After the Inspection

Our standard sales contract consists of 14 pages and about 70 standard provisions. It’s not only long but extremely tedious. I expect it would provide excellent therapy for even the worst insomniac. It’s easy to be confused by some of the standard provisions.

Misunderstandings of Paragraph J1: Property Inspections

Most notably, paragraph J1 related to property inspections seems highly misunderstood. Unless deleted elsewhere, this paragraph allows the purchaser a period of time in which to perform a physical inspection of the property. It also includes a right to inspect all public records and regulations related to the property. It is interesting to note that the physical inspection may be performed by anyone the buyer wishes. Nothing requires the buyer to use a licensed contractor or certified home inspector.

As-Is Sales and Seller Obligations

Unlike many states and municipalities, Hawaii requires no pre-sale public inspections. With few exceptions, homes can be sold “as is” without regard to condition or permits. In fact, Hawaii sales are all considered “as is”. The confusion seems to be related to what happens after the inspection. Many are under the impression there is a contractual obligation for the seller to make repairs or correct permits prior to sale. Unless negotiated in the contract, the seller is under no obligation to do either.

Buyer Requests and Negotiations

The buyer can request repairs. Many sellers try to accommodate the buyer, but they are under no obligation to do so. They are also under no obligation to renegotiate the price based on inspection findings. The buyer’s option, should the seller not wish to cooperate, is to withdraw from the transaction. The buyer must do so prior to the expiration of the inspection period, or the earnest money could be in jeopardy. Termite inspections and survey results are addressed elsewhere in the contract. It’s a good idea to read through the contract early on, even before the offer is drafted. Give yourself time to make a list of questions for your agent.

Importance of Early Understanding

Remember, this provision is number J1 of the purchase contract. Understandably, focus seems to wander by the time paragraph J1 is reviewed. But don’t get too focused on the numbers because, guess what, our purchase contract never seems to get shorter. Understanding the process in advance helps avoid confusion and ensures buyer and seller expectations are in line with our not always entertaining but oh-so-important Purchase Contract.