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.
Wisconsin real estate buyers are well protected in the house buying transaction. At least they are protected to the extent the Seller and licensees comply with their duty to disclose conditions which may adversely affect the transaction or the property.
Sellers of 1 to 4 family residential properties are required to complete a Real Estate Condition Report (RECR) and provide the report to the Buyer within 10 days of the accepted offer. It’s not illegal for a transaction to close without the RECR being provided. Instead, the law extends rescission rights to the buyer who does not timely receive a RECR.
A buyer who does not receive a RECR, and used the Wisconsin approved offer to purchase form will have affirmative statements from the seller representing they have no notice or knowledge of specific conditions which may be defects or material to the transaction. Unless the provisions are deleted or a counter offer is prepared to override the affirmative condition statements in the Offer, much of what is on the RECR is addressed by the seller in their acceptance of the Offer.
If the Seller declines to adequately complete the RECR the licensee still has an obligation to disclose to the seller and the buyer adverse conditions he/she is aware of from a limited inspection of the property.
A consequence of this hyper active seller’s market may be a loss of attention to disclosure obligations. I’ve heard attorneys say their post closing complaint cases have increased in the last two years. I’m not surprised. Whether a person resents having been pressured to pay more or accept conditions without an opportunity to do discovery, adverse conditions, the extent of which are unknown until after closing are likely to bring the buyer and seller together again, and this time with lawyers instead of real estate licensees.
Suggestion: Sellers who correct, prior to listing, and fully disclose adverse conditions are better protected from a claim of failure to adequately disclose. I understand some people will shy away from a home with a condition report acknowledging defects, even those which have been repaired. It’s safe to say the person who would not consider the house because of a known condition would be a prime candidate for suing a seller who didn’t disclose. Licensees who complete a pre-listing inspection of the property and document their findings in writing will have what they need to conduct an appropriate pre-listing discussion of the property condition with the seller.