Inspections were conducted during the due diligence period and the inspections revealed certain defective items of the home that makes my buyer client feel uncomfortable. What should we do?
The purpose of an Inspection and Due Diligence period is to give your buyer client ample opportunity to determine if a particular home is right for them. The Inspection and Due Diligence Period is located in lines 154-191 of the Louisiana Residential Agreement to Buy or Sell. It is important that every agent familiarize themselves with this section and keep the dates outlined in this section at the forefront throughout the closing process.
Every now and again inspections come back “clean.” More often than not, however, inspections reveal “something” wrong with the home. The question for the buyer is: is that “something” major or minor? The difference between major and minor is often determined by how much significance a particular buyer places on that “something.”
If the defect revealed during inspections is a minor defect that the buyer can deal with, then the parties usually resolve this defect either:
- By seller fixing the item or
- By seller reducing the sales price to allow the buyer to fix the item on his/her own, or
- By buyer simply moving forward to closing with the minor defect present and with the intention of fixing the problem at a later date.
If the defect revealed during inspections is a major defect, then your client has a couple of options at that point: have the seller fix the problem or cancel the contract.
I’m an advocate of parties attempting to remain in contract, so I usually recommend that agents do everything legally possible during the inspection and due diligence period to have the necessary repairs made.
But what if the buyer requested seller fix the item and the end of the due diligence period is
nearing and the seller hasn’t provided a response. What should the buyer do, then?
If the seller doesn’t respond within the due diligence period, to be safe it is recommended the agent advise the buyer that according to Lines 179 to 183 of the Agreement that if the Seller doesn’t respond, the buyer has the following options:
- Either accept the property in its current condition or
- Cancel the Contract within the Due Diligence Period
Generally speaking, if the buyer fails to cancel the contract within the Due Diligence Period, then the buyer might be stuck in the contract (of course, there are exceptions to every rule, but this is a good principle to keep in mind).
As stated in lines 188-191 of the Residential Agreement to Buy or Sell,
“FAILURE TO GIVE WRITTEN NOTICE OF EITHER TERMINATION OR DEFICIENCIES AND DESIRED REMEDIES TO SELLER (OR SELLER’S DESIGNATED AGENT) AS SET FORTH IN LINES 161 THROUGH 177 WITHIN THE INSPECTION AND DUE DILIGENCE PERIOD SHALL BE DEEMED AS ACCEPTANCE BY BUYER OF THE PROPERTY’S CURRENT CONDITION.”
For any questions concerning this email, please contact me at email@example.com.
H.L. “Rye” Tuten, III, is a Title Attorney/Real Estate Closing Attorney and Owner of Tuten Title & Escrow, LLC. Formerly assigned by RICE Insurance to defend real estate agents throughout Acadiana, much of his more than nine years’ litigation experience is with real estate concerns.