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Our agent recommended a 5 day inspection period and a $5,000 earnest money deposit on a $164,000 purchase price.
Does that seem resonable?
I feel like the 5 day period is rushing things for sure. I also feel like there was no need for such a big escrow deposit, supposedly to "show the seller that we are serious".
Also, he said that in our area, most agents are writing contracts on the "as is" form. (this is for a regular sale, not short sale or foreclosure by the way)
He says this means we have the right to inspect and then in the event that costlly items are found, we would then have to "call the sellers bluff" and say we are going to terminate the contract.
What's the deal? The price we agreed on was based on the assumption that there are no major defects with the house. I hate to think the seller would rather lose a contract than repair some issues. I guess we could cancel our contract and come back with a lower price if needed, but this seems a little off to me.
Our agent recommended a 5 day inspection period and a $5,000 earnest money deposit on a $164,000 purchase price.
Does that seem resonable?
I feel like the 5 day period is rushing things for sure. I also feel like there was no need for such a big escrow deposit, supposedly to "show the seller that we are serious".
Also, he said that in our area, most agents are writing contracts on the "as is" form. (this is for a regular sale, not short sale or foreclosure by the way)
He says this means we have the right to inspect and then in the event that costlly items are found, we would then have to "call the sellers bluff" and say we are going to terminate the contract.
What's the deal? The price we agreed on was based on the assumption that there are no major defects with the house. I hate to think the seller would rather lose a contract than repair some issues. I guess we could cancel our contract and come back with a lower price if needed, but this seems a little off to me.
Ten days is the "standard" inspection period here in Tucson. But can be negotiated for any time period, it can be a tool for negotiating. It sounds like you are uncomfortable with your agents "style" of doing business. Writing "as is " offers on non foreclosure/short sale properties, then coming back with repairs to pressure the seller is certainly not a common practice here. Now if you are going in with a real "lowball" offer trying to steal a deal,(nothing wrong with that) then this could entice a seller to accept the lowball offer, could be a good strategy. If you are offering close to market value then that's another story. It's a buyers market, and as a buyer you are offering, short inspection period, high down payment, "As Is" ??? Whats in it for you? Just food for thought.
What does your contract say? Typically you are able to set the inspection window to a maximum amount of days or an amount less that everyone agrees on. 5 days seems short to me; 7-10 days is OK ! Most inspection windows included any and all discovery which means that if your physical inspection suggests that you get another expert out; you would have to do that. I'm with you on the deposit, the smaller the better!
I had a 7 day inspection period and $1000 earnest deposit on an offer of $232,000 (short sale). It was accepted and we closed. The most I ever offered for earnest was $3,000 on a home listed for $300,000, but always the 7 day inspection period.
I had a couple other things going for me to entice them to accept the offer such as large down payment and 30 day close so that may have helped offset the lower earnest. Lower earnest is pretty standard now. We're in a tough market.
Inspection report info was rec'd during the inspection and rec'd written the same day from one guy on a CD and the following day from another guy (2 different homes). These inspections included well and septic. The water analysis was rec'd within about 4 business days because it was sent out to a lab.
Last edited by tryin2buy; 06-24-2010 at 01:33 AM..
Reason: Additional info.
Our agent recommended a 5 day inspection period and a $5,000 earnest money deposit on a $164,000 purchase price.
Does that seem resonable?
I feel like the 5 day period is rushing things for sure. I also feel like there was no need for such a big escrow deposit, supposedly to "show the seller that we are serious".
Also, he said that in our area, most agents are writing contracts on the "as is" form. (this is for a regular sale, not short sale or foreclosure by the way)
He says this means we have the right to inspect and then in the event that costlly items are found, we would then have to "call the sellers bluff" and say we are going to terminate the contract.
What's the deal? The price we agreed on was based on the assumption that there are no major defects with the house. I hate to think the seller would rather lose a contract than repair some issues. I guess we could cancel our contract and come back with a lower price if needed, but this seems a little off to me.
Your Agent is setting you up for aggravation and problems! A 5 day inspection period is a recipe for major issues. It seems that 10 days is an average for most places I have been aware of. But even 10 days can be a problem as they use 10 calendar days. Think of this scenario which happens quite often. You put your offer in with a 10 calendar day option period. The seller then waits until late on a Friday to accept your offer. You can find plenty of Inspectors who are willing to work on a Saturday or Sunday. However if issues are noted requiring estimates and/or more in depth checks then how fast can you get a tradesperson out? How many are willing to come out on a Saturday or Sunday to provide an estimate/check? With the 10 calendar day you potentially lose 4 days (weekend days) to get anything done.
I certainly don't know why Agents don't advise buyers to place a 10 "Business Day" option period (or 14 calendar days if they don't want to define what a business day is) clause in purchase contracts? That would certainly help the buyer and reduce the amount of stress and bad decisions to buy a home with issues they did not get checked. It only adds 2 (maybe 4) additional days to any option period, and ensures the buyer 10 days to get any needed tradespeople out.
With the earnest money deposit you would definitely need to speak with your local people to see what the averages are for amounts. We are in a buyers' market and unless you're buying in a highly sought after area, with very short sales times, then an offer is just as serious as $5000! Keep in mind that if you miss canceling a contract in your option period due to any reason then most likely the seller has the option to keep that $5000, unless your contract states otherwise. You're going to have to rely on the "5 day, $5000" Agent to make sure that your cancellation paperwork is properly filed with the seller if you choose to cancel. With a 5 day option period that will leave an extremely short time to inspect, get estimates and cancel if you so choose.
You're buying the home and should be calling the shots! If you feel comfortable with your Agents advice then follow it. If you don't feel comfortable then call them on it and have them explain everything to you, including their reasoning down to the smallest detail. If the proverbial crap hits the fan then all of your paperwork will point back to you as responsible for making these decisions and you'll have little recourse against anyone else!
Escanlan, you being in TX should know that all our contracts are based on Calendar days and nowhere can we change it to "Business" days. Business days is a very vague term since RE is a 7 day a week profession.
Depending on the home and the buyers situation or schedule the very minimum I put is 8 days. If I anticipate issues on an older home or have an out of town buyer I may go 10-12 days but rarely 14 days is needed.
If there is a major issue that is discovered such as potential foundation problems our "Option Period" can always be extended a few days to get additional inspections or questions answered. If these unforeseen issues arise it is usually in the best interest of both parties to take the time to address by a professional.
First, call a few inspection companies to see how much time is reasonable to go through the house and then issue a report. Then verify with your agent to determine what is meant by the "5 days" -- complete the inspection or make a decision based on a report. If you can make it work, go ahead. If you need more breathing room, then counter on the form that suits you best.
What "most agents" do is not your concern. If the seller specifies as-is, you can counteroffer. If the seller sticks to it, then you must either proceed on that basis or walk away from the house. If you go ahead, the inspection report will place both you and the sellers at another crossroads. Typically, buyers will request that the sellers make any major repairs called for (termite, A/C, roof leak) and excuse the minor items (leaky faucet, torn 'fridge gasket, blocked sprinkler head, etc.)
Keep your eye on the prize. Is it the house or is it the contract?
We have scheduled the inspection for Saturday (the earliest day that the realtor-recommended inspector can come out) That would make Monday our cancellation deadline. Our realtor says the report would be available the same day, but I tend to question that. How could we get the report and review it on Sunday/Monday? Why rush it???
I am also insisting on a septic inspection which we wanted to do after the home inspection but now this is getting messed up due to the Saturday home inspection. Being the crazy, do it yourself buyer that I am, I might have uncovered a major issue already. I called a septic company about doing an inspection and they typed in the property address. Turns out the septic was pumped there back in March and the note says "bad drain field". OMG
So we are in the process of (a) extending our inspection period and (b) checking to see what to so about this mess. The seller checked "no" on the disclosure form related to septic/ pumbing.
We were burned to the tune of $15,000 on our last home purchase by a dishonest seller. If that never happened, I wouldn't have even considered a septic inspection. This time, I am determined not to get myself on the hook. We don't have that kind of money again.
One final area of concern is that we were told there was prior termite damage but it was "taken care of before it could even get started". Hmmm, trust but verify. Now that I see this seller may have lied about the septic system, I am more concerned that he is covering something up about the termites, esp since the part in the contract where it says "wood destroying organisims" says "deleted".
By the way, the inspection period of 5 days was for everything: getting the inspection, getting the report, reviewing the report, and cancelling if needed. Way too short, but I signed because my kids were running around the seller's house and my husband is clueless. UGH
Yes, the amount of earnest money and the short inspection time frame sound unreasonable. Real estate practices differ around the country. In our area it's customary for the buyer to pay around one percent of the purchase price in earnest money, and to get ten calendar days to complete their home inspection and submit their inspection notice. While all terms in a contract are negotiable, your agent should try to establish terms that are favorable to you. I have to ask: Is your agent also representing the seller?
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