BINSR … referred to as the “binzer”
The Buyers Inspection Notice and Sellers Response, the BINSR, is probably the most complicated two pages involved in an Arizona residential real estate transaction and nearly as important as the purchase contract. 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.
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.
The BINSR is just a form … the design of which is very carefully tailored to follow the notice process outlined in Purchase Contract sections 6i and 6j … that is NOT part of the purchase Agreement, cannot be used to change the Agreement, and is NOT delivered to escrow. The BINSR is just a very specialized form for very specific communications between buyer and seller. This is further explained below under “Alternative to Accept or Cancel”.
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. Some great info regarding inspections … Arizona Home Buying Inspections … Home Purchase Inspections – Vital – Tricky
Step 1 – Buyer notice to Seller
With the day of “Acceptance”, which is 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
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.
Licensed Contractor Specification – NOT Valid
Very commonly, buyer agents include words similar to the following for disapproved items … “… work to be preformed by a licensed contractor.” The Purchase Contract specifies otherwise. Section 6j(2)(b) specifies ” … complete any repairs in a workmanlike manner …”. AZ law requires the work be perform by a licensed contractor only if cost of repair of the item is more than $1,000. For such items, the seller’s agent can respond … “Repairs will be completed consistent with PC section 6j(2)(b) and Arizona law.”
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.
Step 2 – 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 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.
Step 3 – Buyer Response to Seller Response – OK or Cancel
Where the seller is indicating that he/she is not going to fully and entirely comply with the buyer’s demands, 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 of the seller’s responses 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 acceptably, 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.
IMPORTANT … agreement for a specific price reduction, or any other contract change, on the BINSR does NOT change the contract. An addendum to the contract for all changes must be executed and signed by all parties to the contract, then submitted to escrow prior to closing, to affect any changes agreed to in the BINSR. The BINSR is NOT part of the contract. The BINSR is just a form specifically designed to facilitate the communications required by the process outlined in Purchase Contract sections 6i and 6j
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
Buyer Advisory … if you are considering buying or selling AZ real estate, whether you’ve done 27 transactions or none, this is a document you need to study … not just read … study. The guidance and information in this succinct-but-comprehensive, well-written document is essential to fully successful real estate results.
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