Why when selling/buying a property do the buyer and seller never meet? (home sales)

Factual Questions
61

IANAL, but it’s my understanding that you would get your deposit returned if the defects the inspection found were significant or “material”. However, I’m not sure who makes that determination.

I recall that during some past real estate booms, speculators would swoop in and sign contracts on pretty much every property that came on the market, then use small items in the inspection report to void the contracts on the properties they decided not to acquire, which was a substantial percentage of them. As a result the language in the standard contract was tightened to in order to stop this practice,

62

During our search for a house, my wife and I met a couple owners. The first happened to be at the house when our realtor showed it. He showed us some of the good stuff. We started pointing out stuff that needed repair, rotting deck boards, a weed filled yard and dripping faucet. There were many other issues. He said we were being too picky, we would never find a house in perfect condition. We had our realtor offer $20,000 under asking. Of course, didn’t hear anything back.

The next was an older couple that were at their open house. They gave us the grand tour and said we were the type of people that they wanted to buy the house. We offered asking, a week later their realtor called us and said if we could go $7500 over asking the house would be ours. The asking price was already over our budget so we declined. About a year later we ran into the couple at a farmer’s market. They said they wanted to accept our offer but never saw it so they accepted one just over asking. We told them we made an offer but the realtor wanted more. They said they told their realtor to accept our offer. Found out later their realtor never showed them our offer, he thought they could do better.

63

I suppose it would depend on the contract, but you shouldn’t. That’s the point of the contingency.

I’ve only every bought real estate in Virginia, but the way it worked was that the buyer had X days after the inspection to demand certain repairs/concessions; the parties had Y days to negotiate; and then (assuming no agreement), the buyer had Z days to void the contract.

The buyer only lost the deposit if they breached the contract and the point of the contingency was that if the contract fell through because of the inspection, it wasn’t a breach (same with financing contingencies, etc.).

64

As I understand Ontario (and many other places in North America) have gone to a computerized land registry system. This makes poring through a pile of old books going back a century an obsolete exercise.

As part of the registry, the legislation enabling it basically made it the final word on who has title. In Ontario they cleverly forgot to make an exception for fraud, until a number of cases like to couple who found someone had registered a fraudulent mortgage on their property and disappeared with the money. They had no idea until the bank started foreclosing; then the court ruled that they owed the mortgage amount anyway since the law said the registry was correct no matter what. The law has been since corrected. (Plus, when I sold and then bought my new house, I had to provide proof of identity to the lawyers - IIRC the lawyers would be on the hook for the costs of the fraud if they didn’t check)

I suppose since everyone takes the registry’s word (or data) for it, then a survey is irrelevant. I haven’t heard of anyone running across a typo in the registry data - I can imagine a reversed digit perhaps making a windfall extra few feet of land for some lucky homeowner. Can’t hurt to verify.

I know when I sold, my lawyer was happy to take and pass on the copy of my land survey that I had received when I bought my house.

65

I’m with you on the need for inspections. My daughter was interested in a house. She got a 70 page inspection report. Water had gotten everywhere in this place. She passed, of course. She sent me the report. It was amazing.
But in the current market, if you reasonably insist on an inspection you’re going to lose out to the seven other bidders who won’t.

66

When I bought my current house (and yes, I’m in Ontario) it ended up being a private deal because the seller was a friend of a friend, so we just used lawyers, but no real estate agents. My lawyer had a funny story (when I was providing my proof of identity) about a previous sale that she had handled. The buyers were a a couple, the wife was dressed in casual business attire but the husband was scruffy with a worn leather jacket, beat-up jeans an a tee-shirt. When she asked them for their proof of identity, the husband pulled out a bulging wallet and stared sorting through a stack of drivers licenses. Turns out he was an undercover cop on assignment and had a stack of fake ID’s as part of his cover.

As for those poor folks who got caught by the badly worded legislation, I hope they were able to appeal to a higher court. Isn’t there something in the Canadian Charter that protects us against unreasonable harm by our government?

67

There’s so much wrong information in this thread that I don’t know where to begin, and quoting specific posts would be a real hassle. So I’m just going to define some terms and hope that the appropriate posters connect this with the posts.

Inspection vs. Appraisal vs. Survey

An inspection involves examining the structure with the intention of revealing defects that might affect the price or desirability. A good inspector will not only uncover and point out what a buyer or seller might not know, since he typically knows more about stuff than most buyers. If his expertise is insufficient, he may recommend further inspections by more qualified people. The bank doesn’t much care about this detail, and rarely orders an inspection.

An inspection may or may not include testing. Refer to the listing contract for this.

An appraisal is an attempt to place a reasonable sale value on a property, nothing more. All banks will order one before finalizing a loan since it is their money that is being risked, and they want to minimize potential loss.

An appraiser will compare similar properties that have recently sold in order to establish a value. An inspector will not.

A survey is not an inspection nor an appraisal. It usually refers to a map of the property with regards to the boundaries and location of objects (houses, wells, fences, etc.) Surveys are highly recommended in rural areas or where there is likely to be a property line dispute. City properties are rarely surveyed.

Procuring Cause

In the case of the agent who put together MLS listings in a flyer, then presented these to a prospective buyer, he was probably the Procuring Cause, and is entitled to some of the commission (assuming he is properly licensed and can prove he introduced the buyer to the property via the brochure or other means).

If I sent a prospect some information about a property and he called his cousin to act as an agent for him, that would be fine with me, but if I am the procuring cause, I deserve to be compensated as the “primary” reason the property came under interest or negotiation. His cousin might end up serving for no commission, or trying to get additional commission external to the MLS.

69

Some of those definitions are variable- apparently, what we in the US call an inspection is called a survey in other places. And while an appraisal is meant to establish the reasonable sale value of a house , the inspection might have an effect on it, too. The last time my house was appraised it was literally a drive-by ( it was a refinancing) - I’m pretty sure that even if a house was appraised at $200K based on comparable sales the actual reasonable sale price drops if the inspection shows it needs $20K to replace the heating system.

What does this mean - I assume you are not talking about a flyer left in my front door or in a place where free “newspapers” are distributed. Do you give printed flyers to people who come to your office?

70

I can’t speak about Canadian law, only USA, and specifically only Wisconsin, since states differ.

Please note that a survey is not a title search. While the surveyor will access public records about the property boundaries, and show any obvious errors (gaps, overlapping land, etc.), he will not verify that the title is good. That is the job of title companies. In order to insure your title, the title company must feel confident that it is clean; that there are no pending disputes and no active liens or claims against the property. If they cannot or will not, while it is perfectly legal for a buyer to purchase it anyway, no bank will lend on a property that has a clouded title.

71

Remember that I said the agent may have to prove he is the procuring cause if there is a dispute. This is often difficult to do, and it is a large gray area. Good agents will keep logs of phone calls and records of emails and text messages, which may be the only proof available. There is no hard & fast rule that I am the procuring cause for someone who merely got a brochure from me (yes, we hand out such at our office – why wouldn’t we?). A brochure alone probably wouldn’t be sufficient for procuring cause, but if I followed that up with a showing or had a request for more info, those combined might be sufficient.

72

Sure, terms may vary from place to place.

Just because an inspection shows a major defect, the price doesn’t automatically drop. A buyer makes an offer based on what he thinks the property is worth. If an inspection comes in that suggests otherwise, he will usually ask for a price reduction (or other compensation). In properly written contracts, if there is a significant defect, the buyer can (1) walk away and get his deposit back, (2) accept the property as offered anyway, or (3) both parties can modify the offer.

If a bank is involved, they can have a major say in this process. I have seen may offers where an appraisal came in under the offering price, and the bank wouldn’t lend what was originally expected. Typically the seller will accept a price reduction or the buyer will offer to pay a higher down payment to reduce the bank’s financial exposure. It’s all part of negotiation.

In today’s market, cash offers are more desired than ever, and you can see why. If a seller gets multiple offers on the same property, he will probably give cash offers higher weight – they will close sooner and have fewer unforeseen twists & turns. For this reason, sometimes buyers will borrow on property they already own, then offer cash for the one they want to buy. From the seller’s perspective, this is equivalent to a cash offer.

73

What happens with contents in the USA?

In the UK, a seller may include some of the contents in the sale. or may offer them to the buyer after the sale is agreed. “Contents” in this context can be anything in the home that is not a fixture or fitting:

Fixtures and fittings include wall-mounted cabinets, cookers, and plumbed-in washing machines. It would not include furniture or carpets for example. Any buyer is well advised to establish exactly what is and is not included.

Because Stamp Duty Land Tax is proportional to the sale price and paid by the buyer, there may be a good reason to reduce the sale price of the house and deal with the contents separately. A typical £300k house would incur a tax of £5k. Reduce the purchase price to £29500 and the tax is £500 less.

74

And please note that title insurance is also not a title search. The reason given by the real estate agent at the time for not fussing about having an up to date, certified survey, was that if I bought title insurance, I would be indemnified against, amongst other things, errors in surveys and public records.

75

Certainly in my very hot market. And it can work. Well, it worked on me and my co-owner when we were selling our place and we had three identical offers on the table we were trying to parse after a short bidding war. One offer was shakier on financing, so got eliminated that way. The other two came down to two of those gushing letters, absolutely the kind of thing I would not ever want to do myself :wink:. One was fine and was from very well-heeled buyers that would have no problem getting another place. The other was much better, from folks that reminded us of our own situation when we buying and had tighter economic constraints. The latter got the place.

76

Normally, houses are sold without contents. The stove and any carpets that are tacked to the ground usually stay. Other major appliances (fridge, washing machine) are negotiable. I guess the dishwasher usually stays if it’s there.

Furniture and unattached rugs are expected to be cleared out. Our seller asked us for permission to leave a unit in the upstairs bedroom that they had put together in the room, and couldn’t remove.

77

I know a gay couple who think they lost a house to a couple who offered less because the other couple was straight. Due to those letters.

78

Don’t lenders demand an inspection? It’s been a while but I am 98% certain mine did.

Of course, not every buyer is getting a loan and can pay in cash on the spot.

79

Very wise advice (to itemize what is and is not included in the sale). It avoids arguments later. USA-wise, in general (but itemization is still a good idea) anything that is attached to the structure, and which by removing it, would cause harm, is called a fixture (counter top, fireplace, door, carpet) and included. Anything detached or easily removable (chair, table) is not.

One thing to consider, however. Excessive amounts of non-real estate as part of a real estate purchase are often frowned upon by banks. Better to sell things like that on a bill of sale, not wrapped into a mortgage. Another reason why a cash offer is simpler.

80

In my experience, lenders don’t insist on an inspection, but they do require an appraisal.

Unless the buyer is an experienced contractor, an inspection is a good idea for his own protection.

81

Title insurance is not a title search, for sure, but the insurance company promises to protect you against future claims which could include loss of the entire property. So they do a serious title search before writing the policy. Exactly as it says in the brochure you quoted, page 2:

https://www.investopedia.com/terms/t/title_insurance.asp

It is unlikely that a title insurance company would issue a policy if there was any doubt about property boundaries and encroachments, so they usually insist on a land survey, at least in rural locales.