7 Things To Know About Real Estate Property Inspections
An important provision of the residential real property sale and purchase contract is the inspection clause. A buyer will want the opportunity to have an inspection conducted to verify the condition of the property. There are important issues to be aware of with inspections, including:
- Sellers generally are obligated to pay a certain dollar amount or percentage of the contract sales price to remedy defects or damages that are found during an inspection of the residence. A seller will be concerned about limiting his or her ability to repair defective items noted on the inspection report and will seek contract terms that cap the dollar amount he or she must pay for such repairs.
- The seller may attempt to avoid any exposure for repairs by including an “as is” clause in the contract and giving the buyer a chance to inspect the premises. In this event, the buyer has full right to cancel if dissatisfied with the results of any inspection.
- The seller usually includes a deadline within which the buyer must conduct the inspection. The buyer will want the inspection deadline to be sometime after the financing contingency is met so he or she will not prematurely expend money for an inspection. However, it should be set far enough in advance of closing to prevent last minute problems.
- If it appears that substantial repairs are needed, the parties may extend the closing date or, alternatively, may choose to put funds into escrow for the completion of the repairs at a later date. The latter choice may give the buyer greater control over how the repair is done.
- Inspectors frequently report all needed repairs, including those that are not necessarily the seller’s responsibility. To avoid disagreement, delay, or litigation over these matters, some Contracts include an inspection clause that obligates the seller to deliver items in “working condition” (as compared to “cosmetic” repairs.)
- If the cost to repair the damages noted on the inspection report exceeds the cap set for the seller’s liability for repairs, either party may cancel the contract or agree to pay the additional expense.
- If the property is financed by an institutional lender, the lender usually will require the buyer to submit an inspection report. If the result of the inspections reflects the need to repair certain items, the lender may require the repairs to be made before closing.
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