Sponsored Partner Content by Ekko Title
By Todd Condron
Our Northern Virginia real estate marketplace may be perpetuating a myth in the use of our standard Virginia Residential Sales Contract’s Home Inspection Contingency. That myth is the notion that a Buyer’s best course of action in this contingency is to use “Option 1”, which breaks the contingency into three distinct periods: (1) The Inspection Period; (2) The Negotiation Period; and, (3) The Purchaser’s Election. However, in truth, the “Option 2” route, where the aforementioned Negotiation Period and Purchaser’s Election timeframes are not included, is the best route for the Buyer, and for several reasons.
In January of 2014, a brand new Home Inspection Contingency was unveiled by NVAR’s Standard Forms Committee. In this revision, the three-headed monster of the “Inspection Period”, “Negotiation Period” & “Purchaser’s Election” was created. This version of the contingency has been in place since.
In the following years, many agents took artistic license to create their own quasi- contingency in the efforts of creating a “more competitive/stronger offer”. In these instances, agents would waive the Home Inspection Contingency as it stands and write into the contract: “Buyer will have the right to a home inspection during the first 7 days after Ratification with right to VOID”, or something along those lines. This created a bit of chaos, as all of the hand-written provisions were not drafted the same, and some were drafted poorly – even without the right to VOID being granted to their Buyers.
Consequently, the Standard Forms Committee revised the Home Inspection Contingency in 2017. The goal was creation of a 2nd option where the Buyer would have an Inspection period within a certain period of days, with option to VOID specifically granted therein. But this new “Option 2” did not include a “Negotiation Period” or “Purchaser’s Election” timeframe. The intent was that this would create a better option for Sellers and stronger offers for Buyers. The logic of the offer being “stronger” was rooted in the thought that under this new Option 2, the Seller would not be burdened with requests for repairs, as presumably the Buyer would either accept the Property, or deliver a Notice to VOID the Contract by the inspection deadline.
However, in today’s competitive market, shrewd Buyers are using this “Option 2” to present what appear to be “stronger” offers, using the aforementioned logic. However, after contract Ratification, these same Buyers still attempt to negotiate repairs after the inspection. In negotiating these repairs under “Option 2”, these Buyers lean on the leverage they hold by this option’s right to VOID the Contract without penalty. In essence, the Seller is forced to negotiate, or they could potentially lose their Buyer. So, this Option 2 avenue is just as beneficial to a Buyer as Option 1, but carries with it a mythical aura of making the Buyer’s offer “stronger” and more appealing to a Seller.
And, there is yet another reason why Option 2 is a better route for Buyers. in Option 1’s “Negotiation Period”, the right to VOID the Contract by the Buyer is actually suspended for a certain period of days. Under Option 2, at no time is the Buyer’s right to VOID suspended. So, Option 2 gives the Buyers all of the rights of Option 1, without the different framed time periods, and without suspension of the right to VOID.
So, a savvy Buyer in today’s competitive market would be well advised to use “Option 2” under the Home Inspection Contingency, for a leg up on the rest of the Buyers who aren’t in the know. And with all of that in mind, why would a Buyer choose Option 1 at all? It’s something to ponder.