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Right to Inspection and The Option Clause

In this blog post, we are going to cover the section of the Preamble of the inspection report that speaks about the buyer’s right to have a home inspected as well as a termination option. Even though there is a right to conduct an inspection, it doesn’t require the seller to make any repairs.

Here is the verbiage used in the report form:

Contract forms developed by TREC for use by its real estate license holders also inform the buyer of the right to have the home inspected and can provide an option clause permitting the buyer to terminate the contract within a specified time. Neither the Standards of Practice nor the TREC contract forms require a seller to remedy conditions revealed by an inspection. The decision to correct a hazard or any deficiency identified in an inspection report is left to the parties to the contract for the sale or purchase of the home.

Paragraph 7 in both the ONE TO FOUR FAMILY RESIDENTIAL CONTRACT (RESALE) Form 20-13 and the RESIDENTIAL CONDOMINIUM CONTRACT (RESALE) Form 30-12 outline the access, inspections, utilities, and the completion of repairs and treatments.

Section A specifically allows that the buyer and their agent are permitted access to the property at reasonable times and that the buyer may have the property inspected by an inspector of their choosing so long as they are licensed by the TREC or are otherwise permitted by law to make inspections. Additionally, the seller at their own expense must have utilities turned on and kept on during the contract period.

Section F deals with the completion of any negotiated repairs or treatments and requires that, unless agreed to in writing, the seller must complete all repairs or treatments prior to the closing date. Additionally, permits must be obtained when required and the work must be performed by licensed persons, when required by law, or if no license is required by law then they must be commercially engaged in that specific trade. If there are any transferable warranties received by the seller, the buyer can, at their own expense, have them transferred. If the seller fails to complete any of the negotiated repairs prior to the closing date, the buyer may exercise remedies under paragraph 15 or extend the closing date up to five days.

In paragraph 23 of each of the contracts is the Termination Option. For a nominal consideration (option fee) which the buyer pays to the seller within 3 days after the effective date of the contract, the seller grants the buyer the unrestricted right to terminate the contract by providing notice of termination to the seller by 5:00PM on the date specified. Time is of the essence for this paragraph and strict compliance with the time for performance is required.

Finally, when a buyer opts to have an inspection performed and the inspection identifies deficiencies, it doesn’t mean a potential buyer should or shouldn’t purchase the home, only that they will know in advance what to expect. However, when a deficiency is reported, it is the client’s responsibility to obtain further evaluations and/or cost estimates from qualified service professionals prior to the expiration of the option period. And while there is no requirement for the seller to make repairs, an effort to negotiate the completion of repairs can always be made between the parties of the contract.


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