Inspection Contingency: Terms to Consider for Buyer’s Written Corrective Proposal

The inspection contingency of the Standard Agreement for the Sale of Real Estate (Form ASR) has three options. Boiled down, it’s take it, leave it or negotiate. When it comes to negotiations, “Buyer WILL present all Report(s) in their entirety to seller with a Written Corrective Proposal (“Proposal”) listing corrections and/or credits desired by buyer.” That may sound easy, but there’s a lot that goes into drafting and negotiating a Written Corrective Proposal that works for buyers and sellers.

No Napkins. No Texts.

Whatever the final negotiated proposal looks like, it should: (a) include some specific details on what’s going to be done; and (b) be signed by both parties. A “back of the napkin” proposal that just lists several inspection items but doesn’t say what the seller will do about them is only going to lead to trouble. A text chain where the buyer agent says, “We need you to take care of the mold issue,” and the listing agent says, “Will do,” is not actually an agreement between the parties because the parties never actually signed off on it. And besides – PAR has a form for that! The Buyer’s Reply to Inspections/Reports or Written Corrective Proposal (Form BRI) is custom built to help agents and clients work through this process.

Which Inspection(s)?

The very top of Form BRI states that the form is to be used “In reply to the following inspections/reports only.” Our forms libraries generally allow multiple copies of this form in a transaction so you can respond to inspection reports individually instead of waiting for them all to return if that’s what the buyer wants. For example, if the home inspection has come back with three items, but the radon inspection has not come back yet, you can mark off Home/Property Inspections in order to start negotiations, and then submit a second BRI just on radon once that report comes back. The negotiation period doesn’t start until the end of the contingency period, so sellers don’t have to start thinking about or negotiating these requests until then, so they’re sure that all buyer requests have been received.

Follow-Up

Form ASR has the right to pre-settlement walk-through inspections. However, these are limited in scope as to who can attend (hint: only parties and their real estate licensee(s)) and purpose (hint: “for the limited purpose of determining that the condition of the property is as required by this Agreement and any addenda”). If the buyer wants to have a contractor or inspector review any negotiated repairs, that should be included in the response. That might include negotiating a standalone retest or inspection, or maybe bringing a contractor to a walkthrough to confirm that the work has successfully been completed.

Specific Contractors

If the buyer wants someone specific to do the work, put it in the proposal. Otherwise, the seller will still need to make sure the work is done in a workmanlike manner, but the buyer will not have control over who the contractor will be.

Timeline

Without a specific negotiated deadline, sellers technically have up until settlement to complete the work they agree to. If buyers want to give themselves time to reinspect the property (see above), then they’d also want to negotiate a date for completing the work so there’s actually enough time to get that done.

Anything Else

A written corrective proposal could contain just about anything else relevant to the requested work. That might include specifying materials (“repaint wall with XYZ Paint, color code 1234, eggshell finish”), location (“install radon mitigation system in corner of basement near breaker box”) or other project details (“remove current shingles and replace any damaged underlayment before installing new roof”). In short, if the buyer thinks they know what they want, don’t assume a seller or listing broker will just magically figure that out – write it down. While follow-ups can be negotiated, it is always safest to include whatever the parties want at the start.

Sellers Count Too!

Though this article talks mostly about what the buyer wants and what the buyer is looking for, it is also important for the seller to review the request and make sure they understand what they are agreeing to. That’s why this is a negotiation and not a demand. If the seller doesn’t really understand the request, or if it seems vague enough that it could be interpreted in multiple different ways, the seller should take steps clarify what they think the request means and what they think they are agreeing to.

Bonus Round

Remember that the inspection contingency has three timed segments: the initial inspection contingency period, the negotiation period and then the final buyer decision period. During the contingency period, the buyer has to get their elected inspections completed AND submit any desired corrective written proposals. If they miss that deadline (i.e., the buyer doesn’t make any election during the contingency period) and send a written corrective proposal submitted after the contingency period expires, the seller is not obligated to negotiate. Or in the context of some recent PAR Legal Hotline questions, the negotiation period is not a secret extension to submit a written corrected proposal “because hey – we’re negotiating!” A seller is only obligated to negotiate the terms of a request that was made during the contingency period. Of course, parties can always voluntarily negotiate whatever they want during the contract, but a buyer has given up their right to terminate under this contingency if they miss the deadline to submit their written corrective proposal.