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Question

I just put in an offer on a duplex yesterday which the listing agent said the seller agreed to, but did not sign the contract. Initially they would not allow any buyers to do a walk through without a signed contract in place. Our offer was to put 10K in escrow as a down payment and they would allow 10 days for an initial walk through and then an inspection/appraisal before finalizing.

Today, the selling agent countered with a 1 day inspection period, at which point I would have to make a decision and would not be allowed access back into the house. This may not necessarily be a deal breaker, but keep in mind - I still haven't even seen the inside of the house outside of pictures on the listing. The listing agent is also the property manager and his reasoning was simply that he "doesn't want to disturb the tenants", but the fact he's insisting we pay for the inspection up front and can only access the property one day makes me feel uneasy.

I may be overthinking this, but I was hoping to get some feedback from the community - would you be concerned?

Patricia Steiner · Answer

This is just wrong. One day is not an acceptable inspection period ever - tenant or no tenant, pandemic or not. That is not in keeping with our industry standards or market. And, without a signed contract by the seller, you have a whole lot of nothing. Please counter back with at least a five day inspection period so you have adequate time to schedule an inspector, get the report back, analyze possible rehab cost, and decide whether it's a good deal or not. Keep this in mind: it's one thing to do all the inspections in one day...that's convenient for you, the tenant, and seller. But an "inspection period" is something entirely different as the physical inspection is just part of what occurs during that time - and that is your time to bail with escrow returned if anything does not meet with your satisfaction.That PM needs to know that you're not a tenant he/she gets to manage but an investor making a business decision; don't let the PM "manage" you. The tenant will ultimately be YOUR tenant should you proceed and the inspection period is the time to review the lease, rent roll, possibly meet the tenant (I ask if they can be present when I visit "their home" for the inspection), and see how the tenant respects the property.It is a seller's market in Greater Tampa Bay - but buyers aren't stupid. Stand firm. Point out that you've played their game through the offer phase but you're not giving up your right to inspect the property and have adequate time to do your due diligence. You're making a business decision.Hope this helps...

Mike McCarthy · Answer

@Marten M. I totally get disrupting tenants and wanting a contract in place first to weed out the lookers. But that shouldn’t let you from your due diligence. I would NOT put 10K down before seeing it, and I would not rush an inspection. Maybe $10K the day after seeing it, sure. Then I would still want a 5-10 day inspection period. Ask him if he’d invest $$$ in a house he hasn’t gotten a chance to inspect?

Nick C. · Answer

Is this an unbelievably good deal? Have you at least seen pictures or a video of the inside? There's a lot that could be going on; most likely the agent is just lazy, or trying to weed out window shoppers, or could be trying to pressure you into the deal, but there's also a chance it's malicious, and they could be hoping you miss something. I would take the risk if all you'd be out is the inspection fee if it was a really good deal. This also depends on your experience level, I would not suggest making a decision that quick unless you are pretty well versed on the perils of what could go wrong if something comes to light later. And there's a lot that could go wrong.These tactics are pretty common in the wholesale world where high pressure and a 0 day inspection period are the norm. But this property has a listing agent, I'm assuming it's on the open market, generally those transactions are more buyer friendly.

Marten M. · Answer

@Patricia Steiner yes I got clarification on the actual "inspection period", which is still at 10 days. That's a good idea to specifically ask if the tenants can be present as it gives an opportunity for us to converse with them and ask questions. However, this PM is wanting the exact opposite of that, hence allowing us only 1 day to access the property. At which time I'm assuming the tenants will not be there.I'm finding it more difficult to actually receive accurate and current rent rolls/lease agreements from the seller's agent/PM than I would expect. Both tenants are on Section 8 (I verified with SPHA to confirm) in this case. The PM sent me a current lease for one of the tenants which expires in a few months. Then he sent me a lease for the second tenant which expired in 2018. He's apparently been on month to month since then and they didn't realize it. It was my impression that Section 8 tenants had to be on a yearly lease so that raises even more questions. It seems more like they're lazy and/or unorganized more than anything, but it's a little frustrating.

Marten M. · Answer

@Mike McCarthy yes I slightly misunderstood what their counteroffer actually was. I do think you're right - he is trying to weed out the tire kickers. I'm considering agreeing to their terms and paying the $500 for the inspection - I can still back out of the deal and will only be out the cost of the inspection.. not the end of the world but would be nice to at least put eyes on it in person before coughing up the money.

Marten M. · Answer

@Nick C. I wouldn't call it unbelievably good, but it's a good deal on paper (at least with the numbers I ran). I have seen pictures but I don't know how dated they are. I do agree there's a good chance the reason he's doing it this way is sheer laziness, but I also think he's trying to add a little pressure by forcing me to pay the inspection fee prior to any initial walkthrough. I would feel more comfortable if I had more experience and knowledge, but this is actually my first deal. I've ran the numbers and it should be a cash flowing property, but obviously there's a little uncertainty. As you said, worst case scenario I'd only be out $500 for the inspection so it's not the end of the world.

Marten M. · Answer

Thanks everybody for the quick and helpful responses. Let me clarify on the situation a little bit as my agent just sent me the seller's signed counteroffer and I slightly misunderstood what he explained to me: The seller's counteroffer was simply that the initial walkthrough and inspection should be completed on the same day. On day 1 of the contract I have to put $5,000 into escrow as a down payment. I still have 10 days to make a decision before completely backing out - at which point my $5,000 in escrow will be returned. Essentially what I believe he's trying to do is make sure I have actual skin in the game in the form of a $500 inspection before I'm granted access to the property.

Shera Gregory · Answer

Are there special arrangements for viewing the property due to COVID-19? Under "normal" circumstances this would seem very odd to me. But if it's 100% due to limitations related to the pandemic it MIGHT be OK. However, a one day inspection period is quite strange as well. So yes, I would certainly be concerned. Do you have an agent on your side of the deal?