Part 1 – WASHINGTON MARCH 2021 REVISIONS TO FORM 35

BUYER INSPECTION CONTINGENCY REPORT

VIDEO SERIES FOR REALTOR HOME BUYER CLIENTS

Realtors in the State of Washington who do their due diligence can help their home buyer clients avoid waiving the buyer inspection contingency. Watch this 5 part Legal Hotline Series, “Don’t Do It”, with Annie Fitzsimmons, the Washington Realtors® legal hotline lawyer; and Ken Sax, the Managing Broker of Professional Realty Services International, as they discuss the best practices to comply with the 2021 revisions to FORM 35 (Inspection Contingency).

Slopeside Home Inspections offers professional home inspection services for buyers and sellers in the greater Vancouver WA and Portland Metro area. Our inspections are thorough and non-invasive, adhering to InterNACHI’s exceptional Standards of Practice.

NOTE: The contents in the YouTube videos, below, do not constitute legal counsel from Washington Realtors® or from Slopeside Home Inspections.

5 Part Series: Part 1 – Part 2 – Part 3 – Part 4 – Part 5

If you prefer reading to watching a video, here below, we have provided the video transcript as an alternative source of information. This video series was added to the Slopeside Home Inspections website with explicit permission from Washington REALTORS®. Below, where we have provided the text transcript, we have made minor edits, only where the spoken word in video does not parlay to a clear understanding when video speech is transcribed into text.

DON’T DO IT – PART 1 – SERIES INTRODUCTION

Text Transcription Of Video Speech

Hi, I’m Annie Fitzsimmons. I’m your Washington REALTORS® legal hotline lawyer and I hope that you are not learning for the first time in this video that the statewide forms revised in March of 2021. Perhaps more importantly, I hope that you are already aware that one of the revisions to the Form 35 is not only a prohibition on buyers delivering any portion of the buyer’s inspection report to seller without sellers consent, but also a consequence included in the Form 35, that if a buyer acting, even through the buyer’s agent, so this is something that buyers and buyer agents have to be aware of.

If buyer or buyer’s agent delivers any portion a buyer’s inspection report to seller through seller’s agent, the listing agent, just like buyer and buyer’s broker can’t deliver the report; they can’t deliver it to seller or to seller’s agent. If they do so without sellers prior consent, buyer waives the inspection contingency. Huge consequence, and unfortunately what I’m hearing through the hotline is that brokers don’t get it. I’m hearing confusion from listing brokers. I’m hearing confusion from buyer brokers.

I have made a concerted effort in the last couple of weeks to have a lot of conversations with a lot of different brokers around this issue and it has become abundantly clear that we need a lot more information about what buyers and buyer brokers can say when seeking request, when seeking concessions from seller pursuant to buyers inspection contingency. Therefore, we’re going to spend a few videos talking about this issue because the industry needs education around this topic which is going to result in lawsuits based on a lack of information if people aren’t aware of what we’re going to discuss in this video series and the reason here’s going to be lawsuits is because buyers are going to overstep what they’re allowed to do.

Listen to what I’m about to say. Listing brokers are going to overreact to what buyers and buyer brokers have done, encouraging their sellers to fight for earnest money when that may not be justified based on all of the facts at issue. In this first video what I want to cover is how did we get here. How did we get to the place where Form 35 prohibits buyer’s delivery of any portion of buyer’s inspection report without sellers consent?

Backwards in time, prior to 2019, because prior to 2019 there was no prohibition on buyers delivering buyer’s inspection report to sellers and what we saw up to that point was kind of an epidemic, if you will, of buyers taking advantage of the fact that sellers granted buyers the right to inspect sellers property prior to closing. Buyers are not innately gifted with the right to bring an inspector into seller’s home. Buyers can only bring an inspector into seller’s home because sellers give buyers permission to do so, and if buyers abuse sellers in response to seller giving that permission, then it’s only a matter of time as an industry before sellers start saying, “We’re not going to give buyers permission to bring inspectors into our home, if in the process of doing that, buyers abuse us as a group of sellers, by delivering to seller, buyer’s inspection report”, and yet that’s what was happening.

Over and over again, prior to 2019, this is what that would look like. Buyer would have an inspection of sellers home. The inspector’s report would come back with all kinds of horrific opinions from buyer’s inspector. Why?, because buyers inspectors are not only trying to educate buyers about the condition of the property, but they’re also trying to shield themselves the inspector, from being sued by the buyer later. So an inspector’s report is necessarily going to identify all of the conditions that the inspector finds, and all of the conditions that inspector believes could possibly be present, or relevant, for buyers further investigation within seller’s home; generating what was often a horrendous looking inspection report.

Buyers and buyer brokers would then, oftentimes, deliver the entire inspection report to the seller even though buyer might only be asking for three or four items to be repaired. Maybe a few hundred or a couple thousand dollars in concessions, but buyer would deliver the entire horrendous inspection report to seller. Why? Knowingly or unknowingly, buyers were doing that because it would create leverage over the seller. Buyer could say, “Look seller, if you don’t grant to me the concessions I’m asking, then in response; seller, before you sell your home to another buyer you are going to have to disclose all of the horrific opinions of my inspector set forth in this inspection report”.

That was a true statement for two reasons. The first and most obvious is because Form 17, which would then have to be amended before seller could deliver it to another buyer. Why? Because there’s a question on Form 17 that asks, “Has a whole home inspection been done? If so, when?” Obviously, seller would not have disclosed buyers whole home inspection on the inspection report that seller delivered to that buyer because it hadn’t been done yet, but before seller could deliver the Form 17 to a future buyer, seller would have to amend their Form 17 to, if nothing else, capture the fact that the sale failed. Buyer had performed a whole home inspection and when that had happened, but it’s bigger than that because the question that asks “has a whole home inspection been done?” has an asterisk beside it and if you read the instructions on Form 17, it says anytime seller answers an asterisk question with a yes answer, seller must provide additional explanation and attach relevant documents. So if the question asks “has a whole home inspection been done?” and seller answers “Yes”, then seller must attach relevant documents and seller has that inspection report.

Then, must seller attach that sale failed buyers inspectors report to sellers Form 17 before seller can deliver it to the next buyer? I’m not here to tell any seller how they are required to complete the Form 17, and listing brokers, I would encourage you to advise sellers to seek legal counsel as to how they should complete the Form 17. Many sellers would conclude that when the question asks has a whole home inspection been done, and seller is then required to attach relevant documents, and they have the whole home inspection, that they’re supposed to attach it to the Form 17. What if they only have some pages of the inspection report? Would those not still be relevant documents that they would then have to attach?

So, that’s the first reason why I say that buyers are accurate when they say to a seller, “If you don’t yield to the concessions I’m seeking, you’re going to have to deliver all of these horrific opinions of my inspector to the next buyer.

Form 17 is the first reason. What’s the other reason? what if seller isn’t even subject to Form 17? The only seller who’s not, typically, is an estate; but let’s just say they weren’t. A seller is required not only by statute, seller’s disclosure act, to disclose their actual knowledge of the condition of their property, or material defects within the property, but they’re also required based on common law to disclose their knowledge of material facts with respect to the condition of their property. So, what if seller doesn’t have to attach it to the Form 17, but they’ve still got all of these inspectors opinions about the condition of their property? The seller then has to disclose just the conditions identified in inspectors report, or seller’s opinions regarding the condition of sellers property.

When seller gets this horrific report, seller’s got all of this information, potential information about their property and when seller sells the property to a future buyer, seller is going to have to do one of three things with respect to this information. Seller is going to have to repair the problem identified by the inspector or refute the conclusions of the inspector, meaning they might have to hire an engineer or a contractor or their own inspector to prove that the sale failed buyers inspector was wrong, or they’ll have to disclose the condition. Repair, refute or disclose, with respect to the information brought to their attention through the sale failed buyers inspectors report.

Buyers putting sellers in that position is unfair. I would use the word abusive, and it’s the type of situation that if allowed to continue, is going to ultimately result in sellers saying, “No way. I’m not letting a buyer bring their inspector through my house”. As an industry that would be a terrible outcome. We do not want sellers refusing buyers the opportunity to inspect sellers home. That will absolutely result in lawsuits against sellers and brokers alike.

So, how then as an industry can we encourage a healthy process of buyers inspecting sellers property so that buyer can learn the condition of seller’s home for buyers benefit without infecting seller with a buyer’s inspector’s opinion of sellers home that could end up damaging seller if there’s a sale failed by this buyer? How do we do that? We include a prohibition in the statewide form that allows the buyer to bring the inspector into seller’s home. That bars the buyer from delivering a copy, or any portion of that buyer’s inspectors report, to seller without sellers consent.

That’s your history lesson. That is the introduction to how we got to where we are. In the next few videos we’re going to talk about how you then deal with the scenario that we’re in today, or the situation that we’re in today with this statewide forms prohibition.

Please understand, I am an advocate of the statewide form. As it is drafted today, I think it is imperative that this prohibition on buyers delivering inspection reports to sellers is included in the statewide forms. I know some of you disagree with me, and so in the next few videos in this series we’re going to talk about how you, as a buyer broker, can effectively ask for concessions and deal with this issue in representing your buyer. And, listing brokers we’re going to help, hopefully bring some perspective to you when you receive information from a buyer broker that you think crosses the line.

All right we’ll see you in the next video. We’ll talk more about this topic. Thank you for being a Washington REALTORS® member. If you have questions on anything we’ve talked about so far, or anything else, end an email to me, legal hotline at warrealtor.org

Thank you for being a Washington REALTORS® member.