Chapter 10 - Physical Inspection Contingencies Flashcards
What is a home inspection and when should it be performed?
A complete evaluation of the home.
After acceptance of the contract, during the due diligence period prior to close of escrow.
At seller’s request, the buyer must provide copies of all inspection reports (at no cost to the seller).
Repairs must be completed prior to close of escrow and buyer noted during the walk-thru inspection.
Pest infestation
SUBTERRANEAN TERMITES and BACTERIAL DECAY (dry rot) tend to destroy the wood in a home.
Pest Infestation Report
A pest inspector checks a home for TERMITE DAMAGE and DRY ROT and issues a pest report that can be used by the buyer to ensure the property is clear of termites and dry rot damage.
Structural Pest Control Board
Regulates structural pest control companies in California.
How are pest repairs are usually agreed upon?
If the buyer would like a clear pest report or certain items from the pest report to be repaired, the buyer may use an Request for Repairs addendum to the purchase agreement.
A clear pest report describes a home as being free of pest infestation: termite & dry rot. The seller may agree to only repair a few items. It’s also common for a seller to provide monetary credit in lieu of making repairs to the property.
If the buyer and seller cannot come to an agreement, then the buyer may decide not to move forward with the purchase of the property.
When to order a Pest Report?
After acceptance of the contract, during the due diligence period prior to close of escrow.
If the BUYER does NOT request a clear pest report in the purchase agreement, then the seller may not need to obtain a pest report for the property.
New Homes and Newer Homes usually won’t need a pest report. Newer homes only a few years old have a concrete slab foundation, therefore not as much corrective work will be required to obtain a clear report.
Older Homes – with raised foundations may contain a considerable amount of pest infestation and dry rot. Repairs can cost $5000-$10,000 or more.
If a seller wants to call another pest control inspection company for a 2nd opinion
It is ILLEGAL for them to remove the first Inspection sticker (found on garage door) from the first inspection.
Pest reports are kept on file for 2 years at the state Structural Pest Control Board.
After inspections and disclosures are completed, the buyer may ask the seller to make certain repairs by submitting a Request for Repairs addendum to the seller. The seller can respond with one of the following:
- Agree to the terms by repairing requested items and/or providing financing concessions (price reduction/seller credits buyer in escrow)
- Counter with a Response to the Request for Repairs addendum
- Reject the Request for Repairs addendum (if seller rejects, the buyer may keep the contingency in place and not proceed with the purchase)
Active vs Passive Contingency Removal
Active – Requires buyer to actively sign a physical inspection contingency removal form that removes all physical inspection contingencies contractually agreed upon in the purchase agreement. Most commonly used method.
Passive – Occurs when a buyer inspects the property and then does nothing. Thereby passively removing the physical contingencies.
Soils Report / Soils Engineering Report / Geotechnical Report
Report that indicates whether the soil underneath a proposed building construction will support it.
Backfill
Soil that fills in around foundations, retaining walls, or other excavations.
Foundation Plan
Plan that indicates the location of the foundation that supports the house.
Plot Plan
Shows where the house is located on the lot.
Orientation
Shows where the lot is located in relation to surrounding amenities.
Topography
A map that shows the hills and valleys within a parcel of real property.
