It isn’t often that I get to Locust Grove in my real estate travels. In 2020, I was in Locust Grove’s community of Somerset to help sellers list a single family home and was stunned that the frenzied buyer demand was just as crazed that far out. I am sure 2021 made it no better since it was nuts all around since January. When repeat clients contacted me to get out of their rental and back into home ownership on a short time line, I was concerned we may not be able to find something as quickly as they needed it.
After one trip out looking for properties, hopes were not high. They felt defeated that they would have to offer above list price on homes they didn’t even really like that much just to get under contract, but then a ray of hope appeared. The buyers found a property just north of their price range in Locust Grove’s Somerset that had been on the market for one month. Hmm. Nothing is on the market for a month in a seller’s market unless it is overpriced.
We drove out to take a look and they loved it. It was exactly what they wanted and exactly where they wanted it. The big issue to overcome was financing. The loan type the buyers had qualified with had a loan limit lower than what they wanted to offer. It was back to the drawing board with their lender who spent ninety minutes sorting out options and making the deal possible. The lender buyers use matters.
With that sorted, it was time to get an offer below list price accepted. Not only did we accomplish that, we also got a home inspection contingency accepted. Of course, it was with the right to void only, but it was still an opportunity to walk through the home with a inspector and investigate issues.
The inspection revealed a potential issue with the HVAC that could cause a fire. We brought it to the listing agent’s attention and it was solved within days. That’s a seller who wants their buyers to be happy and mitigate their own risk of loss prior to closing.
Today (July 26, 2021) my buyers were thrilled to sign on the dotted line for the home they will love for years to come. All made possible by a fantastic lender and agent to agent communication. After thirty days on the market, the home had landed two offers at the same time. My buyer-clients were chosen because the agent respected me and knew the deal would go to closing. All that to get a gorgeous single family home priced at $425,000 for $400,000. Just goes to show the only mistake a seller can make in a seller’s market is to overprice their home.
When buying a home, there are about four typical contingencies written into offers to protect buyers in the Northern Virginia market:
Home Inspection Contingency
Radon Inspection Contingency
In the intense seller’s market that the Northern Virginia suburbs are experiencing, multiple offers have lead to buyers having to rethink how many contingencies they actually need when writing an offer. A contingency is an option for the buyer to void a contract and get their earnest money back. The home inspection contingency is what we will focus on in this post.
The Residential Sales Contract, written by the Northern Virginia Association of REALTORS® (NVAR) and widely accepted as the go-to contract in even our farthest reaching suburbs, has two options for buyers wishing to have a home inspection contingency. They are:
Home Inspection with Option to Negotiate Repairs or Void or
Home Inspection with Option to Void Only
Reading those two options, the difference seems apparent. In the first option, you have the right to ask the seller for repairs. Doesn’t mean the seller will say yes to your repair requests, but you have the contractual right to ask. There is zero obligation for a seller to do anything based on your repair request. In fact, if everything was left as boiler plate in the NVAR Residential Sales Contract, the only thing a seller would have to fix would be any HOA violations noted on their resale inspection and making sure their smoke detectors were in working order.
When a buyer chooses the second option, they are letting the seller know in advance that they have no intention of nickel-and-diming then over piddly repairs. Having the option to void protects a buyer from having to move forward with the purchase of home with an overwhelming amount of repairs that they feel need to be done. This is an option that I see getting used a lot more often when there are multiple offer situations.
While that second option seems like a good compromise for buyers in a seller’s market, believe it or not, things are getting so competitive that I’m beginning to see buyers making offers without even having a home inspection!
The inevitable question comes up, “What if I have a home inspection with the right to void only and there are items that come up that, if fixed by the seller, I would still buy the house?” That scenario just happened to a buyer of mine. There was discovery of a potential water issue in the basement and improper support of a deck. Because my buyer was ready to void the contract over them, I made a friendly call to the listing agent in advance of sending our Notice to Void and the inspection report itself. Once a seller knows of latent defects with their home, they are obligated to disclose them. The listing agent knew that and agreed to extend our right to void period to allow the seller time to investigate the cost of fixing those items. Within a week, there was an agreement to pay a contractor from seller funds at closing to address the problems and our deal continued to move forward to settlement.
Asking for repairs in a right to void only inspections is not something that usually works out because of other issues, however, like the age of systems. Say the roof is original on a fifteen or twenty year old home and likely to need replacing in the next five years. That doesn’t mean there is anything wrong with it. And there are plenty of buyers who will gladly take on older roofs, HVAC systems and so forth just to get under contract. In situations with aging components, you can ask a seller to fix them, but you are likely to be told no and forced to move forward or void.
One day our market will normalize and home inspection contingencies with the right to ask for repairs will become the norm again. For now, any buyer in a multiple offer situation should consider making their offer stronger by going with a right to void only home inspection.