- Agents should be aware if their local health department is still operating and if they are still able to conduct necessary inspections of septic and well systems prior to sales closing.
- For sales in Ohio where there is a septic system involved, a deal could be held up or killed outright if the inspection does not occur.
- If a property that you represent cannot obtain a normal inspection prior to closing, you could be putting your client in a dangerous position in the future.
For a few weeks now, different departments inside different county governments have had to close or alter their day-to-day operations. Most of us realize that departments like the recorder’s office, auditors, or courts have been affected by COVID-19. How they have done so has not always been consistent with the same type of departments in the surrounding counties. One county department that many of us in real estate probably haven’t thought much about are the health departments. Like other offices, we are finding that many health departments are displaying inconsistencies between geographic areas. How some are now conducting, or not conducting, their day-to-day operations is affecting our industry and real estate agents need to know about this.
Agents should be aware if your local health department is still operating and if they are still able to conduct necessary inspections of septic and well systems prior to sales closing. In the three–county area that typically makes up the Youngstown-Warren market there are Mahoning, Trumbull, and Columbiana counties. From our personal investigation, we have found that all three are operating differently from one another. All made significant changes as a result of the same governor’s order to close when they were deemed not to be an essential business. How? Well, each board of health has interpreted that order in their own way. The result is that one county board, Columbiana’s, is not currently conducting any septic/well inspections at all while the other two counties have modified their inspections to only allow them for vacant properties.
Why should agents be aware or care about this? Well, for sales in Ohio where there is a septic system a deal could be held up or killed outright if the inspection does not occur. We won’t go into details about whether lenders, appraisers, or county laws allow for no test to be administered prior to closing. There are too many variables that can affect one deal from closing where another similar deal may see a successful end. The fact is, however, that many deals will encounter significant challenges from this.
What’s important and should be at the forefront of a professional REALTOR®’s mind are these facts:
- If you represent a client buying or selling a property with a septic system, you – as that client’s professional agent – should be aware of how that county’s board of health is currently conducting inspections. Once you have that understanding, you can provide good sound advice to both your buyer or your seller based on your findings. For example, you may want to have a seller get on a septic inspection waiting list early in a listing; or, let both your buyer and their lender know about any closed departments at the onset of negotiating a sale.
- If a property that you represent cannot obtain a normal inspection prior to closing, you could be putting your client in a dangerous position in the future… especially if it’s the buyer who is your client. Providing sound advice is one of the fiduciary duties of a REALTOR® and why people utilize the services of one. If a sale IS allowed to occur sans an inspection prior to closing, that buyer may be accepting the responsibility and financial burden of remedying any issue that the county finds when they are, finally, able to complete their inspection in the future. That’s a big deal.
Here’s a hypothetical
Say you represent a buyer who purchases a $100k property with a septic system on it. The county where that property resides cannot inspect the property before the closing date. Your buyer uses a traditional FHA loan to purchase and closes on the sale with $3,500 down and a $96,500 loan with the bank.
Three months later, the current quarantine is lifted. The county board of health gets back to doing business in their pre-COVID ways and finally gets to conduct a full inspection. Uh oh! Low and behold… they find some major issues with the septic system and fail it altogether. When that occurs, the county demands that the old system be removed/destroyed and a new system installed. “What’s that going to cost?” asks your client.
Let’s, for hypothetical sake, say the system is estimated to cost $20,000 – not at all out of the question in today’s world. How is the new owner going to come up with that in a short amount of time? That’s 20% of the total value of the property purchased! Can they borrow more from the bank? – probably not, right? They’d likely be underwater with the value of the home. Uh oh again! It isn’t hyperbolic to say that in a situation like this, it could be life-changing to your client – and not in good way.
That hypothetical isn’t that far-fetched. Yes, it’s based on a few assumptions, but they are reasonable ones. In fact, I’d argue that the biggest assumption is that a deal like that actually crosses the finish line and closes. There’s just about as likely a result of the bank/appraiser/recorder’s office/etc. killing the deal because of the implied risk with not having a full septic inspection. Nevertheless, lets assume that it can close…
If you represented the buyer, would you be representing them to YOUR fullest if you did not warn them of the possible consequences of what could happen??
Questions like this are for you to ponder and discuss with your company’s broker or manager. For the good of your clients, they are worth asking. A truly professional agent will have thought this over, discussed how they should act in this situation, and already know how they are going to provide consultation to those they have a fiduciary responsibility to.
So, how do we solve these potential issues?
That’s a heck of a long answer. Know that some in our industry have already made our representatives at the Ohio Association of REALTOR® (OAR) aware of their existence. Let’s hope that they can work with the State-level of government and find a consistent way that all county health boards can operate while also ensuring the safety and welfare of those inspectors.
In the meantime, the more information that we can gather on the subject, the better off those who represent our industry and REALTOR® issues will be. It’s the reason why this article was written. I’d ask that if you personally know how the boards of health are working, (or not working), that you take just a few minutes and contact me directly. We would like to compile an informal survey of the counties throughout Ohio where all of you work and live. To your knowledge, is your county still “open for business” and conducting all inspections – occupied home or vacant? Perhaps your area has changed to just vacant property inspections? Or… maybe your local board interpreted the governor’s order as a command to cease all activities 100%?
This newsletter reaches well over 65% of the agents in our State. The more feedback we receive, the more accurate data we can forward on to the policy-makers and representatives that work on behalf of us all. For those of you who can help, we thank you ahead of time!
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