March 1, 2023 – In January 2023, existing home sales were down for the 12th straight month – and down 36.9% from a year ago, according to a recent report by NBC News. While the market is cool now, for two years during COVID-19, the housing market was booming and extremely competitive with buyers competing for homes – who sometimes cut corners in order to make the deal, like skipping the home inspection.
Skipping home inspection, as well as insurance and home warranties, isn’t new for home buyers – mainly as a cost-savings measure – but can result in buyers’ regrets.
As an attorney, you can let your home-purchasing clients know that they shouldn’t solely rely on information from the real estate condition report to reveal property defects.
In fact, you can help them to limit the defects they will accept by a dollar amount, such as adding this clause to the optional inspection contingency:
The aggregate of all defects identified in the report (including environmental concerns) must be repairable or remediable for less than $500.1
Of course, you can advise the buyer that they should determine whether they want to give the seller a chance to cure any defect. An optional inspection contingency in the standard offer allows the parties to negotiate whether to give the seller a right to cure.
Shannon Green is communications writer for the State Bar of Wisconsin, Madison. She can be reached by email or by phone at (608) 250-6135.
While the buyer might want the seller to bear the cost and responsibility of repair, the buyer might not want to wait until the defect is cured or might feel uncomfortable accepting a property requiring many repairs. In addition, the optional inspection contingency specifies that the buyer must pay for the home inspection.2
Another way to help your client is through the Residential Real Estate Condition Report. This form is derived from the form in Wis. Stat. section 709.03, which requires disclosures of the condition of real estate to be in “substantially” the same form and to contain “at least all” of the information given in that statutory section. Wis. Stat. section 709.02 requires that the seller – provided the buyer has not waived their right to receive the report – must provide the report not later than 10 days after the seller has accepted the offer to purchase.3
You can find the Real Estate Condition Report (Form REA-0136) in section 1.57 of Real Estate Transactions System from State Bar of Wisconsin PINNACLE®. The form covers structural and mechanical issues as well as environmental issues; wells, septic systems and storage tanks; taxes, special assessments, permits; land use; and additional information needed.
Creating a Greater Peace of Mind for Your Clients
Knowing that an optional inspection contingency is in place, you and your client can have more peace of mind during the real estate transaction to protect against unwelcome discoveries once the purchase is completed.
More About Real Estate Transactions System
Real Estate Transactions System from State Bar of Wisconsin PINNACLE is a comprehensive, practical guide to the purchase and sale of real estate. It is available in print, or through Books Unbound.
Real Estate Transactions System provides a system for collecting and organizing client information so that real estate transactions can be completed efficiently. The book is designed to be used in Wisconsin in conjunction with standard real estate forms and provides sample text for contingencies, warranties and representations, and other clauses.
Revised for 2022-23 with new and updated forms, a revised analysis for form WB-24, and developments in environmental law affecting real estate.
What is Books Unbound?
Books UnBound® is the exclusive online digital resource from State Bar of Wisconsin PINNACLE® Books. Since 2010, many of the “brown binders” and other treatises that lawyers have relied on for decades have been available in a digital format, which was recently upgraded through a partnership with Lexum, a legal software company.
“It’s faster with a more modern look and feel, includes a more robust search function with Boolean and natural search options, and gives users one-click access to case law through Fastcase and primary law on official websites,” said Carol Chapman, publications manager for the State Bar of Wisconsin.
“It also provides an expanded ability to create and search your notes, including the ability to embed URL links, images, and other helpful information directly in the notes and to print your notes with both the highlighted book text and your user-added comments.
Endnotes
1 John L. Horwich et al., Real Estate Transactions System (9th ed. 2023), § 1.26.
2 Real Estate Transactions System, § 1.51 (line 203).
3 Real Estate Transactions System, § 1.24.
