Hello everyone,

Have a real estate contract question. Im currently in Escrow in Los Angeles and my contract has the standard 17 day inspection/apprasil contingecy. The property Im in contract with has tenants and so far they have not given me access to perform these task and the seller and realtor all acknowledges this problem. I would typically ask the realtor this question but I am using the seller's agent to represent both parties so wanted to get outside opinion just be sure. My question is do i actually need to get these contingencies extended each time they come close to being expired (meaning buyer and seller has to change the dates on the contract and get both parties to sign it) or is there a contingency removal form required for me to sign and as long as it is not signed the contingencies stay in place? Im not sure what is proper protocal for this things? I want to make sure to protect my earnest money deposit.

@David Pai

Typical CAR RPA will specify that a notice to perform document needs to be signed before seller can cancel because buyer hasn’t performed a specific part of the contract.

That being said, ask your realtor to write up an extension anyways and have it signed by both seller and yourself. This protects your rights better in the long run. Sounds like the seller shouldn’t have any problem doing that. After that, crack the whip on your realtor and get him to make the inspections happen. With proper notice, there shouldn’t be an issue getting someone in for inspections.

Disclaimer: I’m not an attorney and this isn’t legal advice. Just a friendly opinion. Talk to your realtor first and if it gets real sticky, talk to an attorney.

Well, you're going to have to resolve it before you close.  

I wouldn't close a deal without a good sample of interior inspections since you're trying to gauge your turnover budget.  So if it's 1 guy out of 100, not a problem, however, 100 out of 100 is an issue.

Assuming you've done exteriors first (I understand you prob can't see stuff like under the roof and floors without int access)?

Originally posted by @Dustin Allen :

@David Pai

Typical CAR RPA will specify that a notice to perform document needs to be signed before seller can cancel because buyer hasn’t performed a specific part of the contract.

That being said, ask your realtor to write up an extension anyways and have it signed by both seller and yourself. This protects your rights better in the long run. Sounds like the seller shouldn’t have any problem doing that. After that, crack the whip on your realtor and get him to make the inspections happen. With proper notice, there shouldn’t be an issue getting someone in for inspections.

Disclaimer: I’m not an attorney and this isn’t legal advice. Just a friendly opinion. Talk to your realtor first and if it gets real sticky, talk to an attorney.

 Thanks for the input. Yea we tried cracking the whip but tenants claim they are high risk candidates so not allowing access at this time. 

Originally posted by @Steve Morris :

Well, you're going to have to resolve it before you close.  

I wouldn't close a deal without a good sample of interior inspections since you're trying to gauge your turnover budget.  So if it's 1 guy out of 100, not a problem, however, 100 out of 100 is an issue.

Assuming you've done exteriors first (I understand you prob can't see stuff like under the roof and floors without int access)?

Actually, in terms of the inspection..the realtor already gave me full inspection report done by a 3rd party when the property was in escrow back in Feb 2020 but fell out. I am comfortable with the amount of repairs/work needed. Mainly I want to make sure no issues with the appraisal or financing issues. 

From a Broker - CAR Form Purchase Agreement requires that Contingencies be removed in writing unless specified otherwise.  Contingencies that automatically expire are called rolling contingencies and are not used very often.  You should not be required to remove the contingencies until your investigations are satisfied, meaning, you can tell the owner that you are not removing contingencies and not closing escrow until the allow proper inspection which is a contractual agreement.  Any notice to perform will be meaningless and not enforceable.  If they do serve you a Notice to Perform, then call an attorney for further advice.  If you need an attorney, I'm happy to refer you to one.

"Yea we tried cracking the whip but tenants claim they are high risk candidates so not allowing access at this time. "

Hate doing this, but how about asking seller if the tenants vacate for a couple of hours you'll give them $50?  I don't know if he'd go for a credit at close, but tenants can he bought :)

Still wouldn't close without a majority of interiors being given a look see and it's only 5 minutes (barring roof/crawl access).

Originally posted by @Dennis Maynard :

From a Broker - CAR Form Purchase Agreement requires that Contingencies be removed in writing unless specified otherwise.  Contingencies that automatically expire are called rolling contingencies and are not used very often.  You should not be required to remove the contingencies until your investigations are satisfied, meaning, you can tell the owner that you are not removing contingencies and not closing escrow until the allow proper inspection which is a contractual agreement.  Any notice to perform will be meaningless and not enforceable.  If they do serve you a Notice to Perform, then call an attorney for further advice.  If you need an attorney, I'm happy to refer you to one.

Thank you. I do see this in paragraph 19 of my contract. Sounds like the buyer is protected for most part then as long as contingencies stay in place and not removed. 

Originally posted by @David Pai :

Originally posted by @Dennis Maynard:

From a Broker - CAR Form Purchase Agreement requires that Contingencies be removed in writing unless specified otherwise.  Contingencies that automatically expire are called rolling contingencies and are not used very often.  You should not be required to remove the contingencies until your investigations are satisfied, meaning, you can tell the owner that you are not removing contingencies and not closing escrow until the allow proper inspection which is a contractual agreement.  Any notice to perform will be meaningless and not enforceable.  If they do serve you a Notice to Perform, then call an attorney for further advice.  If you need an attorney, I'm happy to refer you to one.

Yes.  A buyer can always refuse to buy, a seller cannot refuse to sell under these contracts.

Thank you. I do see this in paragraph 19 of my contract. Sounds like the buyer is protected for most part then as long as contingencies stay in place and not removed. 

 

Originally posted by @David Pai :

Originally posted by @Steve Morris:

Well, you're going to have to resolve it before you close.  

I wouldn't close a deal without a good sample of interior inspections since you're trying to gauge your turnover budget.  So if it's 1 guy out of 100, not a problem, however, 100 out of 100 is an issue.

Assuming you've done exteriors first (I understand you prob can't see stuff like under the roof and floors without int access)?

Actually, in terms of the inspection..the realtor already gave me full inspection report done by a 3rd party when the property was in escrow back in Feb 2020 but fell out. I am comfortable with the amount of repairs/work needed. Mainly I want to make sure no issues with the appraisal or financing issues. 

 Personally, I would not be comfortable with the inspection from Feb 2020. You don't know who the appraiser was or if they were "truly" independent. I would want my own done. A lot of damage can be done in 6 months. The fact that you can't get in to see *any* of the units is suspicious. It makes me think that something is going on that they don't want you to see until it's too late. Do you know why it fell out of escrow? I would be concerned with what I was missing there too. I mean, a lot of properties are falling out of escrow due to financing so that is not uncommon in this market. However, coupled with all the other details this would prompt me to really dig for answers.

Originally posted by @Rachel S. :

Originally posted by @David Pai:

Originally posted by @Steve Morris:

Well, you're going to have to resolve it before you close.  

I wouldn't close a deal without a good sample of interior inspections since you're trying to gauge your turnover budget.  So if it's 1 guy out of 100, not a problem, however, 100 out of 100 is an issue.

Assuming you've done exteriors first (I understand you prob can't see stuff like under the roof and floors without int access)?

Actually, in terms of the inspection..the realtor already gave me full inspection report done by a 3rd party when the property was in escrow back in Feb 2020 but fell out. I am comfortable with the amount of repairs/work needed. Mainly I want to make sure no issues with the appraisal or financing issues. 

 Personally, I would not be comfortable with the inspection from Feb 2020. You don't know who the appraiser was or if they were "truly" independent. I would want my own done. A lot of damage can be done in 6 months. The fact that you can't get in to see *any* of the units is suspicious. It makes me think that something is going on that they don't want you to see until it's too late. Do you know why it fell out of escrow? I would be concerned with what I was missing there too. I mean, a lot of properties are falling out of escrow due to financing so that is not uncommon in this market. However, coupled with all the other details this would prompt me to really dig for answers.

 

 Back in Feb 2020, the inspection reports i got are legit but your right they maybe outdated. I did my research on the inspection company (yelp, accredations, etc). Base on what the realtor told me, it fell out because the seller did not want to do any of the repairs. The duplex is original from 1993 which is considered pretty new for socal standards but it hasn't been property maintained (roof, termites, and 0 updating since built.)  I did the math and it is still considered a very good deal base on my research. 

I do not think the sellers are trying to hide anything...i believe the tenants are just very fearful of covid. I do believe the sellers could be more proactive with the tenants but I think for any landlord right now during the pandemic the last thing they want is to piss off the tenant and cause more problem specially if they are still paying tenants. The realtor told me before the pandemic the tenants were fine with buyers coming in to check out the property. 

Well, in OR, inspectors are licensed by the state, so there is that bar they have to get above.  However, they won't give you a warranty on stuff they miss.

If it's Feb 20 and thorough, I don't think I'd have an issue since about the only thing that might reasonably happen is tenant damages beyond normal wear-and-tear if its a clean report otherwise.  Of course, I'm assuming a tenant will tell the owner about major issues with the building that happened if they didn't cause them.

Sorry, for the non-answer since I disclose too much :)

This is a perfect example of why you need representation for yourself. Contingency need to be extended. Someone's going to be late on one of these and possibly end up screwing you. You should also not trust a word in that inspection report. You dont know the quality of that inspector. You know how to pick an inspector, use the ones realtors use on their own purchases...those will be the best and harshest ones. 

Originally posted by @Russell Brazil :

This is a perfect example of why you need representation for yourself. Contingency need to be extended. Someone's going to be late on one of these and possibly end up screwing you. You should also not trust a word in that inspection report. You dont know the quality of that inspector. You know how to pick an inspector, use the ones realtors use on their own purchases...those will be the best and harshest ones. 

Not saying all realtors are shady but during the 2008-2012 period I made at least 10-15 seprate offers on hot properties in socal and numerous of times I saw a property end up being sold for less than i offered. One time 50k less than what i offered and that left a very salty taste in my mouth. When i looked at the updated sold MLS for those a lot of time i saw the listing agent double ended. My theory is the listing agent pulled harder for buyers who they represented so they can double end the comission. Again this is just my theory. Finally I did get a hot deal but I ended up going straight to the listing agent instead of using my own agent. Ever since then that has been my train of thought. If i lived elsewhere in the country where real estate is not as hot and the properties are dime a dozen then of course i would choose my own realtor but in hot area of the country i personally think you need every advantage you can get as an investor/buyer.

Originally posted by @David Pai :

Originally posted by @Russell Brazil:

This is a perfect example of why you need representation for yourself. Contingency need to be extended. Someone's going to be late on one of these and possibly end up screwing you. You should also not trust a word in that inspection report. You dont know the quality of that inspector. You know how to pick an inspector, use the ones realtors use on their own purchases...those will be the best and harshest ones. 

Not saying all realtors are shady but during the 2008-2012 period I made at least 10-15 seprate offers on hot properties in socal and numerous of times I saw a property end up being sold for less than i offered. One time 50k less than what i offered and that left a very salty taste in my mouth. When i looked at the updated sold MLS for those a lot of time i saw the listing agent double ended. My theory is the listing agent pulled harder for buyers who they represented so they can double end the comission. Again this is just my theory. Finally I did get a hot deal but I ended up going straight to the listing agent instead of using my own agent. Ever since then that has been my train of thought. If i lived elsewhere in the country where real estate is not as hot and the properties are dime a dozen then of course i would choose my own realtor but in hot area of the country i personally think you need every advantage you can get as an investor/buyer.

 David,

You are correct in that a list agent with opportunity to double end is obviously going to push harder for that, however, they still have an obligation to both parties and serve in the best interest of BOTH parties. That is not easily done and more often than not, their loyalties will lye with the seller in such cases. I would only recommend going down this road if and when you are very familiar with the CAR forms and what your legal rights are under the contract.

Your contingency for inspection and appraisal do NOT "auto" expire, they must be removed in writing and the seller could issue a NTP (notice to Perform) demanding the release of those contingencies however, you could also deliver same NTP giving seller notice to perform on contractual obligation to allow access for said inspections. Easiest thing in this case is to simply send a CAR addundum providing an extension of these contingencies with the explanation in the adddendum that seller has yet to provide the access necessary to perform these inspections.