After the Inspection

Our standard sales contract consists of 14 pages, 66 standard paragraphs, and numerous sub-paragraphs. It’s not only long but extremely tedious. I expect it would provide excellent therapy for even the worst insomniac. It’s easy to be confused by some of the standard provisions.

The J1

Most notably, Paragraph J1, related to property inspections, seems highly misunderstood. Unless deleted elsewhere, this paragraph allows the purchaser a period of time in which to perform a physical inspection of the property. It includes the right to inspect all public records and regulations related to the property. It is interesting to note that the physical inspection may be performed by anyone the buyer wishes.

Nothing requires the buyer to use a licensed contractor or certified home inspector. Unlike many states and municipalities, Hawai`i requires no pre-sale public inspections. Inspectors are not licensed, and not all inspectors are created equal. Ask for recommendations. With few exceptions, homes can be sold “as is” without regard to condition or permits. The confusion seems to be related to what happens after the inspection is completed.

What Happens Next?

Many are under the impression there is a contractual obligation for the seller to make repairs or correct permits prior to sale. Unless negotiated otherwise in the contract, the seller is under no obligation to make repairs or correct permits. The buyer can request repairs. Many sellers try to accommodate but are under no obligation to renegotiate price based on inspection findings. The buyer’s option, should the seller not wish to (or be able to) accommodate, is to withdraw from the transaction. However, the buyer must do so prior to the expiration of the inspection period, or the earnest money could be in jeopardy.

Other Inspections

Termite inspections and survey results are addressed elsewhere in the contract. It’s a good idea to read through the contract early on; even before the offer is drafted. Give yourself time to make a list of questions for your agent. Remember, this provision is number J1 of the purchase contract. Understandably, focus seems to wander by the time that part is reviewed….but don’t become too focused on the numbers because guess what? It’s always changing.

And even though the purchase contract is not going to get any shorter, one thing will remain the same: understanding the process in advance helps avoid confusion and ensure buyer and seller expectations are in line with our not always entertaining, but oh so important, Purchase Contract!

Join Us!

This topic was discussed in length at our Real Estate Wine’d Down Zoom meeting. Check out our recap, and email me to join our next Zoom meeting!