Contact to Close: Resolve Inspection Issues
Once a buyer has a physical inspection done on the property, it’s now
time to see if both sides can come to agreement in terms of how to resolve the issues
that are discovered from inspection. The inspector will provide a report
usually within a day, and this documents the items that he or she found when
looking through the property. These reports often include pictures and can be
shared with the other party if the buyer wishes.
Negotiation following inspection usually happens through the buyer’s
and the seller’s attorneys. This is because contracts often allow a five-day
period for modifications on the contract to be requested, and they also often allow
up to 10 business days after the contract is signed to have any requests to be
agreed upon. If agreement is not reached after ten business days, then either
side is free to walk away from the deal without penalty.
Inspection issues can arise from many sources. A single family home or
a condo could have issues within the building such as mold, malfunctioning
appliances or HVAC equipment, and shoddy workmanship with doors not closing
easily, etc. Depending on the problem and the number of requests made by the
buyer, an owner might decline to resolve an issue, resolve the issue by fixing
the problem, or provide some sort of financial compensation instead of fixing
it (usually in the form of closing credits that offset what the buyer will pay
at closing). If a buyer has a laundry list of requests to fix insignificant
problems (like a squeaky door hinge or a spot of paint), they run the risk of
souring the seller’s disposition to working with them. Usually a seller will
offer some kind of remedy though even if it’s a small financial credit. On one
occasion my clients made numerous requests, and since the seller was extremely handy
he simply fixed most of the items himself since it was easier for him to do so
than most people who would have to hire plumbers, electricians, or other
specialists. Another client recently requested a seller fix a number of
electrical outlets that were installed with reverse polarity, and the seller
simply offered a $1,000 credit for this and other problems instead of going through
the trouble of having an electrician come over.
If the property is a condo, the home owner’s association (HOA) throws additional
factors into the resolution. A discovered issue with the home owner’s association
(HOA) may be an obstacle even if the condo itself has no problems. For example,
a recent client found out after their offer was accepted that there was a roof
problem and the HOA was figuring out whether it would be covered by insurance or
whether each unit owner would have to contribute out of their own pocket
through a special assessment. At first the seller agreed to cover any cost that
was assessed before the closing date (transfer of ownership), but since we decided
it was likely that this decision would happen after my clients closed we eventually worked out a solution where
they set aside money in an escrow account that my clients would receive in the
event that they had to pay a special assessment for the roof (otherwise the
seller would get it back after a year).
If both sides cannot come to agreement within 10 days, the deal is not dead
unless one side decides to walk away. It is fairly common for one of the attorneys
to request an extension on attorney review in order to continue the
negotiation. More often than not both sides would rather see the deal work out,
but if one side thinks the other is unreasonable and unwilling to budge… that
might sink the deal. Once inspection requests are agreed upon and any other
issues the attorneys need to sort out are taken care of, attorney review is
completed. This is a major checkpoint in the contract to close process.
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