The Residential Real Estate Contract in New Jersey, part 5 of 7

8. Conditions of Going Forward with the Transaction

There are two major buyer areas of uncertainty at the time the parties enter into the agreement. The first is getting affordable financing. The second is obtaining assurance from professional inspectors as to the acceptable condition of the property.

Before removing his property from the market the seller wants to know that the amount sought is reasonable in relation to the property sale price. A pre-qualification letter may help.

In an effort to get the lowest possible interest rate the buyer may seek financing from a lender who imposes conditions that wouldn't be acceptable to the parties if they knew about them in advance. The lender might require that the closing of the mortgage loan be held at its office far from the property, the parties, and their lawyers. Both the buyer and the seller would be unhappy with the additional costs and inconvenience involved.

It may take forty-five or more days to fully satisfy the mortgage financing condition in the agreement. The conditions relating to inspections and the uncertainty they represent can usually be handled in a shorter time.

The buyer should inspect the property as thoroughly as he can. But it is in his best interest - and the seller's - that the buyer hire independent professional inspectors.

That gives the buyer information and peace of mind. Professional inspections also lift burdens from the seller. He may not have to make representations and is not likely to later be charged with concealing conditions affecting his property.

The buyer normally selects the testers and inspectors and bears the cost. But that's not a rule. Costs can be shared. Or there can be a provision that the seller pays the costs if the results don't match representations of the seller.

9. Inspections

There are some common inspections made in the purchase of a house. One is for termites and other wood-boring insects. A buyer may not be able to perform the crawling and probing that is part of this inspection. And he probably won't know what to look for. Also, an expert report is required by most lenders as a condition of granting a loan.

The agreement should provide for an inspection by a professional. It should allow about ten days to complete the inspection and for the parties to receive a report.

It should provide for what is to happen if insects or insect damage is discovered.

Another inspection category is Structural and Systems. This inspection tests for major problems the buyer can't see or evaluate himself, such as structural defects and defects in heating, plumbing, or electrical systems. This provision is sometimes abused by buyers who change their minds and want to get out of an agreement. It is frequently abused by buyers who want to get minor deficiencies fixed at the seller's expense.

The clause should provide for a short time in which to inspect. It should require that single items have a cost above an agreed upon minimum to fix, before they are the basis of terminating the agreement. Items known to the parties to be deficient in advance should be excluded, such as an old furnace or old roof that is known by all to have reached the end of its life expectancy as these deficiencies have or should have been considered in the process of negotiating the price of the property.

It has always been a good idea to test well water. Tests range from the simple for drinkable water, to the complex for trace chemicals. The costs relate to the complexity.

Since 2001 every contract to sell a residence, for which a private well serves the property, must require the testing of that water supply for at least the parameters in the statute. Closing of title may not occur unless both buyer and seller certify in writing that they have received a copy of the test results. It does not require that problems found be corrected. The parties can negotiate who pays for the test.

Argument over water testing usually centers around the way and means to correct any problem that's found.

Testing for a properly functioning septic system is more difficult. A dye test to see if effluent comes out on the surface of the ground is generally easy. Further testing often involves digging up the system. A built-in limit of costs and options to proceed or not, are the best that the parties should expect from each other in the agreement.

Another common test in New Jersey, particularly in central Hunterdon County, is for the presence of radon, a colorless and odorless gas. Radon itself is harmless, but the by-product of its existence has been concluded to be a considerable health menace. Fortunately, it is easy to test for radon. And fortunately, the cure for the problem rarely costs much in relation to the value of the home.

The government has suggested that a level of up to four picocuries per liter of radon is acceptable. Beyond that level, judgment needs to be exercised to determine if something should be done. The test is only accurate if the basement, where the readings are normally taken, is not exhausted of air artificially during the test.

If the seller has had a test taken for his own purpose, the law requires that he provide a copy of that test to any prospective buyer before a contract is signed. Most buyers will want to take their own test in addition to the seller's test.

Again, the time limit should be short - about twenty days for this test. A cost to correct - and options to cancel - should be worked into the agreement.

The parties should be present at all inspections. The seller should participate so he can offer information and explanation where appropriate, while being careful not to make any representations that are not accurate. And he will learn more about his own property in the event the deal doesn't go through, and he becomes involved in negotiating another agreement. The buyer should participate to learn what he can about the property, and to help him evaluate the report he will receive.

The agreement should provide that if it is to be terminated because of the inspections,copies of all reports shall be given to the seller for his use in either fixing deficiencies or disclosing them to future buyers. (to be continued)