Use contingencies as a safety net when buying or selling your home.
In this series, I talk about the contingencies found in a typical real estate purchase and sale agreement. Today, I’ll be discussing the STRUCTURAL INSPECTION contingency. It’s typically the second contingency date on the real estate sales contract time line. Normally, and I recommend this is always the case -especially for buyers, it overlaps and extends beyond the attorney approval period (see my blog on the attorney approval period at www.Maria Barr.com).
A typical time period for the structural inspection is 2 weeks. It makes sense to schedule your inspections as soon as you negotiate your contract. Schedule them for as soon as possible after your attorney approval date. Keep in mind we need to allow enough time for test results to come back from the lab (water, radon).
In rural locations, a septic inspection may need to be scheduled separately. Home inspectors can do a dye test for the leach fields but are not able to visually inspect the tank, you need a septic company to do this. (Don’t worry, your agent will help set up inspections if you need assistance!)
The structural inspection contingency allows buyers to re-evaluate their situation should “a SINGLE defect that would reasonably cost in excess of $1,500 to remedy” be found. Which means: if the roof needs to be replaced and would cost over $1,500 this contingency would kick in. A laundry list of small items addingup to $1,500 does not qualify.
A DEFECT OVER $1,500 IS FOUND...
What are the buyer’s options at this point?
1. The buyer may cancel the contract if he chooses.
2. The buyer may negotiate the repair by asking the seller to pay for some or all of it.
3. The buyer may decide to move forward with the purchase in spite of the problem.
What are the seller’s options?
1. If the buyer cancels the contract, the seller may put the house back on the market as it was or after performing the repair. The property disclosure must be updated to reflect the new information.
2. The seller can agree to negotiate, or may refuse to negotiate. Ask your agent for their advice, she will have a perspective on how long it may take to find another buyer if this contract falls apart.
Next time, I’ll be talking about the mortgage contingency. These are just the basics, every transaction is unique and you may find yourself faced with some situations not covered. Please feel free to contact me directly if I can help with any questions.