A home inspection identifies several defects. The buyer wants the seller to address them. Should the buyer send a WB-40 Amendment to Offer to Purchase or a WB-41 Notice Relating to Offer to Purchase that lists the defects?
The forms may address the same inspection issues, but they accomplish very different things. Confusing an amendment with a notice can have significant consequences for the transaction.
An amendment is a proposal
A WB-40 Amendment to Offer to Purchase is used when a party wants to change the terms of an existing offer. In the inspection context, a buyer might propose an amendment asking the seller to repair a defect, provide a credit, reduce the purchase price or otherwise address an inspection issue.
The important point is that a proposed amendment does not change the offer unless the parties agree to it. The buyer may propose a solution, but the seller is not obligated to accept it. Until all parties agree to the amendment, the original terms of the offer remain in place.
For example, suppose the inspection reveals a roof near the end of its useful life. The buyer might propose an amendment asking the seller to replace the roof before closing. The seller could agree, reject the proposal or negotiate different terms.
A notice of defects invokes the contingency
A notice of defects is different. Under the Inspection Contingency in the WB-11 Residential Offer to Purchase, the buyer may deliver the required inspection report and a written notice listing the defects identified in the report to which the buyer objects.
The WB-11 makes the distinction clear:
“CAUTION: A proposed amendment is not a Notice of Defects and will not satisfy this notice requirement.”
A notice of defects invokes the contractual process established by the Inspection Contingency. What happens next depends in part on whether the seller has the right to cure and, if so, whether the seller elects to cure according to the terms of the offer. Depending on the right-to-cure provisions and the seller's response, delivery of a timely notice of defects may ultimately result in the offer becoming null and void.
Unlike an amendment, the notice of defects is not a negotiation about what the parties might agree to do. It exercises rights that the parties already negotiated when they entered into the offer.
Sometimes buyers use both
A buyer may prefer to negotiate before invoking the notice of defects process. For example, the buyer could propose an amendment asking the seller to provide a credit rather than repair a defect.
But sending an amendment does not stop the Inspection Contingency deadline from running. If the seller does not agree to the amendment before the deadline, the buyer could lose the opportunity to deliver a timely notice of defects.
Depending on the circumstances, a buyer may deliver an amendment and a notice of defects at the same time. If the parties reach an agreement through the amendment, the amendment may provide for withdrawal of the previously delivered notice of defects. Importantly, the buyer cannot unilaterally withdraw a notice of defects after it has been delivered. Withdrawal requires the parties' written agreement.
The WB-41 Notice Relating to Offer to Purchase includes a caution on this point:
“CAUTION: Once delivered, a Notice cannot be withdrawn by the Initiating Party without the written consent of the Receiving Party.”
The amendment should also clearly address the status of the Inspection Contingency. For example, the parties may want to state whether the contingency is satisfied or waived upon binding acceptance of the amendment and withdrawal of the notice of defects. If time remains under the contingency deadline and the amendment does not address the contingency's status, questions could arise about whether the buyer may subsequently deliver another notice of defects.
Practice tip: Negotiating an amendment does not extend the Inspection Contingency deadline. If additional time is needed to negotiate, the parties may consider amending the contingency deadline.
The form matters
When working through inspection issues, the first question should not necessarily be, “What does the buyer want the seller to fix?” It should be, “What does the buyer want to accomplish?”
If the buyer wants to negotiate a change to the offer, an amendment may be appropriate.
If the buyer wants to exercise the buyer's contractual rights under the Inspection Contingency, a notice of defects may be appropriate.
The WB-40 Amendment to Offer to Purchase and the WB-41 Notice Relating to Offer to Purchase are separate forms because they serve different purposes. One is used to negotiate a change to the contract, and the other is used to invoke contractual provisions to which the parties have already agreed.
Understanding that distinction and continuing to monitor the Inspection Contingency deadline while the parties negotiate can help prevent an inspection issue from becoming a contract issue.
Visit the WRA’s home inspection resource webpage for additional information about the Inspection Contingency.
