Due Diligence Scenarios-2017 AAR PC

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Scenarios

Scenario #1

The seller and the buyer sign a Contract to purchase an old “tear down” home. In the backyard there are several broken-down cars and oil drums that have made it difficult for the buyer to inspect the home during the inspection period. These cars and oil drums were in the backyard at the time that the buyer was first shown the home. Can the buyer require the seller to pay for the cost to move the cars and oil drums in order for the buyer to inspect the home during the inspection period?

Answer:  Probably not. A seller is required under the Contract to make the home available for all inspections. If the seller has made the home available for inspections, there is nothing more required of the seller under the Contract. Therefore, the buyer should have to pay for the cost to move the cars and oil drums. Note: The buyer should have provided in the Contract that the seller pay for the cost of moving the cars and oil drums.

Scenario #2

The buyer lives in New York and signs a Contract for a home in Arizona, solely based on information and photos on the Internet. During the ten-day Inspection period, the buyer has inspections performed by a home inspector and a termite inspector. The buyer personally does not inspect the home during the ten-day Inspection Period. Two months after closing the buyer moves from New York to Phoenix, and for the first time inspects the home. The buyer is very unhappy with the home, and wants to rescind the transaction. Does the buyer have a six-month right of rescission if the buyer did not inspect the home?

Answer:   No. A purchaser of a home has no right of rescission if the purchaser does not inspect the home. Note: On the other hand, the purchaser of a vacant lot in a subdivision does have the right to inspect and rescind the transaction within six months after execution of the purchase contract, if the purchaser did not inspect the unimproved lot prior to execution of the contract. A.R.S. § 32-2185.01(E).

Quick Quiz

Fill in the Blank:
During the ten-day Inspection, the buyer has inspections performed by a home inspector and a termite .

Scenario #3

The seller and the buyer executed the Contract for the home on Friday, June 30. Although the buyer wanted to begin the inspections of the home immediately, both the seller and the listing broker left town for four days over the July 4th weekend and could not be contacted. The buyer now wants to begin the ten-day Inspection Period on July 5, but the seller refuses to amend the contract to permit an additional four days for the buyer’s inspections. Is the buyer entitled to extend the ten-day Inspection Period an additional four days due to the unavailability of the seller and the listing broker for four days?

Answer:   If the buyer cannot reasonably conduct the necessary inspections during the remaining six days of the ten-day Inspection Period, the buyer should be entitled to the additional four days. In other words, the buyer is only entitled to the additional four days if the buyer makes reasonable efforts to complete the inspections, but is still not successful within the ten-day Inspection Period.

Scenario #4

The Ten-Day Inspection Period expired on January 8. On January 8 the buyer faxed to the seller an amendment to the Contract to extend the inspection period to January 11. The seller did nothing. On January 11 the buyer sent to the seller a Notice of Cancellation of the Contract because of a defective roof. Is this cancellation by the buyer effective?

Answer:   No. The Statute of Frauds requires that both the real estate contract, and any amendment, be in writing. The buyer’s proposal to extend the inspection period from January 8 until January 11 was required to be accepted in writing by the seller, and delivered back to the buyer. Inasmuch as the seller did not accept the offer to extend the escrow from January 8 until January 11, the cancellation by the buyer on January 11 for a defective roof was invalid. The buyer is now required to close the transaction. Note: Although there may be certain circumstances when the requirement of a writing to extend the inspection period may be waived, e.g., if the seller verbally misrepresented to the buyer on January 8 that the seller would sign an extension until January 11, any extension of the inspection period or any other amendment to the Contract should always be in writing.

Quick Quiz

Fill in the Blank:
The Statute of requires that both the real estate contract, and any amendment, be in .

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