Should you use existing reports when purchasing?

Occasionally, I find myself reflecting on stories from my youth, sometimes with fondness but often with a facepalm. I did my fair share of foolish things and got myself into some potentially problematic situations. Still, those experiences have helped me see through a wiser lens in my, let's say, middle age, and for that reason, when I hear things that sound like a bad idea or too good to be true, my alert system starts sounding. Let's look at some bad ideas that percolate in the real estate process and clarify why they are not ideal.

Market conditions

I want to set the scene a bit. The market is hot in your town; if it is not, use your imagination, and the best properties are selling fast and with few conditions. The perfect home has just come on the market, and although it is a little older and may require some work, it checks most of the boxes. Speed is crucial for getting a chance to buy it. I often hear this lead-up story when someone calls me with their disastrous after-the-closing story.

Sweet talking, start walking.

The client is king in every transaction, and when provided with all the available information, their decision can be assumed to be the best possible decision for them. The trap for REALTORS® is that occasionally, they may, with the client's best intentions in mind, lean to one side of an issue or the other, forgetting that their job is not to talk anyone into or out of anything but rather to bring all available information to the client and let them make their own decision. To the client reading this article, this is your job: ask lots of questions, request more information, enlist experts when necessary, and then decide. Decisions are yours; gathering the essential information and asking for it is your Realtor's responsibility.

Concept in play

Ok, so what exactly am I getting at? Let's back up the truck to the market conditions scenario I laid out. In the fast-paced market, the seller has a previous inspection report for the home and is willing to provide it to the buyer, thereby eliminating the need for the buyer to conduct an inspection. Wow, what a lucky turn of events. The buyer may need to decide if it is acceptable to them, and the Realtor should note a couple of things for the buyer's consideration first.

1. Is the inspection current? Does it represent the current state of the home or what it was like at some previous time? Maybe when the seller bought it?…things changed.
2. Does a licensed home inspector do the inspection? Is it complete with all appropriate pages intact and no edits?
3. Who paid for the original inspection? (in other words, who was the inspector working for?) Was it a pre-purchase inspection or an inspection done for some other purpose?

These are a few of the more common questions that need to be considered when presenting the idea to a client considering a purchase in this situation. Once the buyer finds these things, getting their inspection seems like the prudent path.

Risky business

From the buyer's perspective, they may accept the risk once presented with the facts, given their overwhelming desire for the property; however, recourse in such situations is limited. If the Realtor® presents all the facts and the buyer proceeds anyway, they likely assume the risks of the purchase without recourse. For example, there would be limited recourse against the inspector who made the report since they never intended that report for this buyer and were never hired by this buyer. Because of the increased risk, the Realtor® should always take careful steps to document their due diligence and discussions with the buyer to ensure their role and actions are above reproach, should the buyer choose to move forward and assume those risks themselves.

Other land mines

The reader must understand that inspections are not the only report under consideration here. There are numerous standard documents in a transaction that require additional context or scrutiny. For example, a current land title ordered from the land titles office is the only protection against changes and encumbrances that even the seller may not be aware of, as the document is up to date. The existing RPR versus the current RPR, which I have written about in detail in other articles, is another issue. How about old condominium documents, foundation or roof inspections, out-of-season utility bills, or old quotes for repair or replacements not yet completed? The moral of the story is that relying on existing documents can be dangerous, and the risks and benefits must be presented to the client in a timely and comprehensive manner to facilitate informed decision-making. The best practice is always to seek current documents, inspections, quotes, and similar information to provide the client with the best and most up-to-date information and proper legal protection.  

I am all for expediency, but expediency without calculating the risk is a recipe for disaster and potential financial loss. I wouldn't buy stocks based on outdated performance graphs, and I wouldn't buy a car solely on the seller's assurance that they haven't had any problems, just as I wouldn't purchase pills from someone who claimed to be "kind of like" a pharmacist. Bad ideas have consequences, but there is safety in a multitude of advisors, so when you hear "trust me," that should trigger an alarm bell that prompts more due diligence.