… referred to as the “binzer”

The Buyers Inspection Notice and Sellers Response-BINSR-0217 is probably the most complicated two pages of text involved in an Arizona residential real estate transaction. You should click the link and print the document, or have the PDF open in another window, so you have it to refer to as you read the following discussion.Buyers-Inspection-BINSR header-image

 

The BINSR is used by the buyer to give written notice to the seller of the buyer’s decisions regarding the physical condition of the property.

Inspection – Basis for Decisions

A professional inspection is not mandatory but of great benefit and peace of mind for the buyer and well worth the typical expense. Specialized inspection is likely also a good idea for some property aspects – like septic systems. The inspection report is also a very objective basis for repair/replace demands the buyer may make.

Agreement “Acceptance”

With the day of “Acceptance”, the date of the last signature on the last-signed document in the Purchase Agreement documents, being day-zero, the buyer has ten days within which to deliver the BINSR to the seller, or possibly some other number of days as written into Section 6a of the Purchase-Contract-0217.

No “Overs”

First, it is important to note on page 1 of the BINSR in the section … Buyer Acknowledges that:  the following item  … (d) Buyer is not entitled to change or modify Buyer’s election after this notice is delivered to Seller  … which means that each step in this entire process involves “no-overs” … for both buyer and seller. This point is also made in section 6i of the Purchase Contract, which includes “…  all Inspection Period items disapproved shall be provided in a single notice.

Buyer Notice – Ok, Cancel, Fix-it

The decision of the buyer regarding the condition of the property is contained in the BINSR section “Buyer elects as follows:“. If the box for “Premises Accepted” is checked, all physical inspection provisions of the contract are done.

If the box “Premises Rejected” is checked, the transaction is done … cancelled … caput. In the open section below, the buyer lists the “Items Disapproved:” … which need NOT be truly significant, except to the buyer … BUT … there must be a list of items disapproved, else the buyer could lose his/her earnest money deposit.

When the third box is checked, “Buyer elects to provide Seller an opportunity to correct …” which occurs by far the most, this is where the complications begin. In the open section of the BINSR just below this option, the buyer lists the items to be repaired, replaced, or otherwise changed from the current condition … this is the “fix-it” list. Buyer signs for these demands at the bottom of page 1 of the of the BINSR.

If the open space on page 1 of the BINSR is not big enough for the fix-it list, a “BINSR Addendum” can be referenced here for which there would be no limit to the length of the list.

Seller Deadline

As provided by Section 6j(2)a of the Purchase Contract, with the date of delivery being day-zero, the seller has five days to respond to the BINSR from the buyer. As also provided in this section, no response by the seller is effectively a refusal to correct any of the disapproved items … same as checking the “Seller is Unwilling …”  box on page 2 of the BINSR, discussed below.

Seller Response – OK to All, No to All, Yes and No

The SELLER’S RESPONSE to that third-box check and list of “disapproved” items by the buyer is on page 2 of the BINSR.

If the seller checks the top box, “Seller agrees to correct …”, all inspection issues are over, except only for the Buyer-Pre-Closing-Walkthrough-0217 where the buyer confirms that the corrections were all satisfactorily completed.

If the second box is checked “Seller is unwilling …”, the buyer has a decision to make … to either cancel the transaction or to accept the property as-is … or … see Alternative to Accept or Cancel below

If the third box is checked, “Seller’s response to Buyer’s notice is as follows:“, there will be a list and/or explanation below. For example, the seller may say here that the item is working and no fix is required, i.e., the inspector made a mistake. Or that the seller is not going to fix certain ones of the listed items, or not fix it in a way stated by the buyer on page 1. For example, the seller could say he/she was going to fix something personally rather than hire a “licensed contractor”. The response possibilities are limitless.

Buyer Response to Seller Response – OK or Cancel

Where the seller is indicating that he/she is not going to comply with the buyer’s demands to some degree, the buyer in much the same position as if the “Seller is unwilling …” box were checked. The buyer must decide for each “fix-it” item the seller took exception to whether the seller’s response is acceptable, or not.

Finally, with either the second or third option response from the seller, we get to the section BUYER’S ELECTION at the bottom of page 2 of the BINSR. With the day of delivery of the seller’s response to the buyer being day-zero, the Buyer has five days to decide which of the two options to elect to take: Accept or Cancel. Yes … cancel the transaction! Until the BINSR process is successfully completed, the transaction is very much “out on a limb”.

Alternative to Accept or Cancel – Negotiate

For the majority of transactions, neither the buyer nor the seller want the transaction cancelled over “fixable” condition issues. Even so, commonly, the buyer will list many, oftentimes all (very irritating where several very minor issues are included), of the inspection report items to be corrected, fully expecting the seller to say “No!” to some. The seller may not be able to correct the item(s) for some reason, or may not want to take the time for the correction(s) prior to the scheduled closing, or may feel that “as-is” the property is worth the contract price and no “fix-it” is justified.

When the seller is concerned about “Will the buyer cancel if I say no to some/all of the issues?”, the best approach is to have a verbal negotiation of the list commenced by the seller’s agent prior to doing anything with the BINSR. For many transactions, this will result in a seller BINSR response that’s acceptable to the buyer.

If the seller delivers a BINSR and one or more items is not acceptable to the buyer, the only solution, other than to cancel the transaction, is a price reduction. Remember … there are no “overs” … the buyer can’t change the fix-it list and the seller can’t change the response. The buyer’s agent would commence this negotiation.

If buyer and seller can arrive at an agreeable price reduction for the item(s) the seller is not to correct, the next step is to execute an addendum to adjust the price. Once the price has been formally adjusted, the buyer can then “Accept” the seller’s BINSR response.

Cancel

Of course, some “fix-it” issues may not be fixable as far as the buyer is concerned, or the seller’s BINSR response is not acceptable and agreement can’t be reached for a price adjustment. In that case, the buyer checks the cancel box at the bottom of page 2 and sends the BINSR to the seller and to escrow. This immediately cancels the transaction and the buyer gets full refund of his/her earnest money.

Buyer may Waiver Inspections – Rare

Very rarely, a buyer may choose to not perform any inspections or submit any sort of “fix-it” list by signing under “BUYER’S WAIVER OF INSPECTIONS” at the top of page 2 of the BINSR, leaving all items on page 1 blank, and delivering that BINSR to the seller. This entirely circumvents the inspection process.

SPDS (“spuds”) Connection to BINSR & Inspection

The SPDS has, by far, the most long-term liability for the seller … more so even than the Purchase Contract. A buyer can sue the seller years after the purchase if there was misrepresentation of a material issue on the SPDS … intentional or unintentional. The seller should fill out the SPDS carefully.

SPDS – Seller Property Disclosure Statement  This is the form the seller uses to give written disclosure to the buyer of what the seller knows about all aspects of the property. The Purchase Contract requires that this document be delivered to the buyer within three (3) days of “Acceptance”, defined above.

Very important:  The buyer should provide a copy of the SPDS to the physical inspector prior to the inspection to identify any items that should be given special attention.

Click here for a full discussion of the SPDS

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