Part 1 of a 3-part series: Buyer’s offers. In today’s competitive market, buyers scramble to make their offer the most appealing one in the seller’s pile. But sometimes they may agree to concessions that do them more harm than good.
ORLANDO, Fla. – Part 1 of a 3-part series: Buyer’s offers. The series focuses on potential pitfalls in relation to buyers’ attempts to make their offers “more appealing” in today’s hot market.
Many buyers are tempted to – and often do – remove or change certain aspects of their offer to make it more appealing, in hopes the seller will accept their offer. However, it’s important to understand that these buyers’ changes may not always be the best idea and could actually lead to potential problems.
Challenge 1: Inspections
Here’s the first example of a trouble spot that’s generating calls to Florida Realtors® Legal Hotline. For the purposes of this series of articles, we’ll consider the language from the Florida Realtors/Florida Bar “AS-IS” Residential Contract for Sale and Purchase (“FR/Bar Contract”).
In the FR/Bar Contract, the Inspection Period grants buyers the ability to terminate in their sole discretion within the Inspection Period. In today’s competitive market, many buyers are either reducing the amount of time for the Inspection Period or waiving it completely, i.e. putting zero days for the time for inspection.
If the buyers offer a shorter time-period than the default 15-days in the contract, they’re limiting their ability to terminate for any reason and retain their deposit.
Buyers should make sure they can complete any inspections they want done and provide notice of cancellation within their limited inspection period. This can be difficult. If an issue comes up after the Inspection Period ends – one not covered by another section of the contract – the buyers have lost their right to terminate under this clause. The buyers could be in default should they choose to cancel after the Inspection Period and, more importantly, face losing their deposit.
As such, buyers should understand the nuances and risks to reducing their time for inspection. Similarly, buyers who waive their Inspection Period entirely also risk being in breach of contract and losing their deposit should an issue arise regarding the property that results in the buyers backing away.
While it’s legally acceptable to do either of the above, the practical side of things makes it more complicated. It may be a situation of “Even if you can, should you?” when it comes to buyers putting their offers together with shorter or non-existent inspection periods.
If agents have buyers who want to reduce or entirely eliminate their inspection period, they should caution them about the possibility of losing their deposit, or worse, facing a potential lawsuit if they default on the sales contract.
Next month – Challenge 2: Appraisals
Laura Gomes is a Florida Realtors attorney
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