The Final Step: Pre-settlement Walkthroughs

One small section in Form ASR that generates an outsized number of questions on the PAR Legal Hotline is subparagraph 12(A)(2), which talks about the buyer’s right to two pre-settlement walkthrough inspections:  “Buyer may make two pre-settlement walk-through inspections of the property for the limited purpose of determining that the condition of the property is as required by this agreement and any addenda. Buyer’s right to these inspections is not waived by any other provision of this agreement.” It’s two sentences, fewer than 50 total words, but they’re sometimes made into more than what they’re intended to be.  

Question 1: What is the scope of a pre-settlement walkthrough?  

A pre-settlement walkthrough is strictly to allow the buyers an opportunity to look at the property and make sure that it appears to be in the condition stated in the agreement. It is not an opportunity for the buyers to have an inspector walk through the property. If buyers elected inspections, the elected inspections are just inspections  — they’re not a walkthrough. And if the buyer waived inspections, then there shouldn’t be an inspector with them unless the seller gives permission. 

It is also not an opportunity to bring in a contractor to measure and provide quotes for potential renovations, nor is it the buyers’ chance to showcase the property to their close friends and family. If buyers want someone to attend a walkthrough with them, they need to ask permission from the seller (and then abide by the seller’s decision). 

Buyers should take the two pre-settlement walkthroughs as an opportunity to ensure that agreed-upon repairs have been completed, fixtures and appliances are intact (unless otherwise stated in paragraph 7 of the ASR) and there’s no new damage or similar issues that occurred after entering into the contract.  

Question 2: What are the seller’s responsibilities for pre-settlement walkthroughs?  

Under the agreement, the buyer’s right to conduct the walkthroughs is not waived by a buyer who waives some or all of the specific inspections in the inspection contingency. Even if buyers waived those inspections, they still have the right to do two pre-settlement walkthroughs. Sellers’ responsibilities for a pre-settlement walkthrough include providing access to the property, with the utilities on, so that the buyers can assess the property’s condition during the walkthrough. If buyers are requesting an opportunity to do a walkthrough when there is a scheduling conflict or an odd time of the day, then it should be worked out accordingly. However, sellers cannot make it difficult for buyers to have their pre-settlement walkthroughs and cannot demand the exact date and time that buyers will do it.  

A quick note: Under paragraph 4(G) of the ASR, the seller is obligated to provide possession of the property “free of all debris” (e.g., trash, yard waste) with all structures broom-clean, at the day and time of settlement. Buyers don’t always do their last pre-settlement walkthrough on or right before the settlement date, so it is recommended that the seller has the property “broom-clean” a bit before the settlement date, if possible, to avoid any potential issues that could arise.  

Question 3: Can buyers who waived all the individual inspections demand repairs for conditions they “discovered” on a walkthrough, even though those conditions have been present and would have been easily discovered during a home inspection? 

Well, they can always ask, but that’s not the point of the pre-settlement walkthroughs. Paragraph 25(B) clearly states that “Buyer has inspected the property (including fixtures and any personal property specifically listed herein) before signing this agreement or has waived the right to do so and agrees to purchase the property IN ITS PRESENT CONDITION, subject to inspection contingencies elected in this agreement.”  

The point of a pre-settlement walkthrough is that buyers should be checking to be sure that the property is in the same condition that it was when they signed the agreement (“in its present condition” when the contract was signed), or that it’s in the condition negotiated between the parties via the “inspection contingencies elected in this agreement.” If the buyer chooses not to investigate the condition of the property before signing or to make it subject to an inspection contingency, they will have minimal information on the condition of the property before the walkthrough, so the seller may not be required to address any of these persistent issues that the buyer only discovers late in the transaction. 

Question 4: The buyers conducted their two pre-settlement walkthroughs, but … fixtures are gone, repairs agreed upon were not completed, and the house is still a mess with settlement tomorrow! What are my buyers’ remedies?! 

First, a brief mention on fixtures: check the agreement of sale to see what was included or excluded from paragraph 7. If the fixture was included in the agreement, then your buyer needs to speak with an attorney about the next steps. If repairs were not completed as agreed to in a final Form CTA signed by both parties, then buyers need to determine if they want to extend the contract until repairs are completed, close the transaction with a potential escrow agreement to ensure the repairs are made, or maybe even argue that the sellers’ failure to perform under the terms of the contract was a default (after speaking with an attorney, of course). The worst-case scenario is that the parties don’t settle based on the conditions the buyer saw during the pre-settlement walkthroughs. If that’s the case, then paragraph 26(C) of the Agreement of Sale will control what the parties do next.  

The buyers’ two pre-settlement walkthroughs are not inspections, but can be just as important to close the transaction. They are the buyers’ final steps to ensure the property is in the condition it was when they entered the contract. Sellers have rights during the pre-settlement walkthroughs regarding who can attend and what buyers are allowed to do during the walkthroughs. Prepare both your sellers and buyers on expectations during the pre-settlement walkthrough process — it could save the transaction from falling apart!