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I'm making an offer on a house. I was informed that the seller, a relocation company, is asking for the following: a right of the buyer to inspect but "no right to terminate." That is, I would have the right to inspect the property and, if something were found, the seller would have to give me a credit for the problem or terminate the contract. But I as the buyer would not have the right to terminate at that stage.

This is certainly nothing I've ever seen before, and it gives me great pause. Has anyone heard of anything like this?

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    Reject that term. It might be there because they know something you don't know. – acpilot May 22 '17 at 22:40
  • This is one of the few times I'm happy that real estate lawyers are required for transactions in Illinois. They handle this BS with ease. – Joe May 22 '17 at 22:46
  • There is no way I would accept that condition. Suppose the house is contaminated with radioactive waste? You couldn't safely live there and could never sell the house. – zeta-band May 22 '17 at 23:35
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    @zeta-band Of course that was my first reaction. BUT theoretically they have to BOTH disclose what they know AND accept an inspection report. – bshor May 22 '17 at 23:45
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The most likely reason for this is that the relocation company wants to have a guaranteed sale so as to get a new mortgage in the new location. Understand that the relocation company generally works for a prospective employer. So they are trying to make the process as painless as possible for the homeowner (who is probably getting hired as a professional, either a manager or someone like an engineer or accountant).

If the sale is guaranteed to go through regardless of any problems, then it is easy for them to arrange a new mortgage. In fact, they may bridge the gap by securing the initial financing and making the downpayment, then use the payout from the house you are buying to buy out their position. That puts them on the hook for a bunch of money (a downpayment on a house) while they're waiting on the house you're purchasing to close.

This does not necessarily mean that there is anything wrong with the house. The relocation company would only know about something wrong if the owner had disclosed it. They don't really care about the house they're selling. Their job is to make the transition easy. With a relocation company, it is more likely that they are simply in a hurry and want to avoid a busted purchase. If this sale fails to go through for any reason, they have to start over. That could make the employment change fall through.

This is a variation of a no contingencies sale. Sellers like no contingencies sales because they are easier. Buyers dislike them because their protections are weaker. But some buyers will offer them because they get better prices that way. In particular, house flippers will do this frequently so as to get the house for less money than they might otherwise pay. This is better than a pure no contingencies sale, as they are agreeing to the repairs.

This is a reasonable excuse to not proceed with the transaction. If this makes you so uncomfortable that you'd rather continue looking, that's fine. However, it also gives you a bit of leverage, as it means that they are motivated to close this transaction quickly. You can consider any of the following:

  • Refusing the offer as is. If the offer is otherwise satisfactory, consider countering with the same offer without this provision.
  • Countering with a lower price. Accept the provision, but reduce the price that you're offering for the house. Don't expect a lot here, but a small discount is reasonable. Be aware that they may feel that the current price already offers that discount. Your realtor can advise as to the competitiveness of their price.
  • Withholding payment. Agree to the price, but withhold part of it (say the downpayment) until they complete any required repairs.
  • Inspecting immediately. Offer to have the inspector out quickly with a shorter than normal period to consider. They might find an offer like that better than a refusal. After all, they are in a hurry to sell. This inspector could be separate from the mortgage inspector (the bank may do their own inspection later).

Or you can do some combination of those or something else entirely that makes you fell more secure. If you do decide to move forward with any version of this provision, get a real estate lawyer to draft the agreement. Also, insist on disclosure of any previous failed sales and the reason for the failure before signing the agreement. The lawyer can make that request in such a way as to get a truthful response.

And again, in case you missed it when I said this earlier. You can say no and simply refuse to move forward with such a provision. You may not get the house, but you'll save a certain amount of worry. If you do move forward, you should be sure that you are getting a good deal. They're asking for special provisions; they should bear the cost of that. Either your current deal is already good (and it may be) or you should make them adjust until it is.

  • Thank you for such a comprehensive answer. Yes, this is a government sponsored relocation. Question: is there a chance to convert this into a standard termination option transaction? – bshor May 23 '17 at 0:45
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    You can counter with the normal language. They can either accept it or not. If you're willing to continue your house search, they can't force you to accept their offer. It's just a non-monetary price. They can either agree to terms that you find satisfactory or not. I have no experience with government relocation, just employment related. Not sure how they got to this particular provision, whether it is required or not. – Brythan May 23 '17 at 1:01

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