Pre-Settlement Walkthrough Report
A recent spat between brokers brings focus to this standard form. There is a broker who, like others, requires that all settled transactions undergo a review before the salesperson’s commission is paid. The review assures that management is supervising its affiliates and that glaring errors can be rectified with the appropriate education or other measures.
At issue is the broker’s demand that the closed file include a copy of the Pre- Settlement Walkthrough Report signed by the buyers and sellers. Apparently some brokers in the area do not require their agents to use the Walkthrough Report. If it doesn’t exist, how can the salesperson comply with his office audit?
This article addresses the purpose of the form, whether it is required and whether it should be used if not required by law. The form is a Realtor® form, created by Realtors® for use by Realtors®. Its use is not required by law, but it is a form designed to protect Realtors® and their licensees and their clients. I can think of no compelling reason why it shouldn’t be used in every transaction (though I am willing to consider the reasons you may wish to advance for its non-use).
Let’s begin with why buyers conduct pre-settlement walkthroughs. The agreement of sale is an executory contract where promises are exchanged and with full terms to be fulfilled by a later date. A buyer will apply for mortgage funds and make a payment at a later date; the seller will deliver the property at a later date in broom-clean condition and with certain items being repaired.
It’s usually easy to see that the buyer has fulfilled her side of the transaction. The title agent will assure that the funds are present or title doesn’t pass. When it comes to assessing whether the seller has completed his obligations, the title agent is in the dark. Only a pre-settlement walkthrough can shed light on whether the property is in its promised condition. Unless the title agent assumes that responsibility (and I am not aware of those who do) it is up to the buyer and her agent to assure that the property is in the promised condition. Accepting the property in a condition other than what was promised may result in a waiver of the seller’s duty regarding the property condition. So, it is essential that the walkthrough take place.