Due Diligence Inspections Are Vital to Protection of Buyer
Purchase contracts in Utah now boil all the due diligence evaluations including inspections, tests, examinations and reviews of all sorts into a specific provision with a specific deadline. The buyer is free to conduct whatever study he or she desires in order to decide whether or not to proceed with the transaction and close escrow.
This review period is the time for the buyer to determine if there are issues or problems with the property that warrant cancellation of the contract or if the conditions are such that it appears that the deal is sound and makes good business sense to consummate the transaction.
While the seller may feel as though he or she is being held out to dry for the specified time for due diligence examination by the buyer, this is a critical time and condition for the buyer. While there may be various “subject to’s” or conditions in the offer, the buyer has the right to cancel the agreement before the deadline for completion of the due diligence period for any reason the buyer wishes. There may be reasons cited by the buyer that seem totally unreasonable to a seller for cancellation, but the buyer has that right as provided in the agreement unless mutually agreed otherwise between the parties at the outset or formulation of the agreement to sell/purchase.
Because of this bold provision in the agreement, buyers must act prudently and with dispatch to see that all desired inspections are performed within the time period provided. If the deadline comes and passes and the buyer has not secured an extension or given notice of cancellation, and still has concerns about the property condition, it may be too late, depending upon the seller. It is at this critical juncture that disposition of the earnest money deposit may come in to question.
A buyer should counsel with his or her representative in great detail regarding the property condition and items of concern. Buyers should select inspectors to perform the essential services and inspections within the time period allowed and at a fee understood and accepted. Buyers should plan to be present when the inspection is conducted. It is good to get first hand, direct and immediate input from the inspector on items discovered in the property.
When the inspection is completed and the report received, the buyer must act by the deadline to cancel or submit the list of buyer objections and seek solution of the problems that separate the parties. In so doing, if the notice is not that of cancellation but rather that of a request to negotiate repairs and adjustment in price or costs, the buyer must realize that the seller now has the sole opportunity to agree or reject the buyer’s request.
The principals and the agents who are party to the agreement must be conscientious and diligent relative to the deadlines in the agreement. The deadlines are there for a reason: to protect the interest and the rights of the respective parties. Timely action serves the position well; negligence or dilatory response and failure to act may be very costly.
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