“TNAS” vs. “Active, Subject to Inspection”

“Seller Shall/Shall Not have the right to continue to offer the Property for sale until this Inspection Contingency is removed” (check one).

–Standard Minnesota Purchase Agreement, lines 192. – 193.

[Editor’s Note:  The views expressed here are solely those of Ross Kaplan, and do not represent Edina Realty, Berkshire Hathaway, or any other entity referenced.  If you need legal advice, please consult an attorney.]

In a fast-moving Twin Cities Spring housing market with way too little inventory, it’s not uncommon for nervous Buyers to hear footsteps (of another, interested Buyer), even after they’ve inked a deal with the Seller.

And, if the Buyer just prevailed in multiple offers, they may even hear several sets of footsteps.

While infrequent, it’s possible for an especially ardent runner-up Buyer to execute a Backup Offer with the Seller, that automatically goes into effect if deal #1 hiccups.

What can Buyer #1 do to prevent that?

Shutting Down Back-Up Offers

The most effective way to shut down other Buyer interest in a home is to contractually stop the Seller from continuing to show it.

At least in Minnesota, that’s accomplished by checking “Shall Not” on line 192. of the standard Purchase Agreement (see excerpt, above).

Practically, that means the Seller agrees to switch their home’s MLS status to “TNAS,i” — for “Temporarily Not Available for Showing, subject to inspection,” instead of the more standard — and permissive — “A,i” (“Active, Subject to Inspection).”

Should Sellers agree to that?

Each situation is unique, of course.

However, in my capacity as a listing agent, I coach my clients that agreeing to suspend showings while the Buyer’s inspection plays out isn’t as big a concession as it may seem, for three reasons:

One. Hollow right.  Once a home is under contract, MLS rules require that that be disclosed.

When Buyers (and Buyers’ agents) see that a home’s MLS status has been changed to “A,i,” the practical consequence is to chill interest in the home, because they know (or should) that most inspection issues ultimately get resolved, with the transaction progressing to a successful closing four to eight weeks later.

Result:  once there’s a signed deal, showing requests drop significantly, regardless, because Buyers don’t want to waste their time.

Two. Weekend open house traffic = Quantity > Quality.

Yeah, agreeing to take their home off the market during the Buyer’s inspection period will likely cost the Seller a houseful of people at a weekend open.

But, what are the odds that any of those people include a real Buyer?

In my experience, quite low: perhaps less than 5% of all open house traffic is ready, willing, and financially able to buy, now.

As opposed to say, seven months from now, when their lease is up; after they’ve sold their current home (never mind that it’s months away from being market-ready); once those nasty blemishes on their credit report disappear, their student loan balance falls below $[ ___ ], etc., etc.

You get the idea.

None of which doesn’t mean there’s not a benefit to doing opens: as a listing Agent, I love doing first opens for new listings, because the inevitable crowds are always fun.

It’s just that I know that all that traffic likely translates into (at best) a few future clients, who may buy sometime in the next 6-18 months (now you know why veteran agents so often hand off open’s to newbie agents).

Three. TNAS and “Days on Market”; “3 DOM — and Holding.”

While the two disadvantages of “TNAS,i” are not as onerous as they initially seem, there’s also a subtle plus:  that status turns off the home’s Days on Market (“DOM”) clock.

That’s important in the event deal #1 glitches, and the home comes back on the market.

So, assuming a home sold in 3 days, and the Buyer negotiated a 10 (calendar) day Inspection period, if the Buyer’s inspection ultimately causes the sale to be scuttled, the home goes back to “Active” — minus the “i” — at “13 DOM.”

By contrast, when the home’s status is immediately switched to TNAS,i, the home comes back, suffix-free, at “3 DOM.”

Resolving Inspection Issues

Of course, the best way for nervous, new Buyers not to jeopardize a sale is to negotiate any legitimate inspection issues that come to light in good faith.

Sellers who are presented, post-inspection, with documented, material defects in their home have exactly two choices:  1) they can reach an accommodation with the current Buyer, either by agreeing to repair the problem(s) — or discounting the sales price so the Buyer can, post-closing; or 2) if the Buyer and Seller can’t agree on a resolution, and the deal subsequently cancels as a result, the Seller has to update their Seller Disclosure to tell all future Buyers about the problem(s) (note: not doing so constitutes fraud).

As you might expect, once the Seller flags the issue on their Disclosure, they can expect all future Buyers to demand a similar-size discount.

Result: the vast majority of Sellers choose to take their lumps now, with the current Buyer, vs. risking a potentially bigger hit, later.

P.S.: Know why you’ve never read an article on this subject before?

Because no one qualified to write it had the time or energy.

I’ve started no fewer than four drafts of this post over the years — typically during the height of the Spring housing market — but never finished, because I was too exhausted after participating in multiple, multiple offers.

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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