I have decided to take my property off the market. No contracts signed yet. Am I liable for buyer's cost of inspections and tests?

Asked by Connmom, 76065 Wed May 25, 2011

I signed a contract with the realtor that calls for me to reimburse them for marketing expenses if I should decide not to sell my property. However, I don't know what other expenses I might be incurring by taking it off market. One buyer has performed environmental tests and had a building inspection inspection. No sales agreement has been signed yet.

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11
Michael Emery, , Minneapolis, MN
Wed May 25, 2011
BEST ANSWER
It's highly unusual for a potential buyer to perform environmental tests and a building inspection without being under contract with the seller. So no, you are not obligated to pay their inspection costs.

Only if you were under contract with the buyer and you arbitrarily decided not to sell would you potentially have to pay their inspection costs (to prevent a possible lawsuit for breach of contract).

Talk to your real estate agent about your concerns about selling your home. You might not want to lose the opportunity to sell, especially if the buyer that has performed the inspections is seriously interested in buying your home.
0 votes
Marita Topmi…, Agent, Indianapolis, IN
Thu May 26, 2011
Common,

Please speak with a real estate attorney immediately. He / she will give you your
possible remedies and make suggestions. It is cheap compared to walking
through this blindfolded. Keep calling today until you get a live attorney. You
have a lot of issues tied together.

Per the details you gave, your listing agent is not a concern. Your buyer is however.
You accepted, as I read your comments, his offer.

Good Luck with Everything,

Marita Topmiller
Prudential Indiana Realty Group
marita@maritatopmiller.com
1 vote
Marita Topmi…, Agent, Indianapolis, IN
Thu May 26, 2011
In Indiana, a Mutual Release is signed by all parties. Get that Mutual Release
signed before you agree in writing to anything else. In fact, get that signed
before you make any more offers to repay anyone's expenses. You
should also get copies of all receipts with any request for reimbursement.
Gerard was right - if there was no signed acceptance yet, so the buyers went out
of pocket of their own accord - did they even have an agent consulting?

Glad you got to your lawyer today.

Congratulations! It looks like you are well on your way to resolving these issues.

Marita
0 votes
Joan Braunsc…, , Morris County, NJ
Thu May 26, 2011
Connmom, thank you so much for coming back and sharing that information. I love it when the person who asks the question comes back and participates in the discussion that often ensues.

Messy situation for sure although it sounds like things will work out, hopefully with not too much cost to you.

I understand the agent's frustration but we know its a risk of the job and you can always make it clear to her, if you are truly happy with her performance and demeanor, that you will refer her when you can. That should more than help to make up the inconvenience of a withdrawn listing.

I also feel for the buyers but if they chose to spend the money without a signed contract, that was a risk they were willing to take and frankly, they should be happy with your offer of splitting the cost.

It sounds as if you've been through the wringer. I wish you peace.
0 votes
Connmom, , 76065
Thu May 26, 2011
To my surprise, the listing broker calmed down today and told me that she would not enforce the reimbursement clause in the contract. I believe she knew she had gotten emotional and over reacted. However, if for some reason she changes her mind, I am going to ask for copies of their invoices, thanks to the advice given to me below.

I am waitng to hear back from the prospective buyer's attorney as to whether they accept my offer to pay them $1500 toward the cost of their testing and inspections. I think that is fair considering they thought they would be signing a contract with me very soon. The wife mentioned in her email to my broker that they had also incurred legal and banking costs, as well as the value of their time spent looking at the property! However, they are going to be generous and not ask me to reimburse them for those things.

Puh-leez. Real Estate in Fairfield County, CT is a universe unto itself.
0 votes
Gerard Carney, Agent, Spring Hill, FL
Thu May 26, 2011
No sales agreement, well then they did testing at their own risk. Inspection is a buyers cost and risk, if they find things wrong and that was the reason for paying for the inspection. to Cover their but so to speak. To have done an inspection and not in contract is their problem and their decision! You may be obligated to pay the Realtor for advertising expenses or MLS cost, but now here is where you pull out the Listing contract and look towards the back of the contract in particular, but the whole contract over all it is only a few pages, read it well, it will be in an area where there will be a fill in the amount or percentage of what you may be obligated to pay, then if there is advertising fees they can ask for, ask them to show you the actual advertising receipts,
0 votes
Connmom, , 76065
Thu May 26, 2011
What ended up happening: I consulted with my attorney and found that legal, I am not responsible for the expenses incurred because we had not signed the sales agreement yet. However, as a gesture of good faith because these people had spent money on something that is now of no value to them, I offered to reimburse 50% of their expenses. It's a good thing I didn't offer to reimburse 100%, because they said they spent a total of $3,470 on two firms that did the environmental testing and building inspection. I had the building inspected less than two years ago and paid $1,100 to a highly regarded inspection firm,then a couple hundred dollars for radon and lead testing. They apparently went with the Cadillac of inspection companies.

I have offered them $1,500.00 towards their expenses, and I asked for copies of the bills and the reports. Apparently it is standard practice in Fairfield County, CT to get inspections done prior to signing the sales agreement.
0 votes
Connmom, , 76065
Thu May 26, 2011
The property I own is a legal three family house that I got as part of my divorce settlement in 2009 in Connecticut. I had the agent price it for quick sale because I owe the IRS a lot of money ($100K) and have a deadline looming in two months to pay them and the state in full. It was a distress sale.

I asked the listing agent what would happen if I decided not to sell, if some white knight rescued me and I was able to satisfy my debts without liquidating this house (which would be my only asset in the world because I lived on an IRA while my divorce was going on, and that's gone and I owed the IRS for not having enough withheld for taxes and penalties, I'm also a SAHM, not working outside since 2004, and over 50). She put in the contract that instead of the usual 1% of the purchase price (which would have been about six grand) that I would reimburse the firm for their marketing expenses.

In the meantime I got several offers and accepted the one closest to my asking price. The potential buyer is an engineer himself and said they wanted to do inspections first (I assume that they wanted to see what they were getting into, and perhaps adjust the price accordingly). They performed lead, asbestos, mold, and radon tests this week and had a thorough building inspection yesterday. If all went well, the buyers were ready to sign contracts by this week's end.

Yesterday I was in court with my ex and to my shock, the judge ordered him to pay me back monies he has owed me since 2007. I am in a position to pay my tax debt without liquidating this property, which would have netted me maybe $75,000 after paying off my debts. The ca;pital gains tax would have taken the bigest chunk and I would have nothing. I live in a small rental apartment with my teenage daughter.

I fell terrible for the broker, who as you can imagine is furious with me and is regretting that she is letting me off the hook for less than 1%. I assured her that I was happy with her performance but that my circumstances had changed. She tried everything to talk me out of it but I just can't give away my only asset if there was any way to rescue it.

thank you all for your excellent responses. I will check with my lawyer if I can get him on the phone!
0 votes
Scott Butcher, , Austin, TX
Wed May 25, 2011
This sounds more like a commercial real estate transaction versus a residential transaction if a true Phase 1 or Phase 2 Environmental Study has already taken place.

I suggest you re-read your listing agreement that you SIGNED with your listing agent. If you have the right to cancel without 'cause' and your not required to pay your listing agent a dime, then your fine. If not, then you probably had better be prepared to live by the letter of your signed agreement. Worst case, you agree to a 'settlement cost' for marketing expenses incurred by them (if this is in your contract) and then walk away from the contract and you shouldn't have to worry about your Listing agent coming back after you for breach of contract.

Personally, I'm wondering why ANYONE would ever do an environmental assessment of your proeprty without having a signed purchase contract. This just doesn't make any sense to me. The worst thing for you is that they DO find an environmentla problem, then you will have to disclose it to every future buyer.

Please enlighten the community on what type of property your selling.

Good luck
0 votes
Gary Geer, Agent, Antioch, IL
Wed May 25, 2011
Connmom,
If you never signed and accepted a contract from a buyer or his agent then you did not have a contract per Illinois law, but I don't know if it's the same in your area. Our contracts to be enforceable have to be in writing. I can't understand why a potential buyer would complete inspections prior to having a singed contract?? Talk to your agent prior to canceling your listing and discuss any issues his agency, and ask him or her the questions you are asking here as they will know more what your states position is. In fact, you should discuss any potential liability with a real estate attorney in your area. We are not attorney's and can't give advise pertaining to law. Only an attorney can do that. They are the experts in that area. You may want to do this prior to taking any action. I wish you all the best.

Gary Geer

http://www.GaryGeer.com
0 votes
Joan Braunsc…, , Morris County, NJ
Wed May 25, 2011
Make sure that the marketing expenses are clearly itemized and reasonable. These days, with the internet, marketing doesn't cost nearly what it used to.

Regarding reimbursing the buyer, I have to admit that I feel for the buyer but since there is no contract, I don't see how you could be responsible for any costs incurred.

Just curious, would you be willing to share why at this point you have changed your mind? Especially if a buyer is interested enough to pay the cost for the tests and inspection. I certainly don't mean to pry but I can't help but wonder.
0 votes
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