7 Things To Know About Real Estate Property Inspections
Helping Real Estate Clients Since 1994
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:
1.- 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.
2. – 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 the full right to cancel the contract if dissatisfied with the results of any inspection.
3.- The seller usually writes-in a deadline within which the buyer must conduct the inspection. A cautious 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, more often than not, inspections occur within 15 days of the execution of the contract.
4.- 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 by the seller at a later date. The latter choice may give the buyer greater control over how the repair is done. However, depending on the type of financing involved (FHA, FNMA, etc.) the repairs may need to be completed before the transaction closes.
5.- 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.) Note, inspectors are only required to make a limited visual inspection of the property.
6.- In most contracts, if the cost to repair the damages noted on the inspection report exceeds the cap set for the seller’s liability for repairs, then either party may cancel the contract or agree to pay the additional expense. This provision isn’t applicable to as-is contracts.
7. 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 (normally, this relates to roof and termite issues).
For a deeper look into this topic, Larry wrote an article on his real estate blog which includes information about language to avoid in the inspection report: 10 Reasons To Have A Home Inspection In South Florida
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