The sale of real estate is far different in Metropolitan New York than it is anywhere else. For one thing, we use attorneys from the start. For another, the attorneys handle the contracts, not the brokers. Another difference is that they won’t draw up contracts until after the inspections are done, unlike other locales where the inspection is a contingency of the contract. My personal feelings about this are immaterial; it is just how it is done. One area where the buyers sometimes get stuck is the timing of the inspection. Theoretically, a buyer can do their inspections and not get the house for whatever reason. The bank could reject the short sale. In those cases, the buyer paid for an inspection and cannot get reimbursed for the expense. That is the cost of doing business, and part of the risk all parties take when approaching a short sale.
We cannot mitigate a buyer’s risk by allowing them to delay their inspection until after the short sale is approved. There are many reasons for this, but not the least of them is that if the inspection reveals a problem that can only be addressed by adjusting the price, it is too late. We have, in most cases, spent 3, 4 or 6 months getting the lender to approve the short sale. We can’t go back and renegotiate the price. That has to be done early on, before we submit the offer to the lender.
While the buyer does incur risk, their exposure is still far less than that of the listing agent, who has to devote 6 months to negotiating the short sale and will never see a dime of compensation unless it closes successfully. That is not small potatoes. And if a listing agent is well versed in short sales, the buyer’s risk in getting the inspection completed prior to contracts is significantly minimized. I like their chances.
Recently, we completed some difficult negotiations for an offer on one of our short sales in Brooklyn (yes, I cover all 5 boroughs too), and the buyer agent informed me that they would not do their inspection until contracts were sent out. The seller’s attorney will not do that- they send contracts out in all sales after inspections here, as I said. That agent lost the sale. Another agent who advised their client correctly got the house for their buyer, and I expect an approved short sale on that property this spring. It all goes back to the buyer needing to understand that the chronology of events is the same in a short sale as it is in any other transaction. If you are buying a short sale, it is a unequitable apportionment of risk to wait until the blood sweat and tears of the approval are done in 6 months to do the inspection, because no adjustments can be made once the approval is issued by the seller’s lender.
Forewarned is forearmed! Get that inspection done early and you’ll expedite the purchase.