How do Inspection Contingencies work if the seller offers to fix the problem?

Question

We made an offer on a house and the seller accepted it. Now we did a Home Inspection of the house, and we found that it had unacceptably high Radon levels. The seller has offered to install a Radon pump to fix it, but we have decided that we don't want to buy the house because we don't want to deal with the Radon issue in future.

So my question is, what are our options? Is it possible to back out at this point? My understanding is that if the seller refuses to fix a problem revealed in an Inspection, the buyer is allowed to back out. But can the buyer back out if the seller is willing to fix it?

I imagine that the answer to my question might depend on the specifics of my contract, but I don't have it in front of me. So can someone tell me how Inspection contingencies work in most contracts? If it helps I live in New Jersey.

EDIT: Apparently after the inspection was done, we accidentally signed a paper saying that if the sellers fixed the Radon problem, then we would buy it. Now we're really up a creek without a paddle, aren't we?

EDIT 2: To avoid the risk of legal trouble, we have now decided to buy the house after all. So this question is moot now.

Answer 1

The answer depend nearly 100% on how the offer and contingency read. When I have a client make an offer, the contingency includes an inspection, but the buyer would have no obligation to accept a counter offer. i.e. the offer can be withdrawn due to "I didn't like the inspection report, and do not wish to negotiate any repairs." In fact, the buyer need not disclose which fault was the cause. The buyer pays for the inspection and the report is his property.

On the other hand, I agree, if it's only radon, the venting fix is common, and you may be paying for many inspections only to find one house after another with this issue.

Answer 2

First thing, ask your real estate agent who should have been involved in writing the contract, and can explain your options regarding the contingency.

That being said...

The inspection report is the decision point. For every issue/problem mentioned you have decide: Ignore; have the seller fix; have the seller give you money to fix; have the seller drop the price; or walk away.

Minor things you can have the seller fix. They need to be done, but they can be done by the seller.

Expensive things that are difficult to estimate the price in advance should also be done by the seller. The difficultly estimating the cost to repair will make it risky for you to negotiate a price break. Getting a credit of $1,000 when it ends up costing you $20,000 is something you want to avoid.

For items that you want to do the fix yourself you want money at closing to do them, or ask for a price break. Items in this category include replacing an appliance. You can take the money and get exactly the one you want, or let the seller of the house buy one that has the least options and won't match the color. Buyers also take this option when they were going to renovate soon anyway.

Walking away. This happens when there is a large expensive issue that is hard to fix. Or a very large list of mid-size problems. Issues in this category can include foundation cracks, major electrical problems, extensive leaks, mold. It can also include beautifully constructed additions that aren't up to code and were done without permits and inspections.

Which category is your Radon in? You need to ask your agent, and read the inspection report. The agent can explain your options, and how likely the seller will be to agree. They can also tell you how likely you are to not lose the deposit if you do walk away.

Answer 3

First, radon is common in some areas of New Jersey. Before you back out of this house, you should consider if you can find a different place to live that does not have a radon issue.

You should be able to find someone who does radon testing specifically. Such a company should be able to check that neither the gas nor the particulates (on walls, etc.) are present in the house after the mitigation. Apparently checking the water is possible as well. If such a test fails and the seller does not do more mitigation, that would be grounds for withdrawing from the contract.

Since radon is common in New Jersey, it is likely that the contingencies are written such that the seller offering to mitigate is enough to keep you in the contract. You would have to ask a lawyer to be sure.

In general, contingencies are based on the offer you made, which is a contract. If you wanted radon to be a deal breaker, then you should have written the offer that way. Left to themselves, real estate agents will offer mitigation instead. This is because they get paid a commission on the sale. No sale; no commission. Obviously too late for this house, but in the future, you may want to be more careful about this.

Radon mitigation is common and costs in the $1000-$3000 range. One estimate in that link suggests that $1300 is the minimum with required fees, etc.

If your offer is not written to allow you to walk away if there is a radon issue, you will probably lose your deposit if you walk away. You can also try to be extra picky about your contingencies. In particular, they have to show you that they have mitigated the radon problem. If you can find something that indicates that they have not, then you can get more mitigation. If they either fail to respond or choose not to respond, that could allow you to withdraw from the deal without losing your deposit.

There usually aren't additional problems beyond losing your deposit from walking away. But again, this depends on the offer contract. This is really something that a lawyer should read.

Answer 4

Did you get an option contingency? This is usually part and parcel with getting a home inspection; you negotiate a nominal fee, like $100, that gives you the "option" to back out of the deal for any reason at all within X days (typically 7 calendar days). This is usually the time you schedule the home inspection and figure out what needs repairing. If you're still in your option window, then yes, you can back out and get your "earnest money" back from escrow. The seller keeps your option fee (it can be credited to your portion of closing costs if you were to go forward).

If you are not in an option period because it's expired or you didn't get one, you can still back out, but unless you're covered by another contract contingency that would apply, such as financing or appraisal (the bank may not be able to underwrite the property even after agreed repairs), you "default" and typically lose your earnest money. Technically the seller could hold you to strict performance and force you to the closing table, but that requires going to court and it's almost never heard of; just taking the earnest money and putting the house back on the market is the easier route for everyone.