A very common question for real estate agents, and by extension buyers and sellers, is whether to check the box for offer date or home inspection date as it relates to measuring whether the property is in substantially the same condition. This article hopes to put to rest the debate between the two options.
In the course of navigating the contract to close process, buyers will almost universally do a final walk through of the property they are purchasing. Buyers will normally do this walk through the day before or even the day of settlement. Among other things, buyers are looking to make sure the property is in substantially the same condition as it was on either the contract date or home inspection date, depending on which of these options was selected in the contract of sale. Is one option preferable to the other?
On a more superficial level, choosing date of contract seems to capture what a buyer and seller would expect. That is, the buyer expects to receive the property in substantially the same condition as when the buyer saw it and decided to make the offer, as opposed to some future date. The superficial and easily understandable argument for choosing home inspection date is that the buyer and seller presumably get an objective written report regarding the physical condition of the property that can be referenced in the event of a dispute, as opposed to contract date, which provides no such objectivity.
Digging deeper however, we find that either selection within the contract puts the buyer and seller in substantially the same position (no pun intended).
ANALYSIS:
If there are no issues at walk through, then either option will work equally well. The analysis really begins when the buyer claims something is not in substantially the same condition upon completing their walk through and the seller disagrees.
Let’s assume the measuring date is the home inspection date. A seller’s response to a buyer’s claim that an item is not in substantially the same condition is either to agree or counter that the item is in substantially the same condition. If the seller agrees, then no matter the measuring date, we don’t have an issue to resolve. In the event the seller does not agree, the parties presumably have an objective written report regarding the status of the physical condition of the property on the exact date by which we are to measure. Thus, assuming the home inspection was thorough and accurate, the parties should be able to determine, for example, that on the date of home inspection, the dish washer was working and then demonstrate that on the date of walk through, it is not. While not all disputes can be avoided, resolution in most cases should be fairly straight-forward. Additionally, if something changes between the time of offer and home inspection, the buyer would have the opportunity to negotiate it as part of the home inspection contingency process.
Now let’s assume the measuring date is the contract date.
Similar to the home inspection date analysis, the parties only ever have an issue where the buyer claims an item is not in substantially the same condition and the seller disputes that. The challenge of this scenario is that on the date of contract, the parties don’t have a report to which they can refer detailing the physical condition of the property, so it looks as though unless the buyer happened to take pictures at the time of writing an offer, the parties will fall into the abyss of “he said, she said.”
All hope is not lost because where contract date is selected, the vast majority of the time the buyer will do a home inspection. This is significant because when a buyer is making the argument that the property is not in substantially the same condition as it was on the contract date, the buyer will have already received a home inspection report that accounts for the physical condition of the property. If, for example, the report shows that the dryer was malfunctioning, then the buyer had the opportunity to negotiate that with the seller. This makes it very difficult for the buyer to argue that the dryer is not in substantially the same condition as it was on the date of contract when a written report indicates it was malfunctioning and the buyer chose not to ask the seller to fix it. On the other hand, if the report shows the dryer was functioning, it puts the seller in a very awkward position. Specifically, it forces the seller to make the ridiculous argument that on the date of contract the dryer was malfunctioning, then at the time of home inspection, it was functioning, then suddenly malfunctioning again at time of walk through. This is a bit preposterous.
It is understandable that buyers and sellers may naturally gravitate toward one of the above choices to measure the physical condition of the property – in my experience, usually the date of home inspection. However, after a considered analysis and assuming the buyer performs a home inspection, either choice will place the parties in the same position in the event a buyer claims the property is not in substantially the same condition and the seller takes the position that it is.