Real Estate Law: The Home Inspection Contingency

A standard New Jersey real estate contract provides the opportunity for a Purchaser to inspect the property before closing.  Typically, the home inspection contingency allows for a Purchaser to inspect the property 10-15 days following the conclusion of .  Although your real estate attorney is likely to negotiate a two week window for you to inspect your potential home following attorney review, it is the Purchaser’s responsibility to hire the inspector.  Your attorney will remind you to have the home inspected within this time frame, but the Purchaser will pay this marginal cost.

Do not avoid this opportunity to have a professional inspect your potential purchase for this relatively low expense.  Often, Purchasers maintain the point of view that they are buying the home “as is,” and it is therefore unnecessary to exercise their right to have the home inspected.  This is the incorrect viewpoint to have.   Even if a home is sold “as is,” the Purchaser has the option to inspect the property.  However, the Seller reserves the right to not make repairs.  Regardless, a Purchaser should take full advantage of the home inspection contingency, as this clause provides an opportunity to learn the actual state of the home, any necessary or soon-to-be-made-repairs, or allows a Purchaser to receive credits for these repairs, lower the purchase price, or even walk away from the purchase altogether.

When a New Jersey real estate attorney receives a copy of the inspection report, the lawyer reviews it with the Purchaser and sends a letter to the Seller’s attorney requesting repairs to be made or a credit to be issued in lieu of making the repairs.  The home inspection contingency allows for structural repairs.  It does not provide an avenue for addressing cosmetic issues or making upgrades to the home. 

Typically, the inspector searches for issues regarding structural, environmental, physical and mechanical problems on the property.  This includes termite infestation and other wood destroying insects that may be present, inspecting for mold and asbestos, unacceptable levels of radon, abandoned oil and septic tanks, possible contamination and a plethora of other issues.

In fact, bed bug infestation is a potential concern for buyers.  Up until recently however, it was not an issue mentioned or discussed in most real estate transactions. This topic has caused quite a stir in Morristown recently. Because of this, many attorneys are now likely to add this to their initial letter to opposing counsel when representing a Purchaser.

Following review of the letter sent by the Purchaser’s attorney to the Seller regarding the state of the home, the Seller will have the opportunity to contemplate making necessary repairs or provide a credit for the repairs.   Usually the Seller has the option of addressing these issues.  Alternatively, if the Seller does not handle these issues or provide a credit in exchange for not making the repairs, the Purchaser may cancel the contract.

This is why the home inspection contingency is so important and why you should have an attorney review your contract.  It is important to ensure this clause is maintained following the attorney review provision.  As the Purchaser, it is in your interest to have as many opportunities to back out of the deal if something unexpected were to happen: you are not approved for your mortgage, you lose your job, the home is in disrepair, or you find another home you prefer.  As the Seller, it is important you understand your rights and learn how to prevent a weary Purchaser from opting out of a deal, especially if you are relying on selling this home to purchase another.  A competent real estate lawyer will educate and assist you in exercising all of your options to ensure you maintain all your interests in your real estate transaction.