What could be worse than selling your home, moving on in life, then getting a lawsuit about the home you’ve already sold? While there are plenty of ways to prevent this, the market these past few years has had such low inventory that motivated buyers have been waiving inspections left and right. Though waiving inspection contingencies could win you the property, is it worth it if it makes a bigger headache down the line?
A Seller’s Property Disclosure Statement (SPDS) is a good start, though most homeowners aren’t home inspectors or master craftsmen. Even the most well-intentioned and thorough SPDS could miss something crucial. Unfortunately, the reality is that buyers are relying on these disclosures and waiving inspections WAY TOO OFTEN these past few years. And while some of the lawsuits come from bad actors, most come from waived inspections and honest mistakes.
Join me as I go over Section 12. Buyer’s Due Diligence/Inspections of the Agreement of Sale (AoS) in real estate. I’ll cover what the section is, how it’s used, and why it’s so important.
Let’s get going!
What is it?
Section 12 of the AoS covers your opportunities as a buyer to inspect a property before finalizing your purchase. While sellers are required to disclose what they know about their property, most people aren’t inspectors or master craftsmen. For all parties involved, inspection contingencies add a level of peace of mind that what you see is what you get. They’re so much a part of every transaction, in fact, that Pennsylvania Association of Realtors (PAR) dedicated multiple pages in the AoS to this very topic.
Much like other contingencies, this section preemptively structures options for you to proceed with the purchase, or not. If an inspection reveals a substantive problem, a significant contributor to value, or health and safety concern, this section gives us options. We can take the property knowing what needs to be fixed. We can walk away. Or, as more often happens, we can negotiate a solution.
Section 12 is dedicated solely to what inspections may or may not influence the outcome of the sale. Even then, the 9 listed electable inspections don’t cover everything out there. Option 10 calls for any additional inspections you may want that could influence the transaction.
Importantly, any inspections that the transaction hinge on must be outlined in this section. While it’s possible to include inspections that the transaction is not contingent upon, those are listed in a different section of the AoS (section 32.B, for those who are interested). Additionally, remember that electing for an inspection does not limit you to the number of times that inspection can be performed. Buyers have to foot the bill every time, but are free to get as many different inspectors in there as they desire.
Even if you waive all the electable inspections covered in this section, you are still allowed your pre-settlement walkthrough. This is when we walk through your future home to make sure nothing has substantively changed from the time the offer was made to the time of settlement. While issues don’t often develop during this time, it’s especially important to double-check during the stormy seasons.
How do I use it?
When it comes time to fill out this section of your AoS, I’ll explain each of the inspections, their merits, and why someone might elect or waive such an inspection. It’s important to understand the implications of the various inspections when choosing to elect or waive your options.
After submitting your AoS to the seller’s agent and getting the good news that you’re the one they picked, it’s time to get the inspections scheduled. By now, the clock has already started ticking, and delaying could lead to accidentally accepting a problem and moving forward anyway. If the inspections are running behind schedule, I submit an addendum to request a change to the inspection contingency period. This is a situation where more paperwork keeps you safe.
As a real estate agent who’s been working in Chester County for years, I’ve gotten to know the local inspectors. More often than not, I can recommend several to help you find an inspector that’s right for you. For something as big as buying a home, you’ll want to work with inspectors who know what they’re doing and have a good reputation for protecting their clients.
As your agent, I like to attend the inspections and talk with the inspectors in person. When I’m working with an unfamiliar inspector, this is doubly true. In person, I can ask clarifying questions and get perspective on the scale of concerns. The written word is great for a lot of things, but when it comes to interpreting opinions, I find it’s best to speak face to face.
After the inspections are performed, it’s time to get the results and make some decisions. In the best-case scenario, the inspections come back clean and everything can move forward without issue. On the other hand, an unknown significant contributor to value or serious health and safety concern could be reveal that totally undermines the transaction. More often, minor concerns are found, which leads to negotiating solutions. Without electing for inspections, however, there are no openings for negotiations.
Conclusion
After several years of being stuck in a seller’s market, we’ve seen the folly of undermining your own protections just to get your offer accepted. Waiving all your contingencies may seem like a good idea in the short term, but both buyers and sellers benefit from taking the extra time to get the inspections and put everyone’s mind at ease. Take the time to fully understand your inspection options before submitting your AoS. Stay involved during the inspection process and help me respond to the seller in a timely manner.
When you purchased your home, did you waive any inspections? Down the line, did you discover anything about the home you wish you would have known before settlement? I’d love to hear about it! The buyer due diligence and inspection contingency section of the AoS in real estate is there to prevent this kind of buyer’s remorse. Don’t ignore this section, focused on the competition; ensure you’re buying what you think you’re buying.
Thank you for joining me in this overview of Section 12. Buyer’s Due Diligence/Inspections in the Agreement of Sale for Real Estate as put forth by the Pennsylvania Association of Realtors! I hope you’ve learned a thing or two about real estate inspections. Word of mouth remains my number one business builder. Please let me know if you know someone who could benefit from my professional experience and expertise!
