Minimizing the Risk of Going Back to Square One (or Worse)
[Note to Readers: 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.]
Any Realtor who’s represented a Seller in multiple offers knows the risk: 7-10 days after the initial feeding frenzy subsides, the winning Buyer’s inspection turns up a major issue — or several — and the deal is suddenly off.
Unfortunately, at that point, the runner-up Buyers have often moved on, or, at the very least, are suddenly dubious about the home’s condition (and perhaps the credibility of the Seller and/or listing agent).
How do Sellers avoid having their shiny, multiple offer “coach” suddenly turn into a pumpkin?
Proactive Sellers
Savvy agents (and their clients) know that, once a deal has been consummated, there are two main risks** prior to closing: 1) the Buyer’s inspection; and 2) the Buyer’s financing.
How to minimize/eliminate those risks?
Buyer financing pitfalls (qualifying, appraisal, etc.) can be virtually eliminated by accepting a properly vetted cash offer — something that, happily for Sellers, seems to be a feature of many Twin Cities multiple offers lately.
Meanwhile, there’s one, ironclad way for Sellers to avoid the risks of an inspection, including the occasional Buyer who wants to use the inspection to renegotiate the price: sell to a Buyer who waives it.
Since most Buyers are (justifiably) loathe to do that, however, a better alternative is for the prospective Seller to arrange their own home inspection (“pre-inspection”) from a qualified professional prior to going on the market.
That’s especially smart for Sellers who’ve been in their home for decades, and may not be aware of any dormant problems.
Unknown Unknowns
What happens next?
If the pre-inspection uncovers any significant issues, the Seller can address them well before the frenzy of multiple offers, then carefully document that in their Seller Disclosure.
Alternatively, if the Seller is either unable or unwilling to make the indicated repairs, they have the option of disclosing that — and pricing accordingly.
Of course, if the inspection is uneventful . . . the Seller can proceed to put their home on the market.
Then, Buyers who’ve had a chance to digest both the Seller’s Disclosure and their Pre-Inspection Report (which the Seller should provide) can confidently make an offer without an Inspection Contingency.
I’d call that, “win-win-win” (for the Buyer, the Seller, and their Agents).
P.S.: Thanks to Edina Realty’s Marge Kane and Kris Waggoner for prompting this post.
**The dreaded “Buyer’s remorse” — the Buyer gets the proverbial cold feet and wants to back out — is a risk in any home sale.
That’s especially true in multiple offers where (too) enthusiastic Buyers have bid up the price.
The best way for Sellers to insulate themselves from that scenario is to contractually insist on substantial earnest money that becomes non-refundable early in the deal.
