There are now two ways for a buyer to terminate a Contract with no cause. Since I started in 2001, the buyer has been able to terminate a contract based on the HOA documents – buyers have three days to review the HOA documents.
A few months ago the Virginia Association of Realtors released a new home inspection contingency form.
Pursuant to the terms of Contract, Seller shall have all utilities in service If the results of such Inspection(s) are unsatisfactory to Purchaser, in Purchaser’s sole discretion, Purchaser shall provide Seller, prior to Home Inspection Deadline: 1) An entire copy of the report(s) and a written addendum listing the specific existing deficiencies (as defined below) of Property that Purchaser requests Seller to remedy together with Purchaser’s proposed remedies (“Home Inspection Removal of Contingency Addendum,” herein referred to as “Removal Addendum”) OR 2) Written evidence that such Inspection was performed and notice terminating Contract. Upon request by Seller, Buyer shall provide an entire copy of the inspection report to Seller.
At Purchasers’ sole discretion, they may terminate the contract so long as they’ve had the home inspection. Now, the cost of terminating a contract is a couple hundred dollars.
Anecdotally, I’m hearing a lot of stories of buyers using this contingency to back out of contracts for no cause – this isn’t good for the sellers, the market or, frankly, for the buyers.
As a buyers’ agent: This is good and bad. Good: I want my buyer clients to always have the best opportunity to make the best decisions. Notsogood: I tend to think of a Contract as a binding thing that should be taken very seriously. If a buyer enters a contract thinking already about how they’re going to get out of the contract, no one benefits.
As a sellers’ agent: This stinks. A seller should have the opportunity to negotiate and remedy deficiencies. Period. This form changed that.
What value is the earnest money deposit? A purchaser could put down an abnormally large (or small) earnest money deposit (the deposit they make at Contract Ratification that ostensibly binds them to the contract and represents the amount that they potentially lose if they default) – and get it back if they simply change their minds in the home inspection contingency timeframe.
What is a buyer or seller to do? Know what you’re signing.