There are a small percentage of available listings that are listed in the MLS as "subject to interior inspection". That means the seller doesn't want to be bothered with showings, because perhaps the property is occupied by a tenant who doesn't yet know the property is for sale, or perhaps the owner lives there and has a health issue, or there is a divorce going on or .. there could be a thousand reasons. Maybe the seller just doesn't want to have to keep his house clean enough for showing all the time! So you must get your estimation of whether or not you want it and how much you think it's worth by driving by, looking at the MLS photos and description (from now or perhaps from previous times the home was sold), aerial views such as google earth or google maps, and looking at the statistics in the area.
When a buyer writes an offer "subject to interior inspection", he is admitting he hasn't seen the inside of the property yet, and he is making his offer just based on the front facade and the comparable sales. Upon agreeing to the fundamentals of the offer, the owner will then offer the buyer an opportunity to see inside, but until then, he doesn't want his family or his tenant bothered with "lookie-loos" who aren't really qualified to buy under acceptable terms. Then, after the viewing, if there were any surprises, the buyer can propose revisions to his offered price or terms (within an agreed-upon time period), and if the seller doesn't agree, he can walk away, usually with his whole deposit refunded.
Before you offer, the listing agent may do his best to describe the interior, and you will see photos and things on the MLS listing, and the rules of "good faith" deem that you should do your best to use the available information to make an offer you think suits the property. What I mean by that is that it would be unethical to make an offer on the house based on its size and location but high for the neighborhood as if it was all fixed up and remodeled if you already have seen a description and pictures that indicate the property is a fixer-upper.
"Why," you may be asking yourself, "would someone make a too-high offer like that?" Because an offer subject to interior inspection is sometimes the only way you can get an appointment to see a property inside (especially on properties currently occupied by the seller's tenant, because he normally doesn't want the tenant to know the property is even for sale before he has the foundations of a good offer on the table, lest the tenant freak out, give notice and vacate). So you don't want to offer $525k on a property whose condition indicates it is worth more like $450k just so you can get an appointment to see it with the plan to reduce your offer to $440k after the showing. You could be in trouble if the tenant leaves and it becomes clear that you never had any intention of honoring the $525k offer, because you could be found responsible for the now-vacant state of the yet-unsold property, and the vacancy could be costing the owner money!
One thing about an offer subject to interior inspection that is true for most offers but doubly true for this type is that you must be prepared to prove, and include paperwork to the effect, that you are qualified for the offer you are making. This means you must include your preapproval letter. (Check this article out regarding 4 levels of loan approval for more details on specifically what I’m talking about here.) And you must provide bank or securities statements or other verifiable proof that you have the cash you are proposing to put as a down payment and closing costs. Without this important documentation of your qualifications, your offer subject to interior inspection is unlikely to be substantial enough to merit disturbing the occupants for a showing. In other words, nobody is going to take it seriously. But if you really do want to buy something, and you really are considering this property you are offering on, then the need to include that information should not preclude you from offering. In the chance that your offer is accepted, you’re going to have to get the ball rolling on your financing right away, and it will be easiest to get that to happen if you have already done the preliminary preparation.
The bottom line on offers subject to interior inspection is that a smart and gutsy buyer should be open to making them. Properties that only hear these kinds of offers usually sell for less because so few buyers are willing to put up with a requirement to be so bold. But we just do the best research we can, make a real offer in good faith, and then adjust our offer if you are surprised by anything you discover when you get your showing. The seller may agree to any adjustment you propose, they may counter-offer, and they may reject your adjustment. As long as all this is done within the Buyer's Contingency Period (usually 17 days from the original offer's acceptance but frequently negotiated to fewer days), you can cancel the transaction. As long as no costs have been incurred on the escrow (such as an appraisal on behalf of your lender, etc.), it is likely you will be entitled to a full refund of your deposit. (Although, I’m not an attorney and each individual offer to purchase has its own minutia of rules, so please don’t take what I’m saying as any kind of guarantee that you will get your deposit back no matter what if you cancel.)
We at the Etheridge Team are experienced in helping you properly evaluate a property for a possible offer subject to interior inspection. And we prepare a complete package to submit with such offers that tips the odds of acceptance in our favor. Give us a call or comment with any questions!
When a buyer writes an offer "subject to interior inspection", he is admitting he hasn't seen the inside of the property yet, and he is making his offer just based on the front facade and the comparable sales. Upon agreeing to the fundamentals of the offer, the owner will then offer the buyer an opportunity to see inside, but until then, he doesn't want his family or his tenant bothered with "lookie-loos" who aren't really qualified to buy under acceptable terms. Then, after the viewing, if there were any surprises, the buyer can propose revisions to his offered price or terms (within an agreed-upon time period), and if the seller doesn't agree, he can walk away, usually with his whole deposit refunded.Before you offer, the listing agent may do his best to describe the interior, and you will see photos and things on the MLS listing, and the rules of "good faith" deem that you should do your best to use the available information to make an offer you think suits the property. What I mean by that is that it would be unethical to make an offer on the house based on its size and location but high for the neighborhood as if it was all fixed up and remodeled if you already have seen a description and pictures that indicate the property is a fixer-upper.
"Why," you may be asking yourself, "would someone make a too-high offer like that?" Because an offer subject to interior inspection is sometimes the only way you can get an appointment to see a property inside (especially on properties currently occupied by the seller's tenant, because he normally doesn't want the tenant to know the property is even for sale before he has the foundations of a good offer on the table, lest the tenant freak out, give notice and vacate). So you don't want to offer $525k on a property whose condition indicates it is worth more like $450k just so you can get an appointment to see it with the plan to reduce your offer to $440k after the showing. You could be in trouble if the tenant leaves and it becomes clear that you never had any intention of honoring the $525k offer, because you could be found responsible for the now-vacant state of the yet-unsold property, and the vacancy could be costing the owner money!
One thing about an offer subject to interior inspection that is true for most offers but doubly true for this type is that you must be prepared to prove, and include paperwork to the effect, that you are qualified for the offer you are making. This means you must include your preapproval letter. (Check this article out regarding 4 levels of loan approval for more details on specifically what I’m talking about here.) And you must provide bank or securities statements or other verifiable proof that you have the cash you are proposing to put as a down payment and closing costs. Without this important documentation of your qualifications, your offer subject to interior inspection is unlikely to be substantial enough to merit disturbing the occupants for a showing. In other words, nobody is going to take it seriously. But if you really do want to buy something, and you really are considering this property you are offering on, then the need to include that information should not preclude you from offering. In the chance that your offer is accepted, you’re going to have to get the ball rolling on your financing right away, and it will be easiest to get that to happen if you have already done the preliminary preparation.
The bottom line on offers subject to interior inspection is that a smart and gutsy buyer should be open to making them. Properties that only hear these kinds of offers usually sell for less because so few buyers are willing to put up with a requirement to be so bold. But we just do the best research we can, make a real offer in good faith, and then adjust our offer if you are surprised by anything you discover when you get your showing. The seller may agree to any adjustment you propose, they may counter-offer, and they may reject your adjustment. As long as all this is done within the Buyer's Contingency Period (usually 17 days from the original offer's acceptance but frequently negotiated to fewer days), you can cancel the transaction. As long as no costs have been incurred on the escrow (such as an appraisal on behalf of your lender, etc.), it is likely you will be entitled to a full refund of your deposit. (Although, I’m not an attorney and each individual offer to purchase has its own minutia of rules, so please don’t take what I’m saying as any kind of guarantee that you will get your deposit back no matter what if you cancel.)
We at the Etheridge Team are experienced in helping you properly evaluate a property for a possible offer subject to interior inspection. And we prepare a complete package to submit with such offers that tips the odds of acceptance in our favor. Give us a call or comment with any questions!
1 comment:
I have finalized a house near hermosa beach and am searching for a good Home Inspector, so please suggest me the name of inspector that is good in his job.
Hermosa Beach Certified Home Inspector
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