Property Condition

Your offer to purchase should address the issue of property condition in two ways. First, ask the sellers to complete a property disclosure statement that lists every conceivable problem or defect that has now or ever affected the property or the neighborhood. In addition, ask what efforts the sellers, previous property owners, or neighbors have implemented to solve the problem. ("Oh yes, we kept blowing fuses, so we just rewired around the fuse box. Now we never have any problems." Or maybe, "Well, there was a crack cocaine house down the street, but the Neighborhood Watch group got the police to close it down.") The more you can get the sellers to tell you about the property and the neighborhood, the more accurately you can judge the property's market value.

Second, while you can learn a great deal from the sellers, you can't learn everything. Sellers can't disclose what they don't know. As added protection, include a property inspection contingency in your offer that permits you to check out the property with one or more specialists who can verify the condition of the plumbing, heating and air-conditioning, electrical system, roofing, and foundation.

Your contingency clause can state that repair costs should not exceed some designated amount (say $1,000). Ideally, the sellers should pay these costs. But if you've negotiated a bargain price, then you might accept responsibility. If repair costs exceed your specified amount, your contingency clause should give you the right to void the purchase agreement and obtain a refund of your earnest money deposit.

1 If available. Title insurers will not issue policies on some properties when too many uncertainties cloud the quality of the title. In such cases, you would buy the property only at a steeply discounted price. Once purchased, you would then try to resolve the title issues. If successful, you win big.

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