PA Agreement of Sale Part 4
Paragraph 10 headed Inspection Contingency Options is the controlling paragraph for the 4 following paragraphs. It describes the 2 options available between the buyer and seller and the possible results under these options.
Option 1 applies within the contingency period as selected and stated in paragraphs 11-15. There are three possible results of the inspections. 1) The buyer can accept the property as it is and release all parties under paragraph 27. 2) If the buyer is not satisfied with the inspections the buyer can terminate the agreement by written notice with all monies returned to the buyer as per the terms of paragraph 30 of the agreement. 3) The buyer enters into a mutually acceptable agreement with the seller in relation to repairs or credits towards closings costs that are acceptable to the mortgage lenders if the agreement is conditional upon a mortgage.
If the buyer and seller cannot reach mutually acceptable terms within the time stated for the inspections in paragraphs 11-15 and the buyer does not terminate the agreement in writing and give it to the seller within the time specified, the buyer will accept the property and agree to the release in paragraph 27. THIS IS VERY IMPORTANT. Even if you are in the process of negotiating a mutually acceptable deal, if the period has not been extended by an addendum and signed by all parties, as the buyer you MUST terminate the agreement before the inspection period expires. Option 1 is often thought as a more buyer friendly option, however, some sellers prefer option 1 as there is a shorter time period with the various options. It gives the buyer the option to pull out of the deal if they do not like the results of the inspections.
Option 2 like option 1 applies within the period defined for the inspections in paragraphs 11-15. Here you have two possible results. 1) The buyer as in option 1 can accept the property. 2) If the buyer is not satisfied will present the report to the seller with a written proposal of corrections or credits desired by the buyer. It also goes into details of what the proposal can include, such as names of professionals selected by the buyer but is not required. This is where the major difference arises between the two options. If the seller accepts the buyer cannot terminate the agreement. The seller also has a specific number of days as selected by the buyer and stated in the agreement to reply to this proposal, to give them time to get their own estimates. The seller notifies the buyer of the sellers choice in writing; to either agree, or to credit the buyer at settlement for the costs to satisfy the buyer's proposal, as acceptable to the mortgage lender, or to not agree to the buyers proposal.
If the seller agrees to the proposal or to credit the buyer at settlement the buyer accepts the property and accepts the release in paragraph 27.
However the buyer has three options if the seller chooses not to accept the terms of the buyer's proposal or not to offer a credit or does not respond within the time specified then the buyer will within a state number of days 1) accept the property as per their inspection reports and accept the release in paragraph 27; 2) Terminate the agreement in writing and notify the seller with all deposit monies returned to the buyer according to the terms of paragraph 30. 3) Or enter into a mutually acceptable written agreement between the buyer and seller which is acceptable to any mortgage company.
Like Option 1 if no agreement is reached within the time period as stated in option 2.2.c and buyer does not terminate the agreement in writing it is the same as if the buyer is accepting the property and agrees to the release of paragraph 27.
As you are probably already seeing, many paragraphs use similar language and repeat choices stated in other paragraphs as well as making reference to paragraphs 27 and 30, so you need to make sure you understand those paragraphs particularly.
The page continues with paragraph 11 which relates to the Property Inspection Contingency. There is a long description of what you can have inspected and by whom whilst not limiting you to those mentioned; and there are suggestions about what you should investigate such as deed and use restrictions plus many others that may apply to the property.
The buyer then selects to waive this option and agree to the release in paragraph 27, or to elect to make inspections within a specific specified time which runs from the date of execution of the agreement, not the date it is written. All inspections are carried out at the buyer's expense, and the inspector must be a full member in good standing of a national home inspection association or a person supervised by a member, or be a properly licensed or registered engineer or architect. The contingency can state if any existing conditions are exempt from the contingency.
It then continues by defining what the buyer's options are if they are not satisfied with the results of the inspection. Paragraph 10 is referenced as explained above, Option 1 with no further explanation and Option 2. Under Option 2 on the property inspection contingency there is also the choice of entering a deductible where if the repairs specified in the report are equal to or less than this amount, the buyer will accept the property and accept the release of paragraph 27. If the repairs are greater than deductible all the terms as stated above under Option 2 apply. If the seller accepts the proposal from the buyer, it is considered that he has satisfied these terms if any uncorrected or uncredited amounts equal the deductible.