There was a time, several years ago before the great recession, when the standard residential real estate contract provided for a buyer’s inspection of the property and then, depending upon the results of such inspection, the seller was obligated to make certain repairs up to a designated dollar or percentage amount. If the repairs exceeded the designated amount, the parties had the right to cancel the contract and the buyers would have the good faith contract deposit returned to them. However, usually, instead of killing the deal, the parties, with the assistance of their realtors or attorneys, negotiated a resolution of the issues raised by the inspection report so that the transaction could be completed and both buyers and sellers could proceed with their lives without returning to square one with the buyer needing to find a new acceptable home and the sellers needing to look for a new qualified buyer.
Today, we face a market in which there is limited inventory and, while mortgages are at their lowest rates in modern history, being approved for a mortgage is much more challenging than in the past. This combination has led to the use of what is known as the “As-Is” contract. As before, the contract contains provisions calling for the buyer to have the property inspected. However, regardless of the results of the inspection, the seller has no obligation to make any repairs. The implication is that the buyer is left with a “take it or leave it” decision. However, this is not necessarily the case. As before, the parties, with the assistance of their realtors and/or attorneys can still attempt to negotiate a resolution.
Both buyers and Sellers need to keep in mind that finding the right house at the right price point and finding a qualified buyer may both present a challenge they may not wish to deal with. The buyer may want to take the property with its problems, providing that they are relatively minor and do not require any major expenditure of funds. On the other hand, the seller may concede to make some repairs in order to keep the contract in force. If a major problem is discovered, the price of the property may need to be renegotiated. In some cases, like a structural problem or a faulty or leaking roof, the mortgage lender may refuse to make the mortgage unless it is repaired. It is usually best to try to reach a mutually acceptable agreement in the form of an amendment to the contract for purchase and sale. From the seller’s point of view, the seller is now obligated by law to divulge to any new prospective purchaser, the defect(s) revealed by the inspection.
In conclusion, the old saying that “one in the hand is worth two in the bush” should prevail. The parties should try their best to try to reach a mutually agreeable resolution of their differences. If the matter cannot be resolved between the parties, the sellers may be left to find a new acceptable buyer and the buyers may be left looking for another affordable, acceptable home.