The 2019 Contract form contains a new deadline related to inspection, the “Inspection Termination Deadline.” There’s lots of confusion about how to use this deadline.
What should you do? Here’s my two cents.
I have two alternative rules for the Inspection Termination Deadline: 1) Use it alone – with objection and resolution deadlines deleted, or (2) place it on the same day as the resolution deadline.
Using Inspection Termination Deadline Alone
Many sellers don’t like to be bothered with inspection objections asking for things to be fixed. They would rather have the buyer either terminate the contract based on inspection or move forward to closing.
Under last year’s contract, many brokers in competitive purchase situations would delete the inspection resolution deadline. This essentially created a contract whereby the buyer could terminate upon inspection, but the buyer could not object and then seek a resolution.
The new Inspection Termination Deadline, used alone, works the same way. If you remove the Inspection Objection and Resolution but keep the Inspection Termination, the buyer will maintain the right to terminate upon inspection, but will not have a right to object or seek resolution.
Making Inspection Termination the same day as Inspection Resolution
If you’re going to use the Inspection Termination date along with Inspection Objection and Inspection Resolution, I recommend keeping the Termination and Resolution dates the same.
Take the case where you have an objection on Monday and a resolution and termination on Friday. Suppose the buyer finds a break in the sewer line and timely objects on Monday to have the seller repair the line. On Tuesday the seller says that the seller is not going to fix the line. By making the Inspection Termination and Resolution the same day, the buyer has the ability to terminate as soon as the buyer learns that the seller is not going to entertain the sewer repair.
If you, however, place the Inspection Termination Deadline on the Objection Deadline, you set up the same scenario as operating under the old contract form. If the buyer objects rather than terminates, and the seller refuses repair, the buyer would have to wait until the Friday resolution expiration before the contract would terminate. Most buyers want to get on with finding a new property and they don’t want to wait around those extra days for the contract to terminate so that they can have their earnest money returned.