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Timelines for inspection contingency: What are the deadlines?

By: James Goldsmith, Esq. on in  | 

Though the revised Standard Agreement (“ASR”) has been available for the better part of a year, there is still great confusion regarding the timeline established in the Inspection Contingency.  There are those who insist that when a buyer submits a corrective proposal, the timeline is stretched to 17 days, with no exceptions.  This is not accurate.

The common misconception is that process of working through the Inspection Contingency invariably takes 17 days, assuming default times have been elected. What many fail to correctly observe is that buyer’s response time to seller’s rejection of the corrective proposal is always two days from the date the buyer receives seller’s written notification that seller will not satisfy all terms of buyer’s corrective proposal.  Stated another way, the span between the seller’s rejection of buyer’s corrective proposal and buyer’s election to terminate the Agreement is always two days and is never extended by virtue of an early response from seller.  Hence, we can never say that, the process invariably takes 17 days to complete.

The sequence of events and the time periods to observe regarding home inspections are found in Paragraph 12, Inspection ContingencyUnless otherwise specified, the buyer has 10 days to complete any of the inspections elected in Paragraph 11.  It is possible to create timelines of different lengths for different inspection contingencies and four blank lines are available on which to identify a contingency and the number of days for completing the inspection.

The buyer’s right to terminate the agreement or submit a corrective proposal is subject only on the buyer observing a reported condition that is “unsatisfactory to Buyer.”   If the buyer fails to have the inspections performed — or fails to seek a written report — then the buyer’s right to terminate or to submit a corrective proposal are lost under the Inspection Contingency.  Assuming that the buyer had an inspection, received a report and can cite a condition that is unsatisfactory to him, he may submit a corrective proposal along with a copy of the inspection report.  This corrective proposal must be submitted within the period for completing the inspection (10 days unless amended).

How much time may the seller take in responding to the buyer’s corrective proposal? The Agreement gives the seller five days from the end of the contingency period to respond in writing.  Like all contractual time limits, this period may be altered by agreement of the parties; there is a blank line on which the number of days may be noted.  The reply will indicate that the seller will or will not agree to adopt and satisfy the terms of the corrective proposal. What typically happens is that the seller agrees to satisfy part of the corrective proposal — but not all — or the seller proposes a counter-offer.  Anything short of agreeing, in writing, to the full corrective proposal is considered a rejection which serves to put the ball in the buyer’s court. buyer may then terminate the Agreement  in writing

How many days does the buyer have to exercise the buyer’s option of terminating the Agreement?  This time period is also established in Paragraph 12 and gives the buyer two days (if not otherwise specified) from receipt of the seller’s written notification “that Seller will not satisfy all terms of Buyer’s Proposal.”   If the seller does not reply in writing to buyer’s corrective  proposal, then what?  The Agreement provides that the buyer will have two days from the last day (five if not specified) that the seller had to respond in writing to the buyer’s corrective proposal. 

Now that we have formula, let’s see how it works.  For purposes of this example, we will assume that the default time periods were elected:  buyer has 10 days to complete the inspection(s) and submit in writing a corrective proposal; seller has five days from the end of the Inspection Contingency to reply in writing to buyer’s corrective proposal; and buyer has two days from receipt of seller’s written notification that seller will not satisfy all terms of buyer’s corrective proposal.  Let us further assume that each party took their time and waited until the last day to exercise their options.

Under this scenario, the buyer may elect to terminate on day 17:  the corrective proposal was submitted on day 10; on day 15 seller replies in writing that seller will perform some but not all of the corrections; and two days later, on day 17, buyer terminates in writing.

Next, let us assume that the buyer completed the inspections on day six and on that same day submitted a corrective proposal and that the seller took only two days from receipt of buyer’s corrective proposal to respond in writing that seller would not agree.  On what day must buyer respond in writing that she is electing her right to terminate the Agreement?  No later than day 10.  The buyer submitted a written corrective proposal on day six and even though seller could have waited until day 15 (five days from the expiration of the contingency period), the seller responded on day eight. According to the Agreement, the buyer has two days from receipt of seller’s written notification that seller will not satisfy all terms of the corrective proposal.  Buyer received that notification on day eight and two days later brings us to day 10.

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Comments (11)

Comments

  • Ellie Connelly   November 4, 2010 at 8:58 am

    Thank you for your timely response. I have spoken to many people including instructors of the agreement of sale as well as the PAR hotline regarding the inspection timeline. It has been extremely confusing and polarizing to hear different adamant interpretations (including my own) of the time periods.
    Hopefully, this will now allow us all to move forward on the same calendar!!
    As always, thank you.

    Reply to Ellie Connelly
  • Judy Greene   November 4, 2010 at 9:31 am

    Anything that needs such a lengthy explanation should be made easier to interpret and execute.

    Reply to Judy Greene
  • Jonathan Mendys   November 5, 2010 at 9:37 am

    I was happy to see this article because I was confused and was going to call PAR for a detailed explanation. What I had thought was the correct procedure with everything, I was right.
    However, I do not like the new way of the contingency periods. I think that its backs a Buyer into a corner and it is better for the Seller. Negotiating Strategies that I had before and worked great before, I can no longer use.

    Reply to Jonathan Mendys
  • Bill Hammill Jr.   November 5, 2010 at 12:21 pm

    MUCH NEEDED! Too many licensees are making their own interpretations, or are confusing the timelines in the “old” Agreement. Licensees should READ the Agreement of Sale along with the Guidelines for Preparation and Use plus ATTEND TRAINING on the Agreement when provided. I am going to encourage all licensees in my company to keep this article handy so that when another licensee wants to debate the inspection timelines they can share this article and educate the licensee who does not understand the correct timeline!!!

    Reply to Bill Hammill Jr.
  • Peter N. Lamandre   November 10, 2010 at 10:39 am

    As always… Great info…

    Reply to Peter N. Lamandre
  • Cindy   June 18, 2013 at 4:28 pm

    I have a question, in paragraph 12 a. appraisers are included. What if the Seller does not give the appraiser access in a timely manner? The result is a late commitment.

    Reply to Cindy
  • kathleen brownlee   August 30, 2013 at 12:41 pm

    My agent sent my inspection with the final decision regarding repairs to the buyer’s agent. when Does the two day rule start? When the buyer’s agent or the Buyer receives the report.

    Thanks

    Reply to kathleen brownlee
  • Hank Lerner, Esq.   August 30, 2013 at 12:56 pm

    Kathleen:

    Generally speaking, in a real estate transaction the delivery of an item to an agent is considered to be delivery to the principal party – though there are certain situations in which that isn’t true. With inspections you should normally expect that a time period begins when the other agent receives a report. If there’s some reason why the other party can’t get or comment on the report (e.g., if the listing broker knows the seller is out of touch for several days) it’s usually up to that agent to let the other side know that there’s going to be a timing problem and to work it out.

    Reply to Hank Lerner, Esq.
  • Tracy Williams   April 22, 2019 at 11:55 am

    What happens if an inspector and seller get into an argument and inspector refuses to complete a home inspection? Does the buyer need to still pay?and does the buyer have to cancel the agreement?

    Reply to Tracy Williams
  • Susan   August 3, 2020 at 6:49 am

    How are Landing weekends handled when a contingency falls on one of them?

    Reply to Susan
    • Kelly Leighton   August 3, 2020 at 7:05 am

      Hi Susan,
      If you already have asked your broker about this, and haven’t received an adequate response, you can contact the PAR Legal Hotline if you are a PAR member.

      Reply to Kelly Leighton

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