subject: Buying A Home - When Is The Best Time To Remove Your Inspection Contingency? [print this page] In the home buying process, you'll want to incorporate an inspection contingency into your purchase contract. After the inspector has completed the inspection report, you'll find out all the defects and problems a home may have.
Once you completely dissect the report, you'll need to make a decision if the defects can be fixed and if the property is habitable; which party is going to take care of the repairs; and what alternatives there are when both parties are unable to negotiate a successful agreement on who foots the bill for the repairs.
Let's review these concerns 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 Will Fund The Renovations? - Your initial gut reaction may be the seller should foot the bill for all the required renovations, but if you try to negotiate for the seller to be responsible for too many repairs, he or she may walk away from the deal. However, if you know the seller is desperate to unload the property, you may be able to ask the seller to cover a majority of the repairs. But if you're trying to buy in a super hot real estate market, you can't afford to be picky, otherwise the seller will pass your offer for the next one in line.
3) How To Manage The Renovations - After you come to a decision who will cover the renovations, you can manage the repairs using the following methods:
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) Deduct The Estimated Repair Costs From The Purchase Price - If you can convince the seller to drop the sales price by the amount of the repairs, you'll save money from lower property taxes (if applicable) since the sales price will be less.
c) Make The Seller Responsible For Completing The Renovations - This should be your last choice. A seller has little incentive to invest their profits into fixing a home they won't enjoy. It's not surprising most sellers will hire an inexpensive repairman, or even worse, attempt to complete the repair on their own.
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.
