“RIGHT TO CURE”

Have you ever made a mistake and wanted an eraser? Remember back in the day when we used “White-out”? I loved that stuff! How do you feel about Mulligans? Do-overs? We all have moments when we would like to correct an error. That is the basic idea of “Right to Cure” – an extra clause in the Offer to Purchase that allows the seller the right to a do-over, an opportunity to fix defects flagged during the inspection process.

How does this issue play out during a transaction? Let’s say a buyer makes an offer contingent on a home inspection but DENIES the seller “the right to cure”, and the seller accepts. The inspection process may find at least one (probably more) defect(s) in the property. Let’s use faulty electrical wiring for example. The inspector finds outlets and wiring in parts of the home that are faulty and outdated. Not good!

The buyer doesn’t want to buy a property with outdated wiring and potential electrical issues. So what happens next? The buyer can ask the seller to have a licensed electrician cure the problem. Using an Amendment to the Offer to Purchase, the buyer specifies what needs to be addressed.

Now the ball is in the seller’s court. Does he want to pay an electrician to fix the problem?  Maybe he doesn’t and says no. Now what can the buyer do? He can buy the house anyway. Or, he can decide he doesn’t want to buy a house with potential electrical problems and can issue a “Notice of Defects” to the seller and end the transaction.

Let’s look at the same scenario, except the buyer ALLOWS “Right to Cure” in the offer, and the seller accepts. The inspection finds electrical problems, the buyer asks for an electrician to repair them, and the seller refuses. Now what? The buyer can still issue a “Notice of Defects”.

This puts the ball back in the seller’s court once again because the offer included the  “Right to Cure”. He can still elect to cure the defect, even though he initially said he wouldn’t. He can have one more chance for a “do-over”. 

And here is the sticky part, the offer states that the seller must cure the defects in a “good and workmanlike manner”. Does this mean the seller could ask his handyman Uncle Herbert rather than a licensed electrician to update his electrical wiring and call this a cure? Such a great question! Did he do this in a “good and workmanlike manner”? Will the buyer agree? Will the lender agree? Murky waters! The Offer To Purchase leaves a lot of wiggle room with the wording “good and workmanlike manner”.

We are in a sellers’ market. Buyers are doing their best to make their offers as appealing and competitive as possible. “Right to Cure” is almost always offered in this market. And, in some cases, may leave the buyer in a bad spot.  

How can buyers protect themselves? They can mitigate risk by examining a property’s details during a showing: the basement, the mechanicals, the electrical box, the exterior, the windows, the roof, etc. While well-maintained houses are less likely to have major problems, most have issues of some sort – even new houses. And, buyers can embrace reasonable expectations. Expecting a seller to fix too many things can backfire. 

Buying a home is an investment, a business venture – with an element of risk. I wish I could erase that factor for my buyers, but I cannot. I have no magic wand (or eraser). If I had a magic wand, I would wave away any defects, protecting buyers and helping sellers. And, I would eliminate all risk involved in the real estate market. Stay tuned for when I obtain these magical powers!