Real Estate Round-Up: Septic system – not a dirty word
Last updated 10/2/2020 at 5:27pm
Last week I wrote about the unpredictability of appraisals. Appraisals can be one of the biggest checkmates in the escrow process. One other challenging component of many of the transactions in Fallbrook is the septic inspection and certification process. This inspection, if requested by the buyers, is required to be completed and provided to the buyers within seven days of acceptance of the offer.
Many of you understand septic systems because your home utilizes this self-contained waste disposal system. It's a simple system that operates until it doesn't. Buyers need to include with their purchase agreement, a form, the Septic, Well and Property Identification Addendum (SWPI).
If it is included, the sellers, if they agree, must have the septic tank tested (a 20-40 minute water test is performed), pumped, list any repairs needed, and complete the repairs so the "system" can be certified. Sellers generally agree to this request, since having an operational septic system is a health condition.
Sounds like a simple process, right? If agreed to at the time the purchase agreement has full acceptance, the septic inspection, repair, and certification is no longer negotiable. The seller understands that they will have to do what is required, if anything, to provide the certification to the buyer and the buyer can have confidence in the fact that they will have an operational septic system when they close escrow.
For us, the timing of all of this can be challenging. If it were me, I would want someone else's waste removed just before escrow closes. The SWPI, however is included under the "reports" definition of the purchase agreement, so the seller, unless they counter the timing, are required to provide the certification within seven days of acceptance. There are pros and cons to adhering or countering out the timeline.
The pro of adhering to the timeline is that the seller has completed the inspection and provided the report to the buyer who now has the time to review the report and accept or reject the report, within the 17 day contingency period allowed the buyer.
Imagine that the seller has the septic inspected and discovers that they must perform repairs to the leach field. Having lived in homes for the past 30 years that had septic systems, I understand repairing/replacing a leach line is not a huge obstacle in most cases.
But think of the buyer who is coming from a home that is on sewer and who has a Realtor who is also coming from that same perspective. This repair may cause undue concern and even doubt over continuing with the purchase.
Remember, the seller has already agreed to do the repairs and provide "certification" on the system. With or without the need of a "repair," a certified system is a certified system. It works.
The pro of countering the timeline out to a later date, closer to the close of escrow, is critical. Septic certification is good the day the septic system is inspected and tested. Remember what I said before: septic systems work until they don't. Roots can grow into a leach line. The inlet or outlet T's can break down.
Just like a dishwasher, heater or toilet can work one day and then stop working the next, septic systems are the same. One day they function and one day they don't.
Delaying the inspection is important because the seller gets to perform one of the potentially more expensive reports/repairs, after the buyer has removed all their other contingencies, like disclosures, pest report, appraisal and loan approval. This way, the seller is making this large commitment, once they know the buyer is all in. It also provides a "cleaner" transition for the new owners.
I want to share two stories with you. Recently, we received an offer on a property with a septic. The buyer's Realtor didn't include the SWPI, so the seller was not required to test, pump or certify the septic system. The buyer's Realtor was from out of the area and so was the buyer, so we shared the information with the seller and proceeded to write a counteroffer addressing other items of the purchase agreement and addressing the septic certification.
In that counteroffer, the seller requested that the septic inspection process not be performed until the buyer removed all their other contingencies. That buyer's agent should have been thanking the seller for protecting them on this critical and potentially expensive item, but instead, in the buyer's counteroffer, asked that the septic be done immediately and included within the seven day time period to deliver all reports.
The offer was good otherwise, so the seller agreed to do the early inspection. The seller had performed, in good faith, all duties they agreed to do within the purchase agreement. We were set to close escrow in a week and the buyer, who had still not removed all their contingencies, canceled. Wow!
The seller now had a septic certification that was only good the day it was performed, and they had no buyer. Because of our relationship with the septic company and the property being vacant, the septic inspection company said they would still be able to certify the system for an additional 60 days. Fortunately, the home went right back into escrow and the potential expense for the seller was averted.
Now for a funny story. Approximately eight years ago, we sold a property that was on septic. The buyer and the buyer's Realtor were from out of the area. The septic inspection was delayed until the buyer removed all their contingencies. Timelines were good, all was set to proceed.
The buyer's Realtor called my husband to ask when the septic company was going to come out to dig the system up to verify that it was working. We asked her what she was referring to. She thought that inspecting the system required digging up the leach field to make sure it was leaching. It required multiple conversations with the Realtor and her broker to educate them on what inspection of a septic system involves.
There are multiple times that negotiations occur within a real estate transaction. Septic is just one more place where having a professional, educated, local Realtor will help you through the process. Here's to keeping things clean.
Kim Murphy can be reached at [email protected] or 760-415-9292 or at 130 N Main Avenue, in Fallbrook. Her broker license is #01229921, and she is on the board of directors for the California Association of Realtors.