Are sellers required to pay all inspection costs that the VA prohibits a buyer from paying?

QUESTION:  I represent a seller. A buyer submitted an offer that was substantially below the listing price. In paragraph 5(a) of Standard Form 2-T, the buyer represented that she intended to obtain a VA loan. My client eventually agreed to a lower purchase price but he also crossed out buyer’s figure in paragraph 8(i) of the contract and inserted a zero to indicate that he would not pay any of the buyer’s expenses associated with the purchase of the property. The buyer applied for a VA loan and the lender has required the buyer to obtain several inspections. The lender has said that these inspections must be at the seller’s expense. The buyer’s agent called and told me it was up to the seller to pay those expenses. Is she correct?

ANSWER:  She is not. The language of the FHA/VA Financing Addendum (Standard Form 2A4-T) expressly states that if the Department of Veterans Affairs requires certain inspections, they may or may not be required to be at Seller’s expense. Form 2A4-T then states: “If such inspections are required to be performed and are required to be at Seller’s expense, Seller agrees to pay the costs of such inspections, subject to the limit set forth in Paragraph 8(i) of the Contract.”

Paragraph 8(i) of the Contract states: “Seller shall pay at Settlement $__________ toward any of Buyer’s expenses associated with the purchase of the Property, . . .including any FHA/VA lender and inspection costs that Buyer is not permitted to pay . . ., less any portion disapproved by Buyer’s lender.” The Guidelines for completing the Contract (Standard Form 2G) instructs, in bold print, that the figure inserted in the blank in paragraph 8(i) include any FHA/VA lender and inspection costs (seller mandated fees) to be paid by Seller.

If the parties ignore this instruction, and the Contract is signed with a zero in paragraph 8(i), the Seller has not agreed to pay any “seller mandated fees”. If a buyer’s agent allows that to happen, and if the VA lender insists that the inspection costs not be paid by the buyer, then it is likely the buyer’s agent who will end up paying those costs in order for the transaction to proceed. For buyers’ agents to be safe, if Form 2A4-T is a part of a purchase contract, the amount inserted in paragraph 8(i) should never be zero.

Release Date: 2/28/2017; revised 08/22/2017

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