Q: We are buying a house and opened escrow last week. The home inspector did the inspection today and found that there are termites. We’re not sure we want to go through with the sale, but will we lose our deposit if we back out?
A: The first thing you need to do is speak to your realtor because he/she is aware of the specific circumstances of your transaction and can advise you in this instance.
In general, though, there are several things to look at.
If you are not sure if you wish to cancel the agreement, could there be another suitable resolution to this issue? As the buyer you have the right to request the seller take care of the problem or adjust prices accordingly. At this time it becomes a negotiation again between you and the seller. Perhaps there is a way you can come to an agreement on how to take care of the issue and still move forward with the purchase.
If you do want to cancel the contract, in Paragraph 9 of the California Residential Purchase Agreement the buyer’s acceptance of the condition of the property is a contingency of the sale. Paragraph 14(B) outlines the time frame for this (standard is 17 days). It is during this time that you have your home, pest and any other type of inspections. If, during this time period, you find something, you may request the seller to repair any issues (as stated above) or you may cancel the agreement. Paragraph 14(E) states that if you cancel “pursuant to rights duly exercised under terms of [the] Agreement, Buyer and Seller agree to sign mutual instructions to cancel the sale and escrow and release deposits to the party entitled to the funds.”
Because it was a contingency of the contract and you were still within your inspection period you have the right to cancel and to get your deposit money returned.
Typically once you have satisfied yourself on the condition of the property after the 17 days you are asked to remove that contingency from the contract. Once contingencies are removed you could be subject to losing your deposit money; but this depends completely on the situation. I would recommend if you get to this point that you speak to an attorney about your options.
Q: It seems like whenever anyone buys a house something breaks within the first few months of moving in. I am using all my savings for my down payment and won’t have any money for repairs after we close escrow. Is there anything I can do to protect myself?
A: It does seem like “Murphy’s Law” that often when buyers move into their home something stops working in the first year. Though there is no way of preventing these things from happening (no one has crystal ball about when the water heater may leak) there are some things you can do to minimize the toll it takes on you.
First, I believe everyone should have a complete home inspection before purchasing a home. A good home inspector will do a thorough inspection of the property and make you aware of any current issues. You can then make decisions based on factual knowledge of problems that are present and deal with them before owning the home and bearing the financial burden.
Next, for those issues that aren’t known but may happen after you own the house, I believe every buyer should get a one-year Home Warranty when purchasing a home (your realtor will advise you and negotiate for you as to who will pay for this warranty).
There are several Home Warranty companies out there, but they all operate pretty much the same way: If your water heater starts to leak you call the company and for a service fee they will send someone to fix it – and if they can’t fix it they will replace it. Just like with all warranty plans, be sure to read the fine print and know exactly what they will and will not cover. Your realtor should be able to help you in choosing the best coverage for you.
Finally, home ownership is just like anything else in life: You need to be prepared for unexpected expenses because they do happen. So perhaps you need to look further into whether it is the right decision to spend all of your savings on your down payment and/or create a plan for what you will do when issues do come up.
Contact Lara Wells Osborn at Coldwell Banker C&C Properties – Westside, 1801 Buenaventura Blvd., Redding, CA 96001. Cell: (530) 276-3026. Fax: (530) 419-1167. E-mail: laraosborn@ccproperties.com or www.larawellsosborn.com.
