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Due Diligence Vol.2 . . After The Home Inspection What’s A Buyer To Do?

Mar 09

filed under: Buying A Home, Home Inspections, Real Estate

Inspection Report and KeysIn my first post on Due Diligence Vol. 1  Home Inspections, we went through what you can expect to take place, who will do the home inspection, how much they cost etc. sort of the basics if you will. Now that your home inspection has been completed and you have that quarter inch thick report that your home inspector has provided you, what’s next? The answer to that question will depend on what’s in the report and if you choose to proceed with your home purchase. So what are your options?

You may need to have a licensed contractor or contractors come out to the property for further evaluations and cost estimates.

First, often with these home inspection reports things are not as bad as they appear. What we are going to want to do after you have had a chance to really go through the report yourself is sit down and go through it together to find out the items that are really a concern to you. If there are some items that require further inspection by an outside licensed contractor, such as something to do with the roof, we will work with you to find a roofing contractor to come out and look at the roofing problem that the inspector called out in your report. In this example the roofer will give an opinion about the roof issue and provide you with the cost to fix or possibly replace the roof.

Minor items can still add up, but sometimes a good handyman can do the job for less money than a licensed contractor.

In another situation there may be several items that require attention that can be taken care of by a “handyman” rather than by a licensed contractor. I know some agents may freak out that a “licensed contractor” isn’t going to be repairing a hole in the wall or replacing a couple of cracked floor tiles, but come on, there are some very good handy men out there that can take care of these types of items.  Again its a matter of having a handyman come out, look at all of the items and once again provide you with a number to fix all of the items. What we are trying to accomplish in both of these scenarios is to determine how much money we are looking at so you can make an “informed” decision before we proceed to the next step.

The Buyers Inspection Notice and Sellers Response, the “BINSR” and the options you have.

  1. Your first option available to you is that you can inform the Sellers in writing that you do not wish to go forward with the contract and your earnest monies will be fully refunded to you.
  2. Your second option is for us to prepare what is called a BINSR (Buyers Inspection Notice and Sellers Response). In the BINSR we will document your request for the Seller to repair all items or some of the items that are of concern to you in the inspection report. There could also be items that are not functioning that you can request that the Seller replace.
  3. The BINSR is also used to request the Seller to address additional issues that may have been found outside the confines of the home inspector’s report, i.e. the termite/pests report, pool report, any environmental issues etc.
  4. Another option available to you is to not ask the seller to make any repairs or replace any items that may have been found in your inspection report or any other reports prepared by other licensed contractors.

The Seller has five days to respond to the BINSR and he has options too. After all negotiations have been done, it’s decision time. . .

If you choose to do option number 2 and or 3 the Seller will have five days to respond to your requests.  Outside or separate from the BINSR, the seller also could offer you a credit at closing against the purchase price of the property.

The following are situations that could occur when a Seller responds to a BINSR and the options you will have.

  1. The Seller responds to the BINSR stating that they are not willing to do anything that you have requested in which case you may cancel the contract and have all earnest monies refunded to you OR you can accept the Sellers response and go forward with the contract.
  2. The Seller responds to the BINSR stating they are willing to take care of “some of the items” you have requested. In this case you may cancel the contract and have all earnest monies refunded to you OR you can accept the Sellers response and go forward with the contract.
  3. In both of these scenarios, an attempt can be made to negotiate further with the seller to a conclusion which will be deemed to be satisfactory to you. If these negotiation attempts do not reach a successful outcome for you, then you may cancel the contract and have all earnest monies refunded to you OR you may go forward with the contract.
  4. If the Seller chooses not to respond to the items you have requested within the time period allowed, his failure to respond is treated as the Seller agreeing to your requests in the BINSR.

What you have here is a negotiation process that must take place within the ten day inspection period, unless a written extension has been agreed to by you and the Seller. The inspection period begins on the first day after your offer has been accepted to purchase the property.

As you can see the home inspection process has many facets to it.  Many variables can occur and those variables will determine if you will go forward with your purchase or choose to walk away. The most important thing for you to know as a buyer is you have many options available to you after the home inspector hands you that quarter inch report.

In forthcoming blogs I will cover other things you need to be addressing during this very important 10 day “Due Diligence” time frame. These are items that are just as important as the actual home inspection and can also be a contributing factor to whether you decide to go forward with the purchase of the property or not. If you have any questions about the “home inspection” process  Contact TJ or Howard, we are here to help.

For further reading on this subject here is a link for a “non-lengthy” article by Michelle Lind, counsel for the Arizona Association of Realtors,  “Inspection Period Issues In The Residential Contract”.

Written by Howard Harris