Wielding Veto Power Over Buyer’s Lender, Inspector

[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.]

Whoever has the gold, make the rules.”

–“Golden Rule” (at least, one version).

“Whoever has the keys to a house . . . decides who gets in (or not).”

–Residential real estate corollary, Ross Kaplan.

Over the years, unscrupulous lenders have been accused of all manner of discrimination against borrowers.

Can borrowers ever discriminate, legitimately, against lenders?

Sure — against bad ones . . . by not using them!

Mandated Second Opinion

It’s rare, but would-be home Sellers are within their rights, when they have misgivings about the Buyer’s lender, to stipulate that the Buyer/Borrower be qualified by their lender (or, one they know and trust).

And if the Buyer is serious about buying the house . . . they will.

That’s because, unless it’s a cash deal, it’s ultimately in both the Buyer and Seller’s interest to make sure the Buyer qualifies for a mortgage — before they get to the closing table (ideally, before the Purchase Agreement is signed).

(Un)Approved List

Somewhat analogously, I’ve recently heard about Twin Cities home sellers who claim a veto power over the Buyer’s choice of inspector.

Their concern?

That an especially aggressive inspector — at least one notorious local company comes to mind — will raise bogus inspection issues that torpedo the sale of a perfectly good (and defect-free) home.

Two Strategies

How does a Seller exclude a particular inspector?

Two strategies come to mind.

Strategy #1:  Contractual.

One can certainly imagine a clause, inserted by the Seller into the Purchase Agreement, stipulating that the Seller shall have the right to approve the Buyer’s choice of inspector.

At least to me, however, that seems too heavy-handed — especially if the Seller’s concern is limited to one or two inspection companies in particular.

Instead, I’d counsel Strategy #2: “crossing that [inspection] bridge when the Buyer and Seller get to it.”

Fragmented Market

Even the largest Twin Cities inspection company has less than a 1% market share.

Ergo, the odds of any one inspection firm showing up are extremely low.

If they do, however, the listing agent can intercept them simply by changing the home’s showing instructions.

Specifically, once there is an executed Purchase Agreement, the listing agent can stipulate that all home showing requests be approved by them, and — if the offending inspector’s name pops up — reject their showing request (acting on their client’s instructions, of course).

I can’t imagine the Buyer will be thrilled to be told that, if they want the house, they’ll need to choose another home inspector.

However, as long as the Seller makes clear that their concern is limited to 1-2 Twin Cities inspectors (out of thousands) — and allows the Buyer sufficient time to line up a replacement — I’d wager that the issue isn’t a deal breaker . . .

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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