I recently represented buyers in a multiple-offer situation. The house was being sold through a corporate relocation company, and before making their offer, my buyers had quite a bit of information about the property. They had read the Seller’s Disclosure completed by the people who had lived in the home and reviewed reports provided as part of the relocation transaction.
Given the competition for the house, they made a calculated decision to waive their own inspection to make their offer more attractive. Before they did, we talked more than once about the additional risk they would be taking on. The relocation company had never lived in the house, the reports provided were not a substitute for inspections performed on the buyers’ behalf, and the relocation addendum contained its own limitations and protections for the relocation company. I advised them not to waive their inspections.
But advising a client and making the decision for them are two different things. My job is to make sure buyers understand the risks and help protect their interests. Ultimately, they decide how much risk they are willing to accept, particularly when they’re competing for a house they really want. My buyers understood the tradeoff, made the more aggressive offer and got the house.
After closing, they discovered that the oven wouldn’t heat and two of the four burners didn’t work.
This isn’t a story about whether the previous owners knew the appliances weren’t working. We don’t know that. Nor is it an argument that buyers should never waive inspections. What makes the situation interesting is the way a relocation transaction can change some of the assumptions buyers ordinarily make about who knows what about a house and who is responsible for that information.
In this particular transaction, the relocation company’s obligation to sell was contingent upon it first becoming the contractual owner of the property. The rider also stated that the company had never lived in the house and had no firsthand knowledge of its condition beyond inspections it had reviewed and information provided by the previous owner. The people who knew the house and the party selling it to my buyers weren’t necessarily the same people.
The buyers received a Seller’s Disclosure completed by the previous owner and occupant, but the relocation company specifically stated that it made no representation about the accuracy or conclusiveness of that disclosure. It made the same disclaimer regarding the inspection reports provided to the buyers.
Those documents can still provide useful information. A disclosure completed by someone who actually lived in the house can tell a buyer quite a bit. The same can be true of previous inspection reports. But there’s a difference between being given information and having the party selling you the house stand behind it.
There’s also a difference between receiving someone else’s inspection reports and commissioning your own. Who ordered the report? What was the inspector asked to examine? How old is it? What wasn’t inspected? Has anything changed since then? In this case, the relocation company didn’t prevent my buyers from investigating further. The rider provided an inspection period and specifically acknowledged that the buyers had been advised to obtain their own inspections. They chose to give up that protection as part of their offer strategy.
The relocation rider also wasn’t simply another disclosure to initial. It contained terms that affected the transaction itself. The property was being sold “as is,” including defects known or unknown to the buyer. Acceptance of the deed at closing constituted the buyer’s acknowledgment that the condition of the property, including its fixtures, equipment and appliances, was acceptable.
Other provisions addressed title and closing. If a lien, encumbrance or other cloud made the title unmarketable, the buyer could terminate, but the relocation company had no obligation under the rider to clear the problem. The rider also provided for a potential charge if a buyer- or lender-caused delay pushed closing more than five calendar days beyond the scheduled date. Most importantly, if the rider conflicted with another provision of the purchase agreement, the rider controlled.
Understanding all of that doesn’t necessarily mean a buyer has much leverage to change it. A buyer can ask for different terms or refuse to sign, but the seller doesn’t have to agree. When several buyers are competing for the same house, insisting that a relocation company change its rider may make an offer less attractive or potentially unacceptable. How much flexibility exists will depend on the particular company and transaction.
So the practical question becomes: Knowing that these are the terms under which this property is being offered, am I still comfortable buying this house? If the answer is yes, the next question is how much additional risk to assume elsewhere in the offer.
That’s where the individual decisions start to matter collectively. If the relocation company isn’t standing behind the previous owner’s disclosure, that matters when deciding whether to waive an inspection. If the reports provided were prepared for someone else and come with disclaimers, that matters when deciding how much reassurance to take from them. If the relocation rider changes provisions of the standard sale contract, that matters when deciding what else you’re willing to concede to win the house.
None of this means a relocation property is a bad purchase, and it isn’t unreasonable for a company that has never occupied a house to limit the representations it makes about that house. It simply means that a relocation sale can allocate risk differently than the ordinary resale transaction it may resemble.
My buyers’ oven and two nonworking burners were relatively minor in the universe of things that can go wrong with a house, but they illustrate why buyers need to look at their offer as a whole. When you’re trying to make an offer more competitive, don’t just ask what protection you’re willing to give up.
Ask how much risk you’ve already agreed to take on.
Karen Moeller
STLKaren.com
Karen.McNeill@STLRE.com
314.678.7866
About the Author:
Karen Moeller is a St. Louis area REALTOR® with MORE, REALTORS® and a regular contributor to St. Louis Real Estate News, helping clients make informed, data-driven decisions.
