Jul. 23, 2006 - Caveat Emptor - Buyer Beware

Question asked on RCG: "Does the buyer take on appreciably more risk? Ignoring any issues that would be discovered during an inspection, do buyer’s agents, in practice, actually help buyers from getting screwed (for things sellers should, but don’t, disclose)? "

It is sometimes difficult to answer a question like this, because the question skews the answer to one specific, and not necessarily true and relevant, response.  The question assumes that the "value" of a Buyer's Agent has to do with home inspection items and Seller Disclosure items.  As promised to the questioner, I will do a string on different topics related to the issue of the question.  Here's the first. 

REAL LIFE EXAMPLES:

Buyer purchases house at $25,000 less than asking and under appraised value. In this case what I noticed were several things. 

1.The home was overpriced.  Because it was overpriced, the client had not noticed the property in his online search.  Also, because it was overpriced, it was getting stale on market and ripe for an offer lower than fair market value.

2. The home had aesthetic issues, but was a home inspector's dream.  Great new roof, top of the line, not a cheap "looks new but cheapest roof available" type roof.  It  was built in the age range when construction was better than the period before it and after it.  Newer is not always better if newer falls in a "weak construction material" period of time.  The heater was not only newer, but also top of the line Trane.  The fireplace had never, ever been used in the many years since the home was built..."like new".

3. We did do an inspection during escrow, but we did not make the offer "subject to" the inspection.  Based on my visual inspection, we used the "no inspection contingency" a point of negotiation to get the lowest price possible.  We then did an inspection to prove out our suspected "good inspection" evaluation, and there were no surprises from the home inspection.  It's a bit of a risk, and I have a better than average eye for these things, but well worth the risk at a $25,000 savings from ask price and $10,000 under appraised value and no competition or price war, even though it was one of the most sought after neighborhoods.  The houses selling were the inferior ones priced $25,000 less...this was the diamond in the rough...the needle in the haystack...the one overlooked by most. 

That is not to say that "no inspection contingency" should always or often be used to get best price.  You have to evaluate the most expensive items that could come up in the inspection:  Site issues like drainage, foundation issues, roof, siding, heater somewhat in that order.  The risk is not in buying a house with problems, as you DO still do an inspection, you simply do not make the seller responsible for the result of the inspection.  The risk is not the potential defect ,as you will know all defects prior to close.  The risk is the Earnest Money deposit, and not necessarily.  If what you find during inspection is something that should have been in the Seller Disclosure Statement, you can still back away without losing the Earnest Money Deposit, even without the protection of an inspection contingency. 

That's an example of Buyer Agent advices with regard to home inspection and seller disclosure...have to go now.  Will do more later.