How A Well Written Purchase Contract Can Protect You
When you and your agent write a purchase contract for a new home, one of the main things to understand is something called the ‘inspection contingency.’ ‘Inspection’ refers to the right for you as the buyer to have the home physically inspected for damage by a qualified home inspector. The word ‘contingency’ means that the contract is written in such a way as to protect you (the buyer) in the event of an unforeseen discovery or circumstance.
The Home Inspection
You’ll want your purchase contract to specify your right to hire a registered home inspector to go over the home from top to bottom looking for problems. Your goal is to identify items that are deficient in that they are currently unsafe or could cost you a significant amount of money to replace or repair in the near future.
You are looking for those items that adversely affect habitability. These could be structural issues, unsafe electric service, non-functioning septic system, contaminated well, or a bad roof for example.
Basic maintenance items and things that are readily apparent cosmetic deficiencies may make their way into your report and are good to know, but do not necessarily constitute an adverse habitability issue.
Your agent can refer a home inspector to you if you need a referral. A good home inspector is an invaluable resource. They can’t see the hidden or invisible of course, but they can certainly help you avoid buying someone else’s problems.
The Results Are In – Now What?
Suppose the final inspection report tells you the roof on the house is at the end of its useful life. You have the right per the purchase contract to ask the seller to replace the roof. One of three things is likely to happen.
- One, the seller agrees to replace the roof and you go ahead and purchase the house.
- Two, the seller refuses to fix the roof and you have the option of proceeding with the purchase anyway, or, walking away from the purchase entirely because your purchase was contingent on favorable inspections.
- The third thing that could happen is that the repair becomes another point of negotiation. For instance, the seller may find a roofing contractor willing to repair the roof at the seller’s expense and guarantee its useful life for a certain number of years. If you are happy with that then you go ahead and purchase the house. If you are not satisfied with what the seller is willing or able to do, we start looking for another house.
Two Other Possible Contingencies
There are a couple of more things your purchase could be contingent on. First, your offer could be contingent on you successfully obtaining mortgage financing. If you were already pre-qualified with a reputable lender before you started looking at houses, there should not be an issue. However, if your financing were to fall through at the last minute, you will not be obligated to complete the purchase. Your purchase is contingent on your ability to obtain financing.
The second thing you may want to include in your purchase offer is a contingency based on the sale of the home you own now. If you don’t own a house now this does not apply. If you do have a house and must pay off that mortgage to obtain a mortgage on the new house, then you will want to make your purchase contingent on the sale and closing of your current home.
What’s The Point?
The point is, we want to do all we can to protect you. If you want to learn more about the home buying experience, click here, for a free download of my latest book Your Guide To Becoming A Home Buying Jedi Master – The Eight Mindsets That Make The Difference Between Home Buying Success and Disappointment. Fill out the form below and we will email it to you ASAP.
