Every year, the Minnesota Association of Realtors publishes changes to the standard forms we all use including purchase agreements, contingencies, etc. Often small changes are made to simplify language, remove ambiguity or lessen confusion. Other times major changes are made such as adding or removing entire forms such as the addition of the radon section to the seller’s disclosure form or the removal and subsequent re-introduction of the As-IS form. These changes are compiled throughout the year and published on August 1.
This year the forms committee has done a complete overhaul of the inspection contingency form, substantially changing how inspections will be handled between the buyer and seller. Here are some highlights:
- The new form combines the inspection period, notification/review period and the seller response period into one timeline. No more do we have 5 days for inspection, 2 for results review and then 2 for the seller to respond. Just one time period for the buyer to obtain the inspections/tests, negotiate any issues with the seller, and either come to agreement with the seller, or cancel the Purchase Agreement based upon the inspection (the “Inspection Period”).
- Previously, the inspection periods were calculated in business days. Now it will be in calendar days.
- The biggest change is that this new “inspection period” also contains all negotiation time. In the past, as long as we were negotiating, the contract was effectively active. Now without the negotiations completed during the inspection period, the contract is valid and proceeds as-is. This is a major shift from the past where if the two sides can’t agree on items after the inspection, the contract cancels automatically.
We have not seen the entire updated inspection form yet and we will need to read it very carefully. I expect it will take some time for all agents to settle into the new norm on how long this inspection period is.
I recommend that if you send a post-inspection amendment over to the seller that you include some language such as: “the buyer and seller agree to extend the inspection period for x additional days. Failure of the parties to execute any additional amendment at the end of this inspection period will constitute this purchase agreement cancelled and both parties shall immediately sign a Cancellation of Purchase Agreement.” I am not an attorney and I am sure that I will modify the above language as we settle into this new norm. The interesting question is, what will that new norm be?