Understanding Inspection Contingencies in New Jersey Real Estate Purchase Contracts

Purchasing a home in New Jersey involves several critical steps, one of the most significant being the inspection contingency within the real estate purchase contract. This clause allows buyers to conduct thorough evaluations of the property's condition before finalizing the purchase. If inspections reveal substantial issues, buyers can negotiate repairs, request credits, or, in some cases, terminate the contract. Both buyers and sellers must understand how inspection contingencies function in New Jersey's real estate transactions.

What Is an Inspection Contingency?

An inspection contingency is a provision in a real estate purchase contract that grants the buyer a specific period to perform professional inspections of the property. If these inspections uncover significant defects, the buyer has the right to request repairs, renegotiate terms, or terminate the agreement without penalty. This contingency ensures that buyers are informed about the property's condition before proceeding to closing.

Types of Home Inspections in New Jersey

In New Jersey, buyers typically conduct several inspections to assess various aspects of the property. Common inspections include:

• General Home Inspection: Evaluates the property's structure, electrical systems, plumbing, heating, and cooling systems.
• Wood-Destroying Insect Inspection: Identifies termites and other pests that could cause structural damage.
• Radon Test: Detects radon gas, an odorless, tasteless, invisible gas produced by the radioactive breakdown of naturally occurring radium in most soils, which can enter a home from the ground, seeping into the interior through cracks or other openings in the foundation.
• Oil Tank Sweep: Determines if underground oil storage tanks are present, which could lead to environmental liabilities.

Additional inspections may be necessary depending on the property's features, such as pool inspections, septic system evaluations, or well water testing.

New Jersey's Home Inspection Contingency Period

Typically, New Jersey real estate contracts grant buyers a 10 to 14-day window from the conclusion of attorney review to complete their inspections and present any repair requests to the seller. It's crucial to schedule inspections promptly with licensed professionals to ensure all evaluations and subsequent negotiations occur within this timeframe. Please note that these time frames can be modified in Contracts and Addendums.  Always review your Contract, Riders and Addendums carefully!

Negotiating Repairs and Remedies

After receiving the inspection reports, buyers can:

• Request Repairs: Ask the seller to address necessary repairs before closing.
• Seek Credits or Price Reductions: Negotiate a credit or reduction in the purchase price to offset repair costs.
• Proceed As-Is: Accept the property's current condition and move forward with the purchase.
• Terminate the Contract: Withdraw from the agreement if significant defects are discovered and an amicable resolution cannot be reached.

Sellers are not obligated to make repairs but often agree to reasonable requests to facilitate the transaction.

Again, please note these statements are generalized and can be modified in Contracts and Addendums.  Always review your Contract, Riders and Addendums carefully!

Attorney Review and Legal Considerations

In New Jersey, real estate transactions include an attorney review period, typically lasting three business days from when both parties sign the contract. During this phase, either party can cancel the contract or propose modifications, including changes to the inspection contingency clause.

If disputes arise over inspection findings, an attorney can assist in negotiating solutions or, if necessary, guide the client through contract termination.

Tips for a Smooth Inspection Contingency Process

• Research and Schedule Early: Select your inspectors and schedule all inspections promptly after concluding attorney review. This approach ensures you have ample time to complete inspections, review reports, and compile repair requests within the contractually specified timeframe.
• Understand Your Rights: Familiarize yourself with the inspection contingency clause. Typically, you have 10-14 days from the end of attorney review to complete inspections and present repair requests. The seller usually has seven business days to respond. If an agreement isn't reached, you may have the right to terminate the contract and reclaim your deposit.
• Maintain Realistic Expectations: Recognize that no property is without flaws. Focus on addressing significant defects rather than minor cosmetic issues. This realistic approach facilitates smoother negotiations and increases the likelihood of a successful transaction.

Final Thoughts

Inspection contingencies are a vital aspect of real estate purchase contracts in New Jersey, providing buyers with an opportunity to assess the property's condition and negotiate necessary repairs. Whether you are buying or selling a home or other real estate or property, understanding your rights and responsibilities under the inspection contingency clause is crucial. Consulting an experienced real estate attorney can help protect your interests and ensure a smooth transaction.

If you have questions about inspection contingencies or any aspect of New Jersey real estate law, or real estate purchases and sale in Northern New Jersey contact the Khorozian Law Group  today at (201) 944-9200 for professional legal guidance. We handle real estate transactions throughout Norther New Jersey including but not limited to Bergen County, Hudson County, Passaic County, Union County and Morris County.

Best of luck with your real estate purchase or sale!

You can see a sample of the New Jersey Realtors Standard Form of Contract here.