A real estate transaction is the largest purchase many of us will ever make. Fortunately, the process in place is one designed to minimize surprises as much as possible. Take advantage of that system fully by familiarizing yourself with the following steps.
In Utah, real estate transactions are conducted under the long-settled legal principle of Caveat Emptor. Translation: “Buyer Beware!” The principle generally places the onus on the buyer of property to investigate sufficiently before buying. It also settles the argument as to which party will generally be stuck with any of the problems that come with the property. But, as discussed below, Caveat Emptor is not without exceptions.
Contractual Due Diligence Period
Most residential buyers in Utah will use the Utah Real Estate Purchase Contract, commonly referred to as a “REPC.” Once all parties sign the REPC, it becomes a binding contract. However, the REPC provides for a variety of deadlines, and allows for a number of reasons for the buyer to terminate the contract upon completion of due diligence obligations. For this reason, a savvy buyer will always make sure prior to signing the document that the deadlines outlined within it offer sufficient time to complete any needed inspections or reviews.
Although the buyer should always exert caution in a Utah real estate transaction, the seller is not without disclosure obligations. The seller’s knowledge of the property’s condition is conveyed to the buyer through the Seller’s Disclosures form. In completing this document, the seller must disclose any and all issues she’s aware of regarding the property’s condition and use, as well as any repairs. Answer falsely, and the seller may find herself accused of breach of contract or even fraud.
Once the seller’s disclosures are completed, it is the buyer’s turn to review issues raised in the Seller’s Disclosures, conduct a property inspection, and complete any other tests or reviews she feels are important. This work is best left to the professionals, especially when it comes to inspecting the structure, roof, foundation and working systems of the house. Tests for mold, Radon gas, and other invisible conditions are also a good idea. This is also the point at which the buyer has the option to review the surrounding neighborhood for sex offenders, or other issues she may feel are important. The downside is, of course, that these tests all come out of the buyer’s pocket—but then, so do any repairs once she signs that dotted line. And keep in mind, if the buyer doesn’t test for a condition or inspect a specific item, Caviat Emptor dictates that she will likely be stuck with it.
Terminating the Contract
If the buyer discovers something during due diligence she has a problem with, the REPC provides ways for her to address it. Depending on the issue, she may be able to cancel the REPC and receive a full refund of her deposit, or agree with the seller, in writing, as to how any specific issues will be resolved. A buyer has the sole right to select either option, though she must do so—once again in writing—before the expiration of the due diligence deadline in the REPC.
If you have any questions about entering into a Real Estate Purchase Contract, or how the due diligence process should work, we invite you to contact us directly at the number listed below.