Request for Repairs

This week’s Blog is a summary discussion on the Request for Repairs List.

Buyer’s Request for Repairs as the result the home inspection can often be a major stumbling block to getting the sale closed. It can be a shock to the Seller and Buyer for the following reasons:

1. Negotiations were assumed completed, but now are effectively reopened if both parties want to close the sale.
2. Every California Purchase Agreement states that the home is sold “As Is.” The Seller is not required by the contract to fix any repairs.  If the Seller refuses to address the repairs, the Buyer can either accept the house as is or back out of the deal.
3. A contractor is required to fix the repairs before the close of escrow.
4. In lieu of a contractor, a dollar credit to the buyer maybe requested for the repairs.
5. In lieu of a credit, a reduction in the purchase price maybe requested.
6. Termite repairs are now included in the request for repairs which were prior to 2015 included in the purchase agreement as a seller expense.
7. The Seller’s Net Proceeds analysis excludes any mention of the cost to the repairs.

If all of the above items are not handled properly, the transaction at worst will be cancelled or at a minimum will leave an upset seller or buyer.

As a listing agent, I highly recommend my sellers to do a complete home and termite inspections prior to putting the home on the market.  Usually there is considerable push back from the homeowners to pay for these inspections, but buyers will eventually find out what needs to be fix.  Ideally, whatever is discovered during the inspections the items should be fixed to ensure a smooth closing.  Buyers also are pleased to see that the homeowner has taken the time to prepare their home for sale.  The biggest advantage is that there are no surprises for either party.

As a buyer’s agent, I ensure that my buyers understand the concept of “As Is” purchase and their options. In today’s low inventory and multiple offers, the seller’s have more leverage forcing the buyers to accept the house with no repairs. However, seller’s are motivated to complete the sale the first time around. I focus on the repairs that are safety issues and most seller’s will not want to sell a home that have a safety concern.

Now some thoughts on how repairs should be completed.  From the seller’s perspective, completing the repairs through a contractor are a hassle to coordinate and may cause the buyer to comeback if not done properly.  It would be best to provide a credit or a price reduction so that the liability is left with the buyer to complete the repairs.  However, a credit may cause a delay by the buyer’s lender if the credit is over 2 to 3% of the purchase price.  Also a credit may not cover the actual expense without getting accurate quotes.  So buyers prefer the repair to be done by a licensed contractor prior to the close of escrow.  The Sellers will prefer to provide a credit or price reduction.  In practice, repairs are handled 50% of the time by credits/price reductions and 50% of the time by sellers hiring a contractor to complete the repairs.

If repairs are completed by the seller, sellers are required by the purchase contract to demonstrate the repairs were completed along with receipts from the contractors  during the final verification of property condition walk-through.

I am sure this summary discussion will help you understand how to handle repairs that come up during a home inspection.