How much to disclose pre-inspection

Had an interesting issue pop up on a brokerage deal yesterday.

After we inspected, we received the prelim and transfer disclosure statement, both of which indicated that a fence ostensibly on the property we are considering buying is actually encroaching on a neighbor’s lot. Clearly, seller was aware of the situation prior to us inspecting.

The question is: Should seller have disclosed this to buyer prior to buyer spending a bunch of time / money on inspections?

Per the contract, seller had 3 days from date of execution of the purchase agreement to provide buyer with all of the diligence material, including the disclosures (which would have alerted buyer to the encroachment). And, indeed, buyer could have waited to carry out inspections until after receiving the relevant documentation.

In the event that documentation was delayed, the contingency period would have been extended to five days after receipt of the last piece of documentation, enough time that buyer could still have carried out his inspections with time to spare.

So, why did I have the buyer move forward with inspections before receiving the docs? In two words, “good faith”.

I’ve found in brokering and in buying properties for myself / my funds that showing good faith in the beginning of the deal is extraordinarily helpful in moving things forward to completion.

There are plenty of bozos who tie properties up with no ability / little intent to close. Brokers find out they’re in escrow with a buyer like this when they go into contract and the buyer delays the inspection. That’s an immediate “bozo flag”.

Therefore, I like to be pro-active and move forward with the inspections immediately. Yes, every once in a while, this results in a buyer (sometimes me!) spending money that he could have avoided spending.

On the other hand, 100% of the time, it will send a strong, positive message to the seller that we are serious and making a good faith effort to close the deal. There are plenty of times during the course of every deal where the other side can either give you a break or make your life miserable. My experience has been that, if you go out of the way to show you’re not a jerk early on, you’re much more likely to get the benefit of the doubt if/when you need it later on.