What your purchase contract should say if you are signing before the Home Inspection and/or Testing is done:
If you’re signing a contract before any inspection (general house, septic, oil tank, radon, termite etc.), be sure that your lawyer inserts a clause stating that the sale is contingent upon a home inspector’s report indicating that no repair or replacement above $500 is needed. The $500 figure is typical, but you can modify it upwards or downwards.
Here’s a sample contingency clause, which you might review with your advisers and adapt to your own circumstances:
“This sales agreement is contingent upon receipt of a structural, mechanical, and electrical inspection, and certain environmental testing, of the house and a condition report by (inspection company). The cost of this inspection will be assumed by the buyer, and the inspection will be performed within seven (7) days (typical – you can always make it longer) of the signing of this agreement.
If the condition report reveals any structural, mechanical, or electrical defect(s) for which the cost of correcting any such defect will exceed (insert amount here), the seller will have these options:
- Effecting the necessary correction of the defect(s);
- Negotiating the cost of correcting the defect(s) with the buyer;
- Declaring this agreement null and void.
In the event that the seller does not exercise any of these options, or cannot negotiate the cost of repairing the defect with the buyer, and if the buyer does not choose to ignore the defect, the buyer will have the right to declare the agreement null and void. Should either party to this agreement make such a declaration, any deposit made by the buyer shall be refunded in full. All options must by exercised within seven (7) days (typical – you can always make it longer) of the inspection date.”
Some contracts provide that the seller must make repairs up to a certain amount-say, $1,000. If the seller won’t go along, the buyer can proceed anyway (he or she may decide that the house is still a bargain). If neither seller nor buyer agrees to make repairs above that set amount, either can cancel the contract.
Buyers should make certain that repairs are done to their satisfaction. You don’t want a roof patched when it should be replaced. Your home inspector can guide you.