QUESTION: I represent Buyers who live in the Bahamas. They want to buy a home they saw online. They cannot travel to personally view the Property right now and they may not be able to do so prior to the Close of Escrow. They have told me that they are not concerned about buying the Property “sight unseen” and they intend to proceed without ever personally viewing the Property prior to closing or even doing a walk-through. Is it legal for them to never see what they are buying? Is it okay for Buyers to waive the walk-through?
ANSWER: Yes, it is legal to buy property without ever seeing it; however, it is completely foolish to do so. Prudence and common sense are not legal mandates; if they were, then people such as real estate Agents and Attorneys would not be needed to provide good advice. As fiduciaries, we must be a “voice of reason” and warn Clients of the risks that they will face if they fail to follow good advice and practical recommendations.
Unfortunately, Agents and Brokers have been sued for not properly warning their Buyers about the risks of buying property “sight unseen” and/or not conducting a walk-through. Although most Agents tell Buyers that they should actually see the Property first before they buy, those recommendations are often not strong enough and/or are not documented well enough to adequately protect Agents and Brokers from these claims.
Attached is a new Buyer Advisory Regarding Buying Property “Sight-Unseen.” This form explains to Buyers why they need to personally view the Property and the steps they should take to properly protect their interests, including the need to include an investigation/inspection contingency in their Purchase Agreement.
This Advisory can be used by either the Buyer’s Agent or the Seller’s Agent; it does not matter which Agent generates the form as long as it is provided to the Buyer as soon as it is known that the Buyer has not, or will not, be seeing the Property for any reason including, but not limited to, a “Shelter in Place” Order or a Travel Ban which makes it impossible for the Buyer to physically go to and view the entire Property.
CONTINGENCIES: Making the purchase “subject to Buyer viewing the Property” is not adequate protection for the Buyer; the Buyer needs the ability to exercise a right to cancel (in good faith) if their personal, visual inspection of the Property and/or the neighborhood is unsatisfactory. The best protection for the Buyer is to include the existing investigation/inspection contingency (such as Paragraph 12 in the C.A.R. Residential Purchase Agreement) in the purchase agreement; that contingency should not be waived.
WALK-THROUGH OR FINAL VERIFICATION OF PROPERTY: It is not prudent for any Buyer to waive their right to conduct a final verification or walk-through of the Property that is specified in all standard purchase agreement forms; this is especially true with Buyers who have never seen the Property. The walk-through is a contractual right (not an obligation); its purpose is to enable Buyers to confirm for themselves that: (a) the Property is in the same general condition as on the day that they made their Offer and (b) agreed-upon repairs have been completed. All Buyers should be strongly encouraged, preferably in an email, to personally conduct a walk-through, especially if they have yet to see the Property.
NOTE: Buyers who are dissatisfied with what they see at the walk-through, may have limited options. The final verification does not create a Buyer right to cancel – it is not a contingency. Buyers who are upset with the condition of the Property at the walk-through should consult with their own qualified California real estate attorney to discuss what their options may be and whether they should close escrow.
The Buyer’s Agent should not conduct the final verification on behalf of the Buyer, regardless of why the Buyer cannot exercise their right to do so. The scope of the Agent’s duty to inspect as part of their competent,diligent, visual inspection of the accessible areas of the Property is limited by California law and by the terms of standard transaction documents, such as the Agent’s Visual Inspection Disclosure (CAR Form AVID). The statutory and contractual limitations which control the Agent’s inspection duty do not apply to (and do not protect) Agents who take on the Buyer’s right to confirm the condition of the Property at the walk-through. The Agent may have to go onto the roof and crawl under the house if they agree to perform the walk-through.
PRACTICE TIPS:
- ALL AGENTS: Regardless of who you represent in a transaction, IF you learn that the Buyer has only seen pictures or videos of the Property, then the Buyer Advisory Regarding Buying Property “Sight-Unseen” should be provided to the Buyer as soon as practicable.
(a) The Advisory can be used by either the Seller’s Agent or the Buyer’s Agent.
(b) If the Buyer refuses to sign the Advisory, the most important step is to document that the form was delivered to the Buyer or the Buyer’s Agent (if sent by the Seller’s Agent). It is not a contract document that needs to be signed to be effective; the signature merely acknowledges receipt. The Buyer’s signature is the best proof of delivery but it is not the only means to prove delivery. An email that clearly shows the Advisory was delivered to the Buyer or Buyer’s Agent is sufficient documentation for the Broker file.
(c) None of the standard walk-through forms, such as the Verification of Property Condition (CAR Form VP) are legally required forms; the VP and other walk-through forms are a convenient mechanism for Buyers to document the results of their walk-through. If the walk-through is being waived by the Buyer, the VP can also be used to confirm the waiver (see the check box in paragraph 2 of that form) but an email from the Buyer regarding their waiver is sufficient proof; the Buyer is not obligated to sign any particular form.
- BUYER’S AGENTS: If your Buyer insists that you prepare an Offer when you know that the Buyer has not and/or cannot personally inspect the entire Property, for any reason, the following steps should be taken:
(a) Make sure that the Buyer receives and preferably signs the Buyer Advisory Regarding Buying Property “Sight-Unseen” as soon as possible and a copy is put into the Broker file.
(b) Make sure that the Buyer has an investigation/inspection contingency in the Purchase Agreement with sufficient time to allow the Buyer to personally inspect the entire Property.
(c) If the Buyer chooses to waive the investigation/inspection contingency and/or removes that contingency without ever going to the Property, send the Buyer an email confirming that they are proceeding against your advice and recommendation. See Weekly Practice Tip: How to Handle Clients Who Will Not Follow Advice? (Nov. 16, 2018)
(d) If the Buyer chooses to waive the walk-through or final verification of the Property, you should not perform that function for them. The Buyer can have a trusted friend or family member do the walk-through but it should not be done by the Agent. If no one else is available, document (preferably in an email to the Buyer) that the Buyer is proceeding against your advice and recommendation by choosing to waive their right to do the final walk-through. See the Weekly Practice Tip referenced above.
This Weekly Practice Tip is an attorney-client privileged document for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.
© Copyright Broker Risk Management 2020 03/27/20
FORM FOLLOWS:
BUYER ADVISORY REGARDING BUYING PROPERTY “SIGHT-UNSEEN”
Property Address: ___________________________________________________ (“Property”)
Although the Seller’s Agent and the Buyer’s Agent have strongly recommended that you view the Property prior to writing an offer and/or before signing a Purchase Agreement, you have chosen to disregard that advice and purchase the Property sight unseen. Failure to personally visit the Property prior to purchase will make it difficult to satisfy yourself as to (1) the condition of the Property, (2) the neighborhood and area conditions that may affect the Property and (3) your personal needs, requirements and preferences.
“Virtual tours”, videos and photographs are, at best, convenient, temporary substitutes for not viewing the Property but these media should not be considered as an adequate method of facilitating your personal assessment of the 3 factors listed above.
Ultimately, the decision of what amount you are willing to offer or agree to pay for any given property rests with you. To facilitate that decision, you should carefully review all comparable sales information as a guide on price; however, you need to understand that each property is different and its value. You will need to decide what type of offer to make, including price and terms, taking into consideration current market conditions, property condition and your personal financial resources and needs.
You are strongly encouraged to obtain and carefully review any and all inspections, reports, applicable homeowners’ association documentation and public records to satisfy yourself as to the condition of the property. The best practice is for you to be present when inspection(s) are being performed on your behalf so that you can ask questions about specific conditions or personal concerns. You should take all reasonable steps to protect your interests and complete your due diligence investigation of the Property prior to removal or waiver of any contingencies.
Standard purchase agreements allow Buyers the opportunity to conduct a walk-through or final verification of the condition of the Property to determine if the Property is in the same condition at the end of the escrow as it was at the time the Parties signed the Purchase Agreement and to confirm that any agreed upon repairs have been performed. You should not waive your right to conduct a walk-through and your Agent cannot perform that function for you.
If you intend to proceed with the purchase of the Property without following any or all of the recommendations in this Advisory, you will be assuming the risk of any liability, costs or damages that may result because of your decision to not follow this advice.
Buyer: _____________________________________ Dated: ____________________
Buyer: _____________________________________ Dated: ____________________