Congratulations! Your client entered into a new Standard FARBAR Contract on the purchase of a single family home in Sarasota. The only contingencies are inspections and marketable title.
Your client immediately hires a professional home inspector to conduct their home inspection. During the Inspection Period the home inspector provides a “clean” report only notating that the life expectancy of the roof is 20 years but the roof is 22 years old and therefore beyond its life expectancy. You fully expect to receive a call from your client to see if they have the ability to negotiate for either a new roof or a credit toward a new roof. You quickly review Paragraph 12(b)(ii) of the Contract and confirm that “limited roof life shall not be considered defects Seller must repair or replace, so long as there is no evidence of actual leaks, leakage or structural damage”. Given the lack of any leaks or damage you inform your client that they have virtually no bargaining power on this issue. Your Buyer decides to proceed forward.
About a week before closing your client attempts to obtain a homeowners insurance policy. The insurance broker requests a copy of the Inspection report. Immediately upon review the insurance broker calls the Buyer to let them know they cannot issue a homeowners insurance policy on this property because the roof is 2 years beyond its life expectancy (regardless of no leaks or damage). The Buyer calls around to several other insurance companies and they state the same. Your Buyer is frustrated that they are now being put in a position to self-insure the property at closing, fix the roof, then obtain a homeowners policy post-closing.
At the closing table (after your Buyer leaves the room) you ask the closing attorney how you can better protect your clients from this issue in the future. The closing attorney explains that Rider H (Homeowners/Flood Insurance) would have protected your Buyer in this instance as it would have given the Buyer an “out” if they could not obtain homeowners insurance or homeowners insurance was not affordable (within stated parameters). Obviously there are many factors that can come up in a real estate transaction that cannot be foreseen. However, with proper counsel, appropriately crafted provisions, and/or the use of preprinted Riders you can substantially reduce the chances that something will harm your client both pre and post-closing. As always, should you have any questions please contact your local real estate attorney for guidance!
Berlin Patten Ebling, PLLC
Article Authored by Jamie A. Ebling, Esq., email@example.com
This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.
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