[photopress:joe.jpg,full,alignright] One of the FEW rights of a buyer these days, is that they have 3 days to review the “Form 17” Seller Disclosure Form.
These forms are often sitting out at the homes when buyers view property, and often buyers pick them up at every single house. Recently the mls system has made these available online, so we can send them to our buyer clients, before they even see the property. A buyer could conceivably recieve 20 or more Seller Disclosure Forms, before even deciding on a property.
The first page of the Seller Disclosure Statement says in all caps: “You (buyer) have 3 days from the day seller or seller’s agent delivers this disclosure statement to you, to rescind the agreement.”
Some agents are suggesting, that every single buyer who has picked up a Seller Disclosure Form in a house, and now possibly weeks later makes an offer on that same property, has given away their 3 day right to review it! They had it in their hand weeks before they were even interested in making an offer, but the clock started ticking the day they picked one of these forms up while looking at property? Is that even remotely possible?
Please say it ain’t so! Otherwise get those darned things out of those houses and off the online access! What a TRAP! Please say it ain’t so…please. Russ, your thoughts MUCH appreciated. Seems to me that if a buyer has “3 days to rescind the agreement” that there has to in fact BE an agreement at the time of delivery!
Ardell-
I’m no lawyer. but…
My first comment to those listing agents is… PROVE IT!
How do you prove receipt of the Property Disclosure prior to writing an offer?
On the WAR version of the form we use here on the REAL Eastside, we have to get the buyers to sign and date that they have received the form.
I’d guess your buyers are in good shape, but as always, for the real answer…
Ask your attorney.
Thanks Geordie…I don’t have a problem other than the buyers at large who could be duped into this. It does say 3 days from the time the seller or seller’s agent delivers it…technically speaking, the seller and seller’s agent “delivers” it to “you” meaning the buyer when you touch it in the seller’s house!
We need that form changed! Not for my benefit. I can fight my own battles. But for the benefit of the buying public at large.
Talk about seller favored practice and forms…this is insanity.
I DID not and DO not as a rule, let the buyer see it or touch it…but how many out there are that aware?
Ardell
This is an interesting development with respect to Form 17.
You ask whether a buyer, who receives Form 17 before mutual acceptance, may have waived their rescission rights. The short answer is no.
Here’s why. The Disclosure Law states in part
“Within three business days, or as otherwise agreed to, of receipt of the real property transfer disclosure statement, the buyer shall have the right to exercise one of the following two options: (1) Approving and accepting the real property transfer disclosure statement; or (2) rescinding the agreement for the purchase and sale of the property, which decision may be made by the buyer in the buyer’s sole discretion.”
Courts will always try to interpret statutes in order to give effect to all of the language. According to the law, the buyer is supposed to have rescission rights after receipt of Form 17. If a buyer receives the form say, 10 days prior to mutual acceptance, they would not have any rescission rights because the agreement does not exist. Thus, to say that the 3 day right of rescission begins prior to an agreement being in place makes the law nonsensical. That was never the intent when the law was passed.
Having said that, I have long counseled sellers and listing agents to make the form available to the buyer before a purchase and sale agreement is signed. If this is done, it is perfectly reasonable for a seller to demand that the buyer waive their right of rescission as a condition to the seller accepting the buyer’s offer.
Many buyers have used Form 17 as an excuse to get out of deal as opposed to a way to understand the condition of the property. In my mind, if a buyer reviews Form 17 before making an offer, then chooses to make an offer notwithstanding any bad stuff in Form 17, then the buyer should not have a “free” three days to decide if they emotionally want to stay in the deal.
In addition, the new NWMLS inspection contingency allows a buyer to get out of a deal for almost any reason, in the buyer’s sole discretion. It is what we in the legal field call a contract hole that you can drive a MAC truck through.
So in summary, the three day time clock does not start ticking until mutual acceptance. However, smart sellers will provide Form 17 to all prospective buyers before they make offers in order to demand waiver at the time of the offer.
Hope that helps.
Russ
Thanks Russ,
In this case the seller’s agent/listing agent expected me to have the buyer waive their right, even though I represented the buyer, without the seller having asked for that? I can’t see any excuse as the Buyer’s Agent for doing that to my buyer client.
We didn’t cancel, just had some questions that apparently made him nervous. I asked the questions immediately after the agreement was signed, so it wouldn’t affect the buyer’s offer being accepted. Sounds right from the buyer’s side to me.
Do you train Buyer’s Agents too? Shouldn’t companies have two different policies? One on how to handle this if your client is the seller,and a completely opposite training for if your client is the buyer?
“One policy fits all” doesn’t seem to fit for just about anything as I see it, but most agents say “we do it THIS way” and don’t change how they do it to fit whether they are representing the seller in the transaction or the buyer. That can’t be right.
Thanks for response, Russ. One thing I’ve learned in this business is that when the other agent starts yelling at me, he’s usually wrong 🙂
Ardell
My counsel to selling agents is also to get the Form 17 to their buyer prior to execution of the PSA. Why? Because it can have dramatic impact on whether the Buyer wants to buy the property and how much they might offer. It might also create the basis of a specific contingency that is warranted to address a condition identified in the form. I believe the market functions well when you have informed buyers who are making purchase decisions based on all relevant information available at the time of the purchase.
I would not, in any circumstance, refuse to allow the buyer to see an otherwise available Form 17 prior to signing the PSA in order to preserve some right of rescission. I just don’t see the logic in that.
Russ
Market conditions should be permitted to apply. While buyers may have to suck up everything tilted toward the seller in a “Seller’s Market”, seller oriented policies should have flexibility to move in a Buyer’s Market.
One of the problems with “common practice” is that if common practice is carved in stone in a seller’s market, then agents are being seller oriented unwarrantedly, when the market shifts to a buyer’s market. You see a lot of that in California with the seller doing their own termite inspections whether it is a buyer’s market or a seller’s market.
No contingencies in the first 3-5 days might be appropriate in a seller’s market, but clearly unfair to the buyer in a buyer’s market. In order to negotiate properly, a buyer will often remain detached during negotiations, and then dig deeper, and do a more thorough due deligence, within the first 3-5 days they are in contract. Gives them a reasonable time to mull over all of the details once, they know they can get the house.
If you say that the buyer having the Form 17 does not start the clock ticking on the 3 days, then by all means the buyer should have it as early as possible. But if they have to strip out their inspection clause by doing a pre-inspection, then retaining the 3 day right is warranted, unless it is not possible.
As a buyer’s agent, tossing away the 3 days for no good reason, would be against the buyer’s best interest any way you slice it. Better for me to take a peek at it in advance, without having the buyer negate their 3 day right to cancel.
Ardell,
You have an agency obligation to disclose all material facts that you know to a buyer. Form 17 may very well contain material facts. If you “peek” at Form 17 and it contains material facts, and you choose not disclose it to your buyer until after they have signed a PSA, you have violated the agency law. This is not a waivable duty either so the buyer could not sign an agreement that says “don’t tell me”
The only “safe” way to do this is for neither the buyer agent nor the buyer to look at Form 17. Quite frankly, I don’t understand why a buyer would NOT want to look at the form (regardless of market conditions) when determining if they want to make an offer on the property. Does not make any sense to me.
Russ
Russ,
I can clearly peek in there and see if there are NOT any material facts. I think you need to get in the trenches for a few months for it to make sense. Say the Form 17 has ZERO negatives…why waste the 3 day right to cancel?
I can also tell you that almost every single buyer turns to me when signing an offer saying “When is the day when I have absolutely no right to cancel?” I don’t know why they like having a little wiggle room, but I can tell you that they do. That’s for certain.
I think you think like a seller more often than thinking like a buyer. Wouldn’t you be upset if your Buyer’s Agent unnecessarily cancelled all of your rights of rescission, just because it was better for the agents and the seller, if you were totally hogtied from the get go?
One thing I’ve noticed about lawyer clients is that they have no legal fees, and consequently view things somewhat differently than the general public. I’ve seen lawyer clients take more risk saying, “So let them sue me. I have no legal fees and I can bury them in legal fees and win.” Not everyone has that advantage 🙂
Hey Tim, pass the popcorn.
Ardell
Hmmm. Not been in the trenches? Because I don’t shuttle buyers around town to look at houses, my representation of them in deals doesn’t count. I think you might be a bit presumptive there.
You say,
“Wouldn’t you be upset if your Buyer’s Agent unnecessarily cancelled all of your rights of rescission, just because it was better for the agents and the seller, if you were totally hogtied from the get go?”
Tell me Ardell, how can an agent cancel a buyer’s right of rescission? Last I checked, the only person who could do that was the buyer.
Here is what I believe and what I tell my buyer clients (I actually have worked with a couple, you know) regardless of market conditions. Don’t waste your time and the seller’s time on a property that you know won’t work for you. If there is info in Form 17 that would disqualify the property from the buyer’s consideration, know that early and move on. If there is info in Form 17 that requires more investigation, include a specific contingency to address that condition. In any event, provide yourself with a comprehensive inspection contingency that allows you the ability to fully inspect the property after mutual acceptance and determine if it meets your approval.
If this is done, why is it necessary to also have some 3 day right of rescission. The inspection contingency provides the exact same rights and by getting it early, it may save the parties time from ever entering into a deal that was ultimately going to flip.
Russ
>Tell me Ardell, how can an agent cancel a buyer’s right of recission…”
Now that the Form 17 is available online the day the property is listed, you email them the Form 17 before you show the property. You tell them to sign page 5 acknowledging receipt and email or fax it back to you. 3 day starts ticking before they even see the property. You don’t think agents are doing this right now, since they’ve become available online? If they are mad at me for NOT doing that, then that’s proof that many ARE doing that.
Many sales have been done with pre-inspections, so many in fact, that the new NWMLS Form 35 is recognizing the number of sales with no inspection, by having added a “pre-inspected” waiver of all rights. So, the 3 days under the Form 17 is often the only out clause, unless it is a condo with the ReSale Certificate out clause.
If there are 10 offers and the property is HOT, HOT…HOT, well maybe…but when agents have NO offers and are screaming at me (2 last weak) regarding WHAT THE SELLER WANTS…it’s time to take a step back and let them yell at thin air. Screamer number one ended up with no sale and a price reduction. So much for what the seller wants…
Ardell
Many agents do things that have no substance in law because they “think” they are being tricky. Please re-read my initial post. Not sure what isn’t clear but a buyer’s receipt and acknowledgement of Form 17 prior to mutual acceptance DOES NOT start any time clock. The only thing that will cause the buyer to waive their rights are 1) expiration of three days after mutual acceptance or 2) buyer expressly waiving their rights with their signature. Receipt by the buyer is NOT a waiver of rights.
Your logic is flawed. If the property is not highly coveted, than there is no need to have a pre-inspection. The buyer has negotiation leverage and can easily negotiate a 10 day (or more) inspection contingency. You get Form 17 up front, give it to your buyer and THEY determine whether there are any show stoppers. In this scenario, buyer has not practically given up a thing.
Substance over form wins in my book any day.
Russ
“Many agents do things that have no substance in law” = the real estate market most consumers are, unfortunately, subjected to…
As long as the agent says so, and the consumer doesn’t have an attorney to tell them otherwise, or a savvy agent who tells them to go pound sand… In fact, many buyer’s agents will side with the listing agent on that. Why? Because it gets them paid. We both know that.
My logic is NEVER flawed, Russ. Nor is yours. NO ONE KNOWS for sure if the property is “highly coveted” until it is not highly coveted. By then, the buyer loses it if they wait around to find out.
Property comes on market. No offers considered until a week from Thanksgiving. Seller reserves the right to “collect offers”. Seller does NOT have to tell you what the other offers look like, even if he has some.
You really have to start thinking more like an ESL or first time buyer with these advices. Not everyone is a Russ Cofano out there. Very few, actually. Most want the best advices they can get.
Ardell
You are very right about desirability of the property. That said, your point can only have negative impact on buyers in deals that don’t have an inspection contingency. Where there is an inspection contingency, the rescission period for Form 17 and the inspection period would run concurrently and the inspection period is usually longer. Do you at least agree with that?
My guess is that the percentage of deals where the buyer is doing a pre-inspection is extremely low but then again, I am not in the trenches 🙂
Russ
So here’s the deal. In order to not have to push on price, we DID do a preinspection to be more competitive, and reserved the Form 17, 3 day just in case. We did NOT have to push the price over asking, even though we were not the only offer and did get the counter based on NO inspection contingency. We did get into escrow, but the agent got ticked when he realized we still had an out over the long holiday weekend, based on the 3 days not counting Saturday, Sunday OR Monday. This gives us time to ask questions, get answers, and not risk losing the house based on the questions.
Often a listing agent who gets a lot of questions, will counsel the seller to bypass the offer from the buyer with all the questions. So best to lock it up and THEN ask the questions.
Point is Russ, there are no “one size fits all” rules in real estate, and we have to stay on our toes…at least we “in the trenches”. Not that I’d mind being “in the trenches with you, should you ever decide to jump in here 🙂
I think the percentage of deals with no inspections was more significatnt than those with pre-inspections. But a quick, rather than full, 30% cost of normal inspection…ie. “pre-inspection” is a great tool that many should use more often.
Ardell –
I’m curious..in your experience, what is the % of buyers who have paid $100+ for a pre-inspection that didn’t get that house in the end? Of this %, did many repeat the process for their next offer?
Eric
Well Eric, I can tell you absolutely verbatim what the last one said, “Best $100 I ever spent” and yes we did repeat the process for the next one, but made it a full pre-inspection, and that one is in escrow.
I do know a guy, whom I refer to as my “favorite non-client”, who apparently has bought 4 or 5 at full price. End result is, he aked me to represent him in the future 🙂
Key is having the right inspector and understanding that we are not looking for $20 problems, just the big ones. We can always go to full inspection if it gets signed around to get the rest of the info.
As to your specific question “% of buyers who have”…it’s a brave new world, Eric. The best agents who are “good enough” will be making their own rules and not following same old, same old common practice. If it makes sense in your specific situation then DO IT and don’t worry about the percentages and what other agents and their buyers may or may not be doing.
Be one of the top 10% of agents and only do it in the cases where you need to. That would make the total percentage very low…and yet the benefit of doing so great, all the same.
I DO NOT ever, almost never, recommend that a SELLER have a pre-inspection. But a buyer can often get a better price, even with no competing offers, if he drops the contingency by having the property pre-inspected. That doesn’t mean you always do it, especially on occupied homes where it can be an unwarranted intrusion on the owner. Vacants are much better candidates for pre-inspections.
So…9 out of 10 buyers who had a pre-inspection had their offer accepted? It’s a simple question, Ardell. I’m not trying to prove a point, or make a case why it may be a bad idea. I’m just curious. Your comment following ‘brave new world’ makes no sense in the context of my question.
Eric,
Certainly enough for NWMLS to put a little checkbox for the option on the one and only standard inspection form. I have no clue Eric, the “data” is not available as far as I know, to answer that question.
Most of my multiple offer situations were on newer townhomes and condos, where a pre-inspection would in most cases, be a joke. Sometimes I do no inspection, without a pre-inspection, and do the inspection if they get the house. When I do that, I take the personal risk to have the items repaired, if needed. I have a pretty good eye, and rarely have surprises.
There are many ways to approach each sale. I am not advising anyone ever do the same thing every time, pre-inspection included. Pre-inspection has come in handy recently, as I have been in Seattle where homes can be built a very, very long time ago.
On my own home, I did no inspection clause, and did the inspection the day before I signed my loan papers. Every case is different. What’s best for this buyer and this house in these set of circumstances, today. Not “Oh, we ALWAYS do it THIS way.”
It’s like people buying stocks and bonds, everyone has a different way to assess risk and a different risk tolerance. I have had a few clients who just had to buy the wrong house, pay top dollar and have an inspection. Just how they were. Nothing I could do about it. Not my favorite transactions.
Robbie et al are coming to dinner in 20 minutes…we were going to invite Eric, but then we’d have to kill everyone at the end of the evening 🙂 Signing out. Have a good evening everyone.
I wanted to add, no dinner guests were harmed during the making of this post. 😉
Ardell is would have to agree with your first poster Geordie where he said have the listing agent prove it. It would be extremely tough for them too do so. Great post!