what the negotiation time frame is, the best thing you can do is write it down. Whether you use a planner, a calendar or an appointment app on your computer or smartphone, the best thing you can do is schedule the negotiation period as you would any other appointment. This keeps it on your radar and really prioritizes the importance of this negotiation period.
But sometimes we get busy; and when we have several transactions in motion at the same time, it can be hard to stay on top of things. Sometimes we have clients who don’t feel the same sense of urgency we do, and that can lead them to take their time when coming to a decision. That is the reason why it is important they understand the ramifications of not honoring the negotiation period. Whether writing up an offer for your buyer or guiding your seller to accepting one, ask yourself whether or not the default negotiation period and even the inspection contingency period is enough time. If the market is busy and you don’t think the inspection can be done for several days, extend the contingency period. When you’re in the middle of a transaction and it doesn’t look like the buyer and seller will come to an agreement in time, talk with your clients, talk with the other agent and consider agreeing to an extension to the negotiation period. Never assume that the other party won’t notice the negotiation deadline or won’t call you out when the deadline has past. Because doing so can not only cost your client the sale of their home or potential home, but also their trust in you . . . and as we all know, trust is earned in drops and lost in buckets.
Richard Boas, III, Berkshire Hathaway HomeServices HomeSale Realty
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