Expert: Lisa Webber - 11/7/2008

Question
We have a contract on a home in AA county.  The septic system failed during our professional inspection.  The sellers agree to repair/replace the system.  The problem is they have applied for a grant from the Bay Restoration Fund to assist in paying for the septic system.  The grant has a 30-90 days wait to know if they receive the grant, then the work will be completed.  In the mean time our closing date is within the next 30 days.  This places us into a situation of losing our interest lock, having to keep our furniture is storage longer and needing a place to stay while waiting for the septic system.  Any suggestions on how to proceed?

Answer
Hi Heidi,  I answered this the same day you asked it and I don't know why it didn't go through - so sorry!

You have several options in this case.  If you have a home inspection contingency, the seller has to repair/replace whatever you request to be done by the settlement date so that you can do a walkthrough and make sure everything is repaired or replaced to your satisfaction.

If the seller does not have the work completed by the date of settlement, you are out of contract and entitled to receive your earnest money deposit back.

If you choose to allow them time to complete the work, you'll need to mutually agree and sign a contract extension.

My concern with waiting on the Bay Restoration Fund is the long waiting time once the request is applied for.  Once they receive the request, you have the waiting time to get an answer.  Then the seller has to obtain estimates for the job and submit them to the fund.  Then the fund will have to decide which contractor to choose.  Then the contractor will complete the job.  

This entire process could go on for months with a springtime or later settlement.  

There is no guarantee that the sellers will receive the grant.  If they don't, do they have the money to replace the system themselves?  If not, is this a situation where you can still obtain the loan without the septic system replaced?  You could ask for a credit from the seller to cover the cost of the septic system and then you could pay for it yourself.  Do not do this before settlement!  Make sure the loan is complete, all the paperwork is complete, and you have the keys before you pay for the work.  

I hope this helps give you some things to think about.  If you have any other questions, please don't hesitate to ask.  Good luck!