In the very competitive Atlanta area market, some buyers are resorting to whatever means necessary to get homes under contract. The most frequent move is to simply try and outbid the competition; appeal to the seller’s bottom line and justify over paying by talking about the low rates and tight market. Others are getting creative with contracts, waiving certain contingencies and trying to appeal to sellers in other ways. The due diligence period, the most important safety net the home buyer has, is being modified and in some cases, eliminated. This is especially risky and many buyers don’t fully understand the pit falls they are exposed to. Below are three due diligence contract mistakes that can wreck home buyers. For additional clarity and understanding, videos on these topics featuring Seth Weissman are included. Mr. Weissman is General Counsel to the GA Realtors and an authority on GA real estate law.
No Due Diligence but Right Request Repair of Defects
The due diligence period in GA is effectively an option period for home buyers; a “free look” window. To compete in this tight market, some agents recommend the buyer waive due diligence but reserve the right to request repairs of defects found during the home inspection. The logic being that this makes the offer more appealing than others. It may, but this presents significant risk to the buyer. The buyers may change their mind about the home, may discover concerns about the home or area, or something personal might come up. What happens if the “perfect” home suddenly appears and the buyers want out? This approach removes all of those options for the buyer.
Instead, this approach is to have the home inspected and have the seller agree to repair defects found. Well, what constitutes a “defect”? Is a poorly maintained HVAC system or one nearing the end of its useful life one? Are blown window seals defects? How much peeling paint constitutes a defect? Rotted wood? Is cracked tile in the master bath a defect? What about that wet area in the yard or failing retaining wall? Cracked driveway and walks? Why would a buyer or agent want to go through this? It’s much safer and in the buyer’s best interest to keep all options on the table. If something is important to the buyer, negotiate it out but retain the option to walk away if all else fails.
Duty of a Buyer to Inspect a Property
It cannot be stated to home buyers enough, GA is a “caveat emptor - buyer beware” state. The buyer is expected to complete all inspections and research before the end of due diligence and closing the home. If a buyer wants to sue a seller for something found subsequent to closing, they must demonstrate that they could not have discovered the issue through a careful inspection of the property. In other words, if it’s an issue that could have been discovered through careful research, courts are unlikely to consider it seller fraud. This may mean that buyers or inspectors need to move boxes, carpets and other easily moved things and thoroughly inspect areas that may not be readily visible. Shallow crawlspaces, tight attics and those areas that some inspectors pass over remain the buyer’s responsibility to inspect.
It's incumbent on the agents, especially the buyer's agent, to ensure that the home is open for inspection and that it's thoroughly completed. Buyers aren't likely to know what to check; each home is different and that buyer's agent needs to be the expert counselor and effectively lead the buyer through the process. If something is missed, it may be very difficult to demonstrate fraud in GA.
Time Lines, Repairs & Due Diligence
The clock begins ticking once a contract becomes binding; failure to pay attention and plan accordingly can have disastrous implications for a home buyer. Unfortunately some buyers and agents take a lackadaisical approach to these time lines and chaos can reign. The most common part of the due diligence period are inspections; home inspections, radon and often other things like surveys, pools or structural. In GA, all of these are expected to be completed within the due diligence, but what happens if time is about out and issue remain unresolved? The best outcome is for all parties agree to extend due diligence and reset the clock. If nothing was agreed to and the clock runs out, the buyer accepts the home as-is. Or, the buyer and agent may terminate the agreement just prior to the end of due diligence and walk away. Too many times buyers and agents fail to properly plan and watch the clock; many agents use an end of due diligence date without a specific time; the default is then 11:59PM. Who wants to be negotiating that late?
In some greater Atlanta markets, inventory is down 70% year over year, that is unheard of and hard to fully grasp. However, a competitive real estate market isn't an excuse to be careless or take risks with offers. To the contrary, markets like this require strict discipline NOT to be reckless. A real estate contract is a legal, binding instrument; there are potentially severe financial land mines if this isn't treated like the major event that it is. This is not a 22 minute TV show, mistakes here will hurt. It's imperative to work with professionals, understand and review the data and contracts and most of all, fully understand the home buying process.
Seth Weissman is a fantastic source of information. He has many videos on various topics and is a recognized expert in the GA real estate field.
The Hank Miller Team puts 30+ years of full time sales & appraisal experience to work for you. Act with complete confidence & make sound, decisive real estate decisions. 678-428-8276 and firstname.lastname@example.org Posted by Hank Miller on