What Options Exist If A Property Sale Does Not Meet Inspection Standards?

If a property sale does not meet inspection standards, it typically means that issues have been identified that could affect the value, safety, or habitability of the property. Both the buyer and seller have options to address the situation, which will depend on the terms of the sale agreement, local laws, and the willingness of both parties to negotiate.

Options for the Buyer

1. Request Repairs: If the inspection uncovers issues that need fixing (e.g., plumbing, electrical, roofing), the buyer can request that the seller make repairs before closing. This request should be clearly communicated, and the buyer can ask for specific deadlines for completion.
2. Negotiate a Price Reduction: In lieu of repairs, the buyer may negotiate a reduction in the sale price to account for the cost of repairs. This is a common approach if the buyer prefers to handle repairs themselves or if the seller is unwilling to fix the issues.
3. Ask for Credit at Closing: Another option is to ask the seller for a credit at closing to cover repair costs. This allows the buyer to handle the repairs after the sale, while still proceeding with the transaction.
4. Walk Away from the Deal: If the inspection reveals significant problems or if the seller is unwilling to negotiate, the buyer may exercise their right to walk away from the sale (if the contract includes an inspection contingency clause). This is typically only an option during the contingency period.
5. Seek Legal Advice: In some cases, if the seller is unwilling to cooperate, the buyer may need to consult an attorney to explore potential legal remedies, especially if the property was misrepresented or if the seller failed to disclose known issues.

Options for the Seller

1. Make Repairs: The seller can choose to make the requested repairs, especially if they want to close the sale quickly and avoid losing the buyer. This may be more cost-effective than lowering the price or offering credits.
2. Offer a Price Reduction: If the seller doesn’t want to deal with repairs, they may offer a price reduction to compensate the buyer for the costs they will incur in making the necessary fixes.
3. Offer a Repair Credit: Alternatively, the seller could offer the buyer a credit to cover the cost of repairs at closing, allowing the buyer to handle the work themselves after the sale.
4. Dispute the Inspection Findings: If the seller believes the inspection report is inaccurate or unfair, they can dispute the findings with the buyer. This may involve obtaining a second opinion or offering a counter-inspection.
5. Terminate the Sale: If the issues are too significant or if the buyer is being unreasonable, the seller can terminate the contract, particularly if the buyer has not adhered to the terms of the sale agreement.

Legal Considerations

• Inspection Contingency: Most real estate contracts have an inspection contingency clause, which allows the buyer to back out or renegotiate the deal if the property fails to meet agreed-upon standards.
• Disclosure Requirements: Sellers are typically required to disclose known defects before the sale, and failure to do so could lead to legal consequences, including the possibility of the sale being rescinded or the seller being sued for misrepresentation.

Example

Imagine a buyer is interested in purchasing a home, but the inspection report reveals significant foundation issues. The buyer requests that the seller repair the foundation before closing, or alternatively, offers to negotiate a price reduction to account for the estimated repair costs. The seller agrees to lower the price by $10,000, allowing the sale to proceed without delays.