Home Inspections & Negotiating in Honolulu Real Estate
April 12th, 2008 categories: Honolulu Real Estate 101, Negotiating
Once a price and Purchase Contract (PC) are agreed to by the Seller and Buyer in the sale of Honolulu real estate, the next major hurdle to get over is the inspection of the property. This can be performed by a professional inspector (I highly recommend the use of a professional inspector) or the buyer. After acceptance of the offer or counter offer, under the terms of paragraph C-51 of the PC, the buyer has a period of time (normally between 10 and 15 days) in which to complete the inspection of the property, the public records, surrounding area and any other aspect of property or neighborhood which may be of concern. Once the inspection (s) are completed it is not unusual for a buyer to ask the seller for a concession or to even cancel the sale.
The cancellation of the sale must be done in writing and within the time frame agreed to under C-51. Assuming this is done correctly, the buyer’s earnest money deposit is returned and the property then goes back on the market.
When it comes to concessions, they can take the form of a price reduction, a dollar credit from the seller to the buyer, or the seller may agree to make certain repairs. Let’s be clear! Nothing in the contract requires or compels a seller to make any sort of concession to the buyer. However, if the concession is a terminal issue to the buyer, then the buyer retains the right to cancel the sale as long as there is time remaining in the C-51 contingency. What is reality?
In my experience, the majority of sales in a buyer’s market, find a seller providing a buyer some sort of concession. Most of the time it is a dollar credit, fewer times you will see a price reduction and rarely will a seller make repairs. On a side note, if you are a seller, I recommend not making any repairs. Watch for a future blog explaining why.
If there is going to be a concession, I recommend the use of a price reduction or dollar credit from the seller. If a price reduction is the chosen path, then the buyer’s broker merely writes an addendum which may sound like this.
1. Buyer and seller agree that the purchase price shall be $595,000 (in the original contract it was $600,000).
2. Buyer hereby removes the contingency associated with C-51 of the Purchase Contract.
If both parties agree in the concession, then the amendment is signed and the transaction moves toward closing. However, one might find the seller offering to reduce the price to $597,000, or not at all. If this is the case, then the buyer will need to decide whether or not they want to move forward, if not, then the buyer will need to cancel the contract (under the terms of C-51). Be aware that you really do not have a sale until you clear this inspection issue.
