Noblesville Real Estate News
I get lots of questions about and have to deal with lots of issues concerning home inspections when selling homes. Before I go too far, let me quote the standard Indiana contract when it comes to inspections and inspection issues. Here is exactly how the contract reads:
If the Buyer reasonably believes that the Inspection Report reveals a MAJOR DEFECT with the Property and the Seller is unable or unwilling to remedy the defect to the Buyer's reasonable satisfaction before closing (or at a time otherwise agreed to by the parties), then Buyer may terminate this Agreement or waive such defect and the transaction shall proceed toward closing. Under Indiana law, "Defect" means a condition that would have a significant adverse effect on the value of the Property, that would significantly impair the health or safety of future occupants of the Property, or that if not repaired, removed, or replaced would significantly shorten or adversely affect the expected normal life of the premises. BUYER AGREES THAT ANY PROPERTY DEFECT PREVIOUSLY DISCLOSED BY SELLER, OR ROUTINE MAINTENANCE AND MINOR REPAIR ITEMS MENTIONED IN ANY REPORT SHALL NOT BE A BASIS FOR TERMINATION OF THIS AGREEMENT. ALLTIME PERIODS APPLICABLE TO INSPECTION RESPONSES SHALL BE REASONABLE.
What does this mean? Well there is theory and there is reality. I will take a look at this from the buyer’s perspective since that is mostly what I deal with.
In theory it means you as the buyer have X amount of days, usually 7 – 10, do conduct a home inspection. This inspection could be a general inspection, a mold inspection, radon, etc. If you find something that is a “major defect” you may ask the seller to remedy the situation. If and only if they say they will not complete this requested repair are you then entitled to exercise your option to cancel the contract and ask for you earnest money back. As you can see, the language is somewhat vague stating “if the buyer reasonably believes the inspection reveals a major defect”. What is a reasonable? What is a major defect? The language does go on to clear up somewhat what a defect is “Defect means a condition that would have a significant adverse effect on the value of the Property, that would significantly impair the health or safety of future occupants of the Property, or that if not repaired, removed, or replaced would significantly shorten or adversely affect the expected normal life of the premises.” Keep reading and you find that if the seller disclosed, on the seller’s disclosure, the defect before hand you as the buyer have no right to terminate the contract and/or ask for you earnest money back. IT IS IMPERITIVE THAT YOU STUDY THE SELLER’S DISCLOSURES PRIOR TO MAKING AN OFFER OR INLCUDE AN ESCAPE CLAUSE THAT ALLOWS YOU TO REVIEW IT AND CANCEL THE CONTRACT.
Reality is different, but not too far off in most cases. If you are purchasing a home using a FHA loan a whole new set of issues can arise if the home is in need of repairs, but this will be the topic of another post. Also, if you are purchasing a bank owned home, short sale, or any other type of as-is property these inspections are for informational purposes only and the seller is stating from the get go they will do no repairs. Again, there is theory and reality in this as well, but this too will be covered in another post. Most of the time buyers ask for major and some minor items to be fixed after the home inspection. Most sellers are somewhat agreeable to the minor items and have them fixed. However, if the seller wants to dig in their heels and absolutely say no to fixing any minor items you must understand that is their right and you essentially have no recourse. If you are the type of person who needs everything 100% done with no onus on you to repair anything, I might suggest buying a new home where everything will 100% done and it is under a builder’s warranty for a period of time.
I think it is very important to have the right expectation when doing a home inspection. Some people think of home inspections as an opportunity to pick a house apart and ask the seller to repair every minor detail and/or negotiate thousands more dollars off the price. THIS IS INCORRECT. According to the contract, you are really getting a home inspection just to insure the home you are purchasing has nothing “major” wrong with it. If you understand this and with a reasonably level headed seller, most inspection issues can be overcome with relative ease and the contract can proceed towards closing.
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Date: Monday, August, 18th 2008 @ 08:59:35 AMViews: 528
This blog entry currently has 3 comments posted.
Patsy Snyder
Very good article. I try to remind Buyers that if they are looking at re-sale homes, there will be issues and they should only concentrate on the big ones. Buyers who want all things taken care of should, by all means, consider a new home.
Posted on 2008-09-10 11:07:49
Mike Taylor
I don't think Indianapolis is unfriendly to buyers, it actually seems quite fair to me. I have sold real estate in other states where it was more oriented towards the buyer and it never seemed fair to the seller that the buyer could back out of the contract for any number of reasons.
Posted on 2008-09-11 12:03:47
Don Drew
WOW! It seems that Indianapolis is not a buyer friendly place...Texas allows buyers to opt out of a contract for "NO REASON" during the option period .. and the only thing they lose is the option fee...
Posted on 2008-09-10 11:05:35