How many times has it happened that the sale of a home falls through after the buyer's inspection? Not only is the seller penalized and back at square one, but as the seller's agent, you have lost valuable time spent marketing a home and negotiating with a buyer that is now either intractable or gone.

In the worst case, the seller may even subconsciously pass the blame to you, by insisting that you reduce your commission to cover the loss. After all, didn't you tell them that you would be able to get X amount for their home? It no longer matters that you did everything right. You looked at the home, suggested structural or cosmetic repairs to make the home ready for marketing and your seller signed a disclosure form. Enough to insure smooth sailing? Hardly.

Along comes the buyer, and the inspector, who finds a litany of problems that you or your seller didn't even know existed. And many repairs such as foundation troubles are so expensive to make that the seller may find themselves unable to convey the home. Perhaps they've relocated or have no means to make extensive repairs. Unless there is considerable equity in the home and a home improvement loan can be obtained, or the seller has the cash to cover the expenses, your sale may be shipwrecked.

The trend in real estate today is to prequalify the buyer in preparation of home acquisition. Buyers know exactly how much home they can buy, but sellers are seldom as well informed about their need to prepare their homes for market. They may be surprised at how up-to-date the competition really is.

When you do a comparable analysis for your seller, make sure you look at more than the numbers. Take a quick peek inside the homes that are offered for sale in the area or have recently sold. Compare the condition and features so you'll know where your seller's home ranks in the pecking order.

Then look closely at your seller's home for signs of neglect or age. These can signal potential problems. A crack in the walls could be more than just "settling." If the settling turns out to be foundation-related, repairs could cause additional cracks, which would then have to be repaired. This is a case in which covering the problem with patching and paint won't work, and a good inspector will flag the cover-up anyway.

Find out if the home has been treated for termites, recently repaired and if new major appliances have been installed. Make sure the A/C system is adequate for the home.

As further insurance of a smooth sale, suggest getting the home inspected. Not only will an inspection help you to price the home and assist with the seller's disclosure, it will save trouble later on. The seller will then have a better basis to understand how their home compares to the market.

If your seller refuses to have an inspection, make sure they clearly understand how important a tool the buyer's inspection is to the buyer and his/her agent. Inspections are designed to reveal the structure behind the fresh paint and new carpet. Should the worst happen - an unfavorable inspection - then the buyer is immediately put in the Captain's seat and you will be the one who will have to hold the rigging through the storm or watch the ship sink.

If after all your preparation, you still receive a bad inspection report, act quickly with a creative, equitable solution.

Your broker or title company may have a form that can serve as an addendum to an existing real estate contract to cover such contigencies as major repairs and other changes to the real estate contract of sale.

Such a form recently saved a sale for Carol Blair. She had a 40-year old home in fair condition listed at $124,000. A contract came in at $123,000, but the buyer went VA. Since the amount was close to asking price, and the home was not in tip-top shape, the seller agreed to pay almost $1,300 in additional closing costs, but insisted that no repairs found during inspection would be paid. When the inspection revealed foundation problems, a large leak and sub floor damage amounting to about $5,000 in repairs, both buyer and seller were shocked and the sale was jeapordized. Blair acted quickly, helping the seller get bids to complete the work needed, and reopened the contract negotiations by asking the buyer to pay their own closing costs if the seller made the extensive repairs.

To help the seller pay for the repairs without coming up with cash or getting an interim loan, the title company agreed to hold the amount of the repairs in escrow to be paid to the contractor at closing. Everyone was happy and the sale proceeded as planned.

The most important advice is to trust your own judgment. When you make your initial tour of a home you are listing, pay attention to what bothers you and don't dismiss it as unimportant. Don't make getting the listing more important than selling the home. It is your job to tell the seller what he/she needs to know to effectively close, not just sell, their home.

Published: October 5, 1999

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