Understanding STI

In answer to Craig’s question, when you look for property “on market” at www.SearchingSeattle.com, you will see two types of property.

The ones on which you can make an offer, that is not a “backup” offer, will show “ACTIVE”.

The others, that I have asked you to pay more attention to in my previous entry entitled USING THE INTERNET TO BUY YOUR NEW HOME, will say “OFFER STI”.

Now Craig, being a lawyer, will be the first to understand that STI (Subject To Inspection), is not necessarily about an inspection at all. It is what we might call a very broad escape hatch or an “out” clause. This “out” clause can be used for many, many reasons that have absolutely nothing to do with an inspection at all.

If a buyer makes the offer contingent on an inspection, especially if it is a 35A inspection clause and not a 35B inspection clause, they have a huge timeframe to change their mind based on many things. In fact, in parts of this country, a buyer may tie up five properties all at the same time, and cancel four “based on the inspection” as he only tied them up to have the time to consider which one he really wants to buy.

That is why our mls system internally, calls these “ACTIVE STI” vs. the public sites that call them “OFFER STI”. Sometimes the very best property on market is the one that falls out of STI status and comes back on market.

It is very important to note that you, as a buyer, should ALWAYS have an inspection, even when you do not make that inspection a contingency. The Home Inspection Addendum makes the seller responsible in some way for the results of that inspection. Sometimes you make an offer without a home inspection contingency to get a better price. The property status then goes straight to PENDING and skips the STI phase, but that does not mean you do not do an inspection. It means you are willing to lose your Earnest Money if you are not happy with the inspection.

Sometimes you can save 5% or more off the price by being the one offer without an inspection contingency, and only lose $1,000 if you want to cancel based on the inspection. But, please do not think that not having an inspection contingency means that you do not do an inspection. You still need to close on that property with full knowledge of it’s total strengths and weaknesses.

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ARDELL is a Managing Broker with Better Properties METRO King County. ARDELL was named one of the Most Influential Real Estate Bloggers in the U.S. by Inman News and has 33+ years experience in Real Estate up and down both Coasts, representing both buyers and sellers of homes in Seattle and on The Eastside. email: ardelld@gmail.com cell: 206-910-1000

12 thoughts on “Understanding STI

  1. Ardelle,

    Thanks for the very informative post, I had no idea that a offer could be so loosely contingent on inspection.

    One part I found striking:
    ” In fact, in parts of this country, a buyer may tie up five properties all at the same time, and cancel four “based on the inspection

  2. 1. Dustin
    In all honesty, Dustin, no public site “impresses” me. I have always had it all via the mls for many years, so pieces of misleading info via public sites just frustrates me. That is your site, my site or their site. I am not playing a my site is better “game”. But having to open the detail to see the status is an unnecessary step you should get rid of by putting the status on the front page like most credible sites do.

    Yesterday I looked up a property that says it has been on market for 15 days. In your dreams! That dog has been on the market for years! Every year the seller has put it on market during “high season” and every year he cancels the listing when it doesn’t sell. Then he brings it back at a higher price and a higher price and it doesn’t sell and it doesn’t sell. So all public sites will say “new on market” or 15 days on market, but I hit the property history button in the mls and see it for sale and not sold in 2001, 2002, 2003 all the way to present.

    I can also look and see the seller adding cash out refis every year and know that he can’t sell it at a fair price because he is top heavy. The loans exceed the value at this point. I can also see he got a divorce and paid his wife half the equity based on his half of the inflated value, so now he won’t sell it for less. So much for Active 14 days, like this is a new fresh out the gate, fairly priced listing.

    So no public site “cuts the mustard” for me, given the depth of info I am privy to. I can’t make head nor tails out of Redfin’s info. If I had to rely on that data alone to know a good property, I’d leave the industry. I used these sites when I moved around the country just to get an idea of what to expect from the market in my new place, not to pick a property to purchase.

    If consumers insist on pretending that these public sites are something they are not, they will shoot themselves in the foot.  If we mislead them into thinking that what is ACTIVE, represents the best they can do…shame on us. 


  3. 2. Arjy
    There are two instances that will cause people to tie up a property without intending to close on it. I have seen both over the many years I have been in the real estate industry. This situation occurs when the market is polarized at one extreme or the other.

    In a strong buyers market, when only 3 of any 10 houses for sale will sell at all, you will see buyers offer on 3-5 houses, especially in developments where houses are quite similar. Then they buy the one on which they were able to work the best deal and cancel the others. If this is the norm in the marketplace, the agents know it and use a Proposal to Purchase or 3 day right to cancel “Attorney Review” “out” clause, rather than an inspection clause, to save money on inspection fees.

    It also happens in the hottest of markets, when a buyer has to act so quickly that he couldn’t possibly have had time to think about if he really wants to buy it, or not. If he took the time to think about it, he’d lose the opportunity to bid on it. So we would write it up as soon as it hit the market (or before, if possible) and then decide whether or not it was the right choice for them. We are seeing this now in the condo market on the Eastside.

    The agents for the buyers and the agents for the sellers are totally “tuned in” to what is happening, so the ethics only affects the uninformed, unrepresented consumer. For instance, the seller’s agent may shorten the inspection time to 3-5 days to keep down the “off market” phase to a bare minimum. The buyer’s agent for the buyer who didn’t get there fast enough, writes a “back up” offer, so they can slide into place and beat out other offers the minute the first buyer cancels. We wrote one up like this back in December on a Kirkland Downtown condo at the Portsmith. Popular building.

    It is the buyer agent’s job to protect the buyer’s interest and the seller agent’s job to protect the seller’s interest. We work to the best interest of our clients and keep them informed to keep the “ethics” of it intact. I know when a deal is “solid” or “flakey”. I can keep showing it until close and take back up offers if I represent the seller and feel the need to do that. I can keep looking for other property for a buyer and find an “out” clause to switch over to a better property if need be.

    First priority is my client. Sometimes that is a seller and sometimes that is a buyer. Then being fair to all parties to disclose and keep everyone informed in a timely manner. So far, so good…no complaints and happy clients by and large 🙂 But you have to keep on your toes and keep your wits about you every minute. You can’t slam dunk something into escrow and hope it “sticks” It is NOT a numbers game; peoples lives are affected. It is serious business and frankly there are way too many people in this industry who got in it for the money and don’t truly “get” it.

  4. Thanks Ardell, that was put very nicely! I think I have a slightly better idea of how things work behind the scenes.

    Regarding your response to Dustin, I never realized you guys have access to such an extensive set of information. Being able to realize that a house for sale is by a guy who got a divorce and paid out half his value … that’s pretty useful, yet scary too. Is all that information available publicly? If not, how do you have access to it?? What other informational advantages do agents have over sites like redfin/ zillow?

  5. Arjy,

    Let’s say my buyer client and I have a dozen prospective properties in mind. I do not do all of that research on every one of them. We narrow the field down to the top three or so. Then I delve into the info on a higher level. Exception would be an investor client that is only looking at the numbers and value to do a flip or to hold as an investment property. Then I go straight to the deeper data.

    Often I have to go around the road blocks to info, as Robbie and I discussed back in the Where’s the Beef thread. As the public gets better and better at finding data and info, savvy owners and seller agents get better and better at burying it betting that at least some buyer agents will be too impatient or lazy to go that far. Pretty safe bet most times 🙂

    Some of the info we access is public and some is not. Almost everything is available on a “need to know basis”. In other words if my buyer is interested in buying a certain property, I find out more and tell him more than if he hates the property and is just being curious. Being privy to lots of info comes with a great responsibility not to abuse the privilege.

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