Tips and Traps When Negotiating Real Estate: The Final Walk-Through

Negotiating a Sales Agreement: The Final Walk-Through

Most sales agreements today provide for a final walk-through by the buyer, usually the day before the deal closes (when title transfers, the seller gets the money, and the buyer gets the house). The reason this walk-through came about, as have so many other things in real estate, is largely to protect agents.

In the past, buyers would not see the property, at least the inside, between the time they first made the offer and the time they finally got clear title. However, during that period the seller might have had orgies every night. The walls might be stained with food, the floors awash in wine, the toilet fixtures ripped out . . . No, it’s not likely. But, believe it or not, I have seen this sort of thing happen!

When the buyers take possession, bright-eyed and anticipating a lovely new home, they are aghast at what they find. And whom do they blame? The agent, of course—but also the seller. In the past, agents have had to pay to make up for the actions of irresponsible sellers. And sellers have lost deals because of their carelessness or negligence.

Therefore, to help prevent any of this from happening, the “final walk-through” came into popularity. Here, the buyer is allowed to see the property just before the deal closes to be sure that it’s just as it was when the offer was made.

The walk-through also has the effect of putting the sellers on notice that they had better keep the home shipshape, because it will have to pass inspection before the deal can close. The actual result of all this, however, is that agents don’t have to deal with angry buy­ers and partying sellers.

READ:  Simplify your life with a Mechanical Turk

The purpose of the final walk-through, therefore, is to make sure the physical condition of the property hasn’t changed, and that’s what’s usually specified in the contract clause that describes it.

However, sometimes buyers see this as a last-minute opportunity to negotiate their way out of the deal.

I have some friends who were buying a townhouse near Los Angeles. (A townhouse normally only has common walls connecting with another home—there is land beneath and sky above.) It was a nice property and they qualified for the financing. Eventually all the contingencies, except the walk-through, were removed. However, just before the sale was to close, they discovered another townhouse nearby that was bigger, cost less, and was in a better neighborhood.

Naturally they wanted out of the deal they had made so they could buy the other townhouse. However, their reasons for wanting out were not likely to appeal to the seller of the first property.

So they confronted their agent and explained their dilemma. The agent said she would “fix it,” and she did.

The agent led them through their final walk-through and sug­gested that perhaps things weren’t as they had originally been. They agreed.

The agent then presented a huge list of problems with the property to the seller, problems that would have cost a fortune to fix. The seller, naturally, said that obviously the buyers were trying to back out. The property hadn’t deteriorated that much since the offer was made. The agent simply said, “Maybe.” Then she empha­sized that the buyers were exercising their right under the final walk­ through contingency. Ultimately they just did not find the property suitable.

READ:  Tips and Traps When Negotiating Real Estate: Walking Away a Winner Is No Baloney

In this true story, the seller finally said okay and released the buyers, signing off and returning the deposit. The agent then sold my friends the other townhouse and completed the deal.

What Could the Sellers Have Done?

The sellers could have insisted that the buyers complete the sale. The sellers could have demanded the deposit. The trouble was that there was the matter of that final walk-through contingency. The way it had been written, it gave the buyers the power to reject the property right up until the last minute.

What the sellers could have done is negotiate for a tougher walk­ through contingency. They could have had an attorney check the final walk-through contingency clause. The wording could have been strengthened so that there was less chance the buyers could use it as a way to back out of the deal.