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Welcome to our Library, which provides legal information on topics related to the firm's practice areas. This information is not meant to be a substitute for receiving personal legal advice from an attorney. For specific inquiries about legal issues, we invite you to contact us at (843) 626-9000. We update this section throughout the year, so please check back for new articles. We also welcome suggestions on topics for future articles and news.
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Jeffcoat Law Firm Article
Home Inspections and Relief under the North Carolina Standard Real Estate Contract
By Otis Allen Jeffcoat, III
Recently, a couple came in to see one of our attorneys regarding a recent purchase of a "dream house" here at the beach. They had invested a good portion of their retirement savings in the home, which they envisioned as a future destination for themselves, their children, and their grandchildren. However, while they were showing the new place off to their son, who happened to be a building contractor, he noticed some large cracks in the foundation which he thought might impair the structural integrity of the house. After a local contractor inspected the house, they received word the repairs would cost them over ten thousand dollars.
Although this story is merely illustrative, it does address a common problem many new home buyers encounter- a previously unknown problem with the structure of the house or the systems therein. Once a buyer accepts damaged property at closing, his remedies are often limited and expensive to pursue, even if he was not told of the problem or lied to outright. Insurance and warranties can sometimes help, but often these defects fall into the numerous exceptions and exemptions of these policies.
Luckily, the smart home buyer has been afforded some protection from the problem in Paragraph 12 of the Standard North Carolina Residential Contract, but the Buyer must be willing to avail themselves of this protection. In essence, Paragraph 12 allows the buyer, at the buyer’s expense, to hire a home inspector of the buyer’s choosing to inspect the house before closing. Usually this is done in the first few weeks after the contract is signed. The inspection usually lasts three to four hours and a written report is prepared for the buyers to review the findings. Many inspectors invite the buyer to participate in the inspection, and a good inspector will teach a buyer a wealth of knowledge concerning the house at that time.
The buyer, armed with this inspection, then has a better idea of the problems with the house. Should the buyer choose to do so, the buyer can make a demand of the seller to repair any or all of the defects discovered. Upon receiving such demand, the seller has three choices:
- First: the seller can make the demanded repairs. Upon a successful reinspection the contract will continue to be in effect and the deal will proceed toward closing. If after reinspection the defect has not been successfully dealt with, the buyer can demand the repairs be made correctly.
- Second: The buyer and seller can negotiate a monetary amount to be paid to the buyer in lieu of an actual repair being performed. After this amount is agreed upon, the parties usually sign an addendum to the contract stating the repair needed and the allowance made for those repairs. One should note at this point the issue is settled and can not be reopened by either party barring the discovery of additional information which could not have reasonably been forecast by the parties.
- Third: The seller can do nothing. If the seller chooses this route the buyer then has two choices: First, the buyer can accept the property "as is" and close on the contract. Second, the buyer can walk away from the contract and receive a full refund of his earnest money.
In many cases the above provisions do not completely solve the dilemma faced by the parties when defects are found in the house. First, for the buyer to be able to walk away from the contract the repairs demanded must go to the structure of the house and not be merely cosmetic in nature. Additionally, any defects which the buyers knew about before the contract was signed would prevent them from being able to walk away from the contract. There are additional items a buyer or seller can insert into a contract to allow themselves further protection than is provided in the standard real estate contract. Anyone who is entering into a contract to buy or sell real estate to have it reviewed by an attorney before it is signed. Given the price of the typical home, an attorney’s advice is well worth the fee.
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The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.
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