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BROKER CORNER

Due Diligence, Right to Inspect and Right to Request Repairs

4/22/2021

11 Comments

 
Picture
The GAR Purchase and Sale Agreement, exhibits and amendments allow buyers and sellers to refine the terms of their agreement. The Due Diligence Period (DDP), the Buyers’ Right to Inspect, the Right to Request Repairs (RRR) and the Amendment to Address Concerns are all tools that are used to come to an agreement between the parties.  If the parties cannot agree, they are also tools that allow termination of the contract.
 
Important Points to Remember about how these different tools operate:
 
Due Diligence Period and Amendment to Address Concerns
The Due Diligence Period is located in the main body of the contract on page 1, paragraph 8 and is further explained on pages 3 and 4. The Due Diligence Period can be analogized to an option period.  Within the Due Diligence Period, the buyer may decide to proceed or not proceed with the purchase of the Property for any or no reason.  Any negotiation of repairs that come up in an inspection are done during the Due Diligence Period.  The buyer delivers its repair terms on the Amendment to Address Concerns (ATAC F704). The seller can agree to the terms, can reject the terms or the terms can be negotiated, but there must be agreement prior to the end of the Due Diligence Period or the buyer can find itself buying “as is.”  That is, if there is no agreement between the parties regarding the terms of the ATAC and the buyer has not terminated the agreement, then the buyer has accepted the property “as is.” 
Unilateral Notice To Terminate Purchase and Sale Agreement and Proposed Disbursement of Earnest Money
Alternatively, if the buyer decides not to proceed, either because they have decided against the house or terms of the ATAC cannot be agreed, the Buyer must send a notice to terminate to the seller.  Usually, it is sent using a Unilateral Notice To Terminate Purchase and Sale Agreement and Proposed Disbursement of Earnest Money (F522).  However, some agents play it safe and include a Notice of Termination within the ATAC in the event that the Buyer and Seller do not agree. Although the Buyer has the right to terminate unilaterally, both parties must agree to the disbursement of earnest money.  Usually, if a termination is during the Due diligence period, it’s not an issue and the seller signs off on a return of earnest money to the buyer. However, if the parties cannot agree to disbursement, then the Holder of the earnest money joins the action by sending a “10-Day Letter” to all parties.  A 10-Day Letter is a reasonable interpretation of the contract as to who is to receive the earnest money.  The process is explained in detail in the Purchase and Sale Agreement, page 3 paragraph 7.

Right to Inspect
The Right to Inspect is in the body of the Purchase and Sale Agreement at paragraph 8.  It is a continuing right, meaning that it is in effect even if there is no Due Diligence Period and it is in effect during and after the Due Diligence Period.  So long as Prior Notice is given to the Seller and the hour and frequency of inspections are reasonable, the Seller cannot refuse to allow inspections.  Checking to see if repairs are completed, bringing contractors and estimators and even showing the property to family and friends are all included in the Buyers’ Right to Inspect.
 
Property Sold with Rights to Request Repairs Exhibit
The Property Sold with Right to Request Repairs Exhibit (F273) differs from Due Diligence in that it addresses only defects in the property that have been identified in an inspection.  To comply, the Buyer must present an amendment to request repairs to the seller, as well as the inspector’s report. The Seller then has a Defect Resolution Period.  The time restraints of the exhibit must be adhered to strictly.  If the parties cannot negotiate terms or the Buyer does not accept the property “as is,” the agreement will terminate.
 
The term “Defects” shall mean any infestation by termites, insects or other wood destroying organisms or any condition, building product or item in Property, or portion thereof identified by an Inspector in a written report, which: (1) is in a condition which represents a significant health risk (including lead-based paint and/or lead-based paint hazards) or an imminent risk of injury or damage to persons or property; (2) constitutes a violation of current laws, governmental codes or regulations except if it is “grandfathered” because it was initially installed or constructed prior to or in accordance with all applicable laws, codes or regulations; or (3) is not at the present time in good working order and repair (including damage caused by termites, infiltrating pests, and any other wood destroying organisms), excepting other normal wear and tear.
11 Comments
Best Access Doors link
10/5/2021 08:39:20 am

Thank you for giving us a direct and straight to the point answer! It greatly helped in clearing our confusion.


Reply
Access Doors and Panels link
10/5/2021 08:45:59 am

Thanks, what an informative post! Everything we need to know are found in this article. We hope you keep posting quality articles.


Reply
Stephanie Fuentes
8/17/2022 02:56:26 pm

This was so helpful and informative. Thank you so much!!!

Reply
Victoria Addington link
11/21/2022 03:37:56 am

I liked how this post shared that right to inspect makes the seller unable to refuse to allow inspections. My brother wants to know if the property he's buying is worth it. I should advise him to opt for pre purchase inspection to ensure everything is in place.

Reply
Divya Jain link
12/3/2022 01:55:12 am

<a href="https://cadivya.com/" >Due diligence</a> process involves researching, analyzing and verifying the accuracy of financial and non-financial aspect of business.

Reply
House inspection Auckland link
3/14/2023 02:26:24 am

Your article is quite helpful! I have so many questions, and you have answered many. Thank you! Such nice and superb article, we have been looking for this information about DUE DILIGENCE, RIGHT TO INSPECT AND RIGHT TO REQUEST REPAIRS. Indeed a great post about it!!

Reply
cash for house link
8/14/2023 09:29:18 am

The article clarifies essential tools in real estate agreements. Due Diligence Period allows inspection and negotiation; unilateral termination involves a "10-Day Letter." Right to Inspect persists beyond the Due Diligence Period. Property Sold with Rights to Request Repairs Exhibit addresses identified defects with strict timelines.




Reply
Sell my home link
8/17/2023 02:28:26 pm

The article highlights the significance of Due Diligence, Right to Inspect, and Right to Request Repairs in real estate transactions. These tools offer buyers and sellers negotiation avenues and termination options, ensuring informed decisions and property condition assessment. Proper utilization is crucial for successful transactions.

Reply
We Buy Houses Cincinnati link
8/21/2023 02:46:25 am

Your breakdown of the GAR Purchase and Sale Agreement's due diligence, inspection, and repair processes is incredibly helpful. Understanding the nuances of these tools is crucial for both buyers and sellers. Your clear explanations offer insight into how to navigate these stages effectively. Thanks for shedding light on these essential aspects of real estate transactions!




Reply
companies who buy house link
9/24/2023 03:34:08 pm

I found this explanation of Due Diligence, Right to Inspect, and Right to Request Repairs very informative. It's crucial for both buyers and sellers to understand these tools and their timelines within a Purchase and Sale Agreement. It's reassuring to know that the process allows for negotiation and termination if necessary, providing clarity and protection for all parties involved. Thanks for breaking it down!

Reply
Gorgia Karen link
6/29/2024 01:12:39 am

I appreciate how the article clarifies what constitutes a "Defect" in this context, including significant health risks, violations of current laws, and items not in good working order. This detailed definition helps both parties understand what issues are negotiable under the F273, providing a clear framework for addressing property concerns.

Reply



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