subject: Buying A Home - Removing Your Inspection Contingency [print this page] When you purchase a home, your contract should contain an inspection contingency. Once the property has been inspected, you'll receive an inspection report detailing all the hidden flaws or problems.
Upon a thorough review of the report, you'll need to decide if the problems can be fixed and whether you can reside in a house if they can't; who pays for the repairs; and what course of action can be taken should both parties be unable to come to an agreement on who pays for these repairs. Let's go over these issues one by one:
1) Can The Flaws Be Eliminated? - Contact an experienced home inspector or contractor and determine if the problems can be fixed and what the cost will be. A concrete foundation that's slowly sinking over time can't be corrected easily, but an incorrectly plumbed bathroom can be easily corrected.
Once you determine the problem is too difficult to renovate, you need to reconsider if you're still interested in purchasing the property. Completing a large repair job will easily take several weeks and may force you to check out other properties. Reviews of some state regulations permit a seller the opportunity to remedy the problems before you're allowed to terminate the deal. If the defect ends up being virtually irreparable, you have a good chance of canceling the deal.
2) Who Covers The Repairs? - You might think the seller should be responsible for all repairs, but if you bombard a seller with too many requests, the seller may refuse to sell the property to you. But if you know the seller is in a bind and wants to sell quickly, you can push for more concessions to have the seller cover more repairs. But if you are facing competition from other homebuyers, you may want to keep your request to a minimum.
3) How To Handle The Repairs - Once you decide who will be responsible for certain repairs, you can arrange to have it completed in the following ways:
a)Convince The Seller To Credit Your Account At Closing - Rather than having the seller receive the entire funds from the sale, you can have the seller transfer money into a special designated account to be utilized for the renovations you've both agreed upon. You can withdraw funds from the account on an as needed basis to cover the agreed upon repairs.
b) Lower The Sales Price By The Estimated Repair Costs - If you can get to the seller to drop the sales price by the amount needed for repairs, you'll benefit from lower property taxes (if applicable) since your purchase price will be lower.
c) Let The Seller Make The Repairs - This should be one of your last options. The quality of repair work can be inferior as a seller will save money by using a cheap handyman or, even worse, try to do the repair themselves.
d)Request The Seller Cover The Bill For Your Contractor - At first glance, this option may seem appealing, but if you run into unforeseen problems, the renovations could take longer than expected and delay your closing date.
If you're applying with a regular bank, they may require you to finish the repairs before the deal's funded. If you have no other choice but to use your own funds to cover the renovations, you may want to inquire if your lender would be willing to include the repair expenses into your home loan.
