When DISALLOW Means Risk!

NO PRE-INSPECTIONS ALLOWEDIt's come to my attention through real estate colleagues and the “Agent Remarks” on the NWMLS that several brokers are not allowing pre-inspections on their listings before Buyers offers are being reviewed (presumably in multiple offer situations, and with their Seller's consent). I find this to be an odd approach. Our duty is to encourage Buyers to investigate and gain knowledge of any defects, and to not obstruct that opportunity. That should lead brokers to encourage their sellers to allow any inspections (within reason), as long as they are not intrusive or potentially damage the property in the process.

In a hot market like Seattle's is now, many Buyers will be tempted to remove the inspection contingency in order to improve their odds when competing with multiple offers. Most agents understand this and try to create time and space for a pre-inspection to happen before the offer is presented so that Buyer gets a chance to inspect the property before waiving this condition. And the Seller gets an opportunity to receive stronger offers with the inspection contingency removed, because it has already been performed to the satisfaction of the Buyer. To DISALLOW pre-inspections just doesn't make sense – it's a lose-lose proposition.

I spoke to a MLS attorney about this and he suggested that it may be a way for Sellers who are trying to conceal or obfuscate defects. But if it is being done at the Brokers suggestion, they may be complicit in attempting to create a “Buyer Beware” environment, such as the case of Douglas vs. Visser a few years back. In that case, the Sellers were Real Estate Agents who tried to conceal substantial mold and defects. The Buyer did an inspection before purchasing the home, and the inspector pointed some minor rot and mold issues that these were not structural problems but should be repaired. The Buyer did nothing further and the transaction closed. After closing the Buyers found out the extent of the damage was so severe that the house needed to be torn down. Investigations revealed that the Seller had knowingly concealed the mold and rotting wood.  The Buyer sued the Seller for fraudulent concealment and negligent misrepresentation (remember the Sellers WERE REAL ESTATE AGENTS!) Shockingly, the Buyers lost in Appeals Court because the court upheld that the Buyer has a common law duty to investigate. Once the original inspector had pointed it out, they should have asked more questions, requested more testing, or investigated it more thoroughly till they were satisfied, according to the court.

To me, especially when I am representing the Buyer, I want Sellers and Brokers to be even MORE transparent and encourage ANY and ALL investigations that can answer my Buyers concerns. And I am very suspicious when Sellers or Sellers agents hesitate or disallow it. I can only assume they are not experienced, or God forbid, the opposite – they are intentionally trying to conceal something.

BUYERS:  If you run up against this in a listing you are thinking of making an offer on you should discuss it with your Broker. Even though it may reduce your chances of getting the home, waiting to have the inspection until after gaining mutual acceptance is always less risky that waiving the inspection altogether and not doing one. Maybe your Broker can have a discussion with the Listing Agent and they might be more flexible.

SELLERS: If your Listing Broker recommends you do this, ask him why?! Since this is not the standard of practice, find out what advantage he/she thinks this gives you. And ask him/her about any liability this may create for you. If you are not satisfied, SPEAK TO A LAWYER!!

Let's hope the Real Estate Division of the Department of Licensing addresses this soon and stops this bad behavior in its tracks! I'm hoping they will see this odd practice as I do – another step backwards for consumers! (less transparency, more buyer-beware environment) Just my two cents. I am not qualified to give legal advice. So do not misconstrue anything in this article as legal advice.