Inspection Contingency

The inspection contingency in the Wisconsin Offer to Purchase is designed to permit a buyer reasonable time and access to the property to complete their due diligence.  A definition of “defect” was added to the agreement to create some objective criteria for a defect.  Objectivity is not a strength of the definition. Defect is still subject to the opinion of the buyer and seller. (Not the licensees. Our opinion is not relevant in the conversation.)

To deter a buyer from objecting to only the defects which are worth losing the property over, the contingency was built with a lever on the Seller’s side.  Here’s a visual of the deterrent: Buyer discovers a few defects he wants cured prior to closing.  The Buyer approaches the Seller with a NOTICE of Defects in his hand. Standing in front of the Seller, on a trap door, the Buyer gives the Notice to the Seller. The Seller receives the Notice and reads:  Buyer objects to the following defects identified in the attached inspection report.  The Seller has the Notice in her left hand, and her right hand is on a lever.  With no explanation required, the Seller who has been Noticed, may pull the lever, opening the trap door, and send the Buyer away.

A less risky approach could be attempted first. A buyer could offer a written amendment to the seller requesting the seller agree to a specified resolution. A repair prior to closing or a price concession are typical.

Beginning with the amendment, a Buyer retains the right to deliver the Notice prior to the deadline for delivering the Notice.  Some issues are worth the risk to some buyers. No one should take the Notice step without weighing the cost of the Seller’s choice.  On the other side, before a Seller terminates an offer because of a Notice of defects, a Seller may want to consider their obligation to future transactions now that they have some information about a condition they did not have prior. Buyers trust that the fact the owner will have to contend with the issue to satisfy the next buyer is enough to motivate the seller to cure the defects and not terminate the Offer.

Just my opinion, but people waiting in secondary positions are likely to accept a condition the first buyer would not, or because they are the fresh face waiting in the wings, Sellers are receptive to giving the next buyer something they would not give the primary buyer.  A human nature thing.

 

Author: Tom Meyer Real Estate Broker, Madison, WI

I believe the difference between an accepted or rejected real estate offer to purchase is the drafter's ability to customize the Offer to reflect the Buyer's commitment. Ready, willing, capable, committed, sincere people can out negotiate higher priced offers by moving away from standardized forms. Ask me how.

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