One of the fun parts about buying or selling a home is addressing needed repairs, who will do them, when will they be done, how will they be done or even if they should be done. All of those questions and more will come up somewhere in the process of negotiating the contract. Your Realtor should be able to guide you through the pitfalls. Here are a few things to be aware of:
Pre-Listing Inspection
If the buyer is going to pay for an inspection, why should a seller spend good money first? First, it’s a great marketing tool to say your home is pre-inspected and essentially problem free. Not many people do this so if you do, your house will stand out to a buyer as well taken care of and having nothing to hide. Note to buyers – always confirm condition with your own independent inspection.
Secondly, if either buyer or seller is going to have a home warranty there will be no disputes about pre-existing conditions. Third and one of the most important reasons is it identifies any unknown or serious problems, allowing the seller to take care of them with their own resources and on their own time beforehand. After you go under contract you will be rushed or it may be impossible to make some repairs before closing. Have you ever tried to get a foundation estimate in August or a roof repaired after a spring hail storm?
Last but not least is after you go under contract, you may not be able to do the repairs yourself. There are many owners who are very capable and experienced at plumbing, electrical, HVAC, etc. However, the Texas residential contract clearly states that unless otherwise agreed to in writing, repairs have to be done by persons licensed or otherwise authorized be law. Ask yourself as the seller if you want that liability for a few hundred dollars. Ask yourself as the buyer if you trust an owner doing his own electrical or structural repairs.
Buying a Home As Is
Remember, we once had a president who said, “it depends on what your definition of is, is”. There are a lot of court cases over that simple definition when it comes to real estate. If you are entertaining selling As Is, make sure you fully disclose everything concerning your property. Buyer beware doesn’t normally work well if you are in court for not disclosing Old Faithful is under the master bedroom.
But wait, Section 7D of the contract says buyer accepts the property in its present condition! That’s correct and you should check that unless you know of specific repairs or treatments required. Unless there is something obviously wrong you won’t know until you have a professional inspection and consider the costs involved. If all the shingles are gone or the windows broken out you could specify that but you will still want a more in depth inspection during your option period.
The Option Period
Whats an option period? That’s another story but suffice it to say as it pertains to repairs, it’s the time when you do your due diligence. This is when you will have a through inspection done of the property to determine it’s true condition. If you find enough significant issues you can make a decision to terminate the contract or ask for repairs.
Option periods are useful for many other reasons but be aware that, time is of the essence. You have the unrestricted right to terminate the contract as long as you are within the option period, have tendered you option fee appropriately and give the proper notice before the deadline.
Amendment For Repairs
What happens when you find problems during the inspection that you want addressed? This is where your agent will prepare an amendment to the contract requesting specific repairs. Even new construction is not perfect and it’s the inspectors job to identify everything they can find that could be a problem. An older home or one with deferred maintenance will have more problems than new construction but you should not expect the seller to fix everything on the inspectors report.
Ask for reasonable repairs, repairs that might be expensive or a safety issue for your family. Keep in mind that many home systems have a expected life span. Don’t expect the seller to replace an aging air conditioning system or re-roof the home 15 years into a 25 year shingle warranty unless there is actually something wrong with it.
Once you have requested the repairs, the seller will decide if they will make the repairs, negotiate back with you on them or simply say, no. As long as you are still in your option period you can always terminate if you don’t like the results.
Price Adjustment or Repair?
Should there be a price adjustment or a repair? There are many reasons to do one or the other but let me give you something to think about. In most cases, I recommend a price adjustment when repairs are required. Now if it’s a small repair or the owner can address it simply then by all means repair it but otherwise you will probably be glad you just adjusted the price.
My reasoning for the preference of a price adjustment is because it’s normally easier and more satisfactory for both home buyer and seller. Sellers will want to have a requested repair done as inexpensively as possible. Is that what you want as the buyer? You want it done right, not by the lowest bidder. Who do you call if you have problems with the repair after the purchase? Since you didn’t pay, the repair company may not feel the same responsibility to you as the person who wrote the check.
If the buyer accepts a price reduction in lieu of the seller making the repairs they can pick their own vendor, they know who to beat up on if warranty work is required and they get to pick the quality of the person or company doing the repair. For the seller, they don’t have to worry about a shoddy repair job coming back on them and they can concentrate on packing versus repairing. It relieves the seller of the hassle of finding, scheduling and hoping the repair person will show up and actually fix what is required. It’s your call but I think you will thank me later if you do the price adjustment.
Home Repair Refusal
What happens if the seller refuses to do the repairs? This happens more frequently in a sellers market but it does happen more often than you might imagine. Normally repairs will get negotiated back and forth just like anything else in the contract. If you have had tensions rise during negotiations or fought hard on the home price, sellers will sometimes dig in. As strange as it seems, sometimes sellers get sellers remorse. They may have lived a good portion of their life or watched their kids grow up in the home and then the emotions of leaving once it’s sold overwhelm them.
You may be asking for something unreasonable to repair, a laundry list of repairs or you may be asking for something that the seller has lived with for years. They see no reason why they should fix it now because it wasn’t a big deal to them all this time. In the end, it all comes down to decision time. If the seller refuses to make any or certain repairs that you feel are important they are telling you they are willing to risk you walking away. It’s time to get realistic if you want the home & bite the bullet or exercise your option to terminate. Fortunately most buyers and seller will reach a compromise.
Home Walk Through
After agreement is made for repairs, the buyer will expect proof they were done to their satisfaction. Invoices showing the repairs were done, who did them and that they are paid if full will be expected by the buyer. In addition, it’s a common practice to do a walk through of the home prior to closing. A walk through just confirms that any repairs were done and done correctly.
One other word on walk through. This is also where buyers make sure the hot tub they negotiated in the sale is still there, the home is clean and items not associated with the sale are removed. No one wants to move in and then need a dumpster or have to do an industrial strength cleaning.
Who Does The Home Repairs?
I’ve covered that the repairs must be done by a licensed person but just keep in mind that unless otherwise negotiated, he who pays, picks. As long as you understand that, your life will be easy. Refer to the section above concerning why it makes sense to do a price adjustment so you can pick!
When Are Home Repairs Made?
Per contract, repairs by the seller are always made prior to closing. Lenders will normally not fund a purchase until lender required repairs are made. Lenders also will not let buyers start making any repairs prior to ownership. If time runs out or weather prevents the repairs from being completed the closing will be delayed or sometimes a repair escrow can be arranged.
If you have an insurance claim be aware that the check may be made out to the seller and the mortgage company. Paying the repairman and ensuring they have not put a lien on the property prior to your closing date may be a problem. It can take some time for the mortgage company to sign the check, verify the work was completed and return the check to you for payment.
Home Repairs Not Completed?
If negotiated contract repairs are not completed by the closing date then the buyer can extend the closing date up to 15 days or the seller will be in default. Default is not a good thing because if not corrected it normally just makes lawyers richer. The buyer can force specific performance and tie up your property so you can’t sell it to anyone else plus get a damage award. See my section above concerning why it’s more sensible to have a price adjustment!
Disclosing Prior Home Inspections
Do you have to disclose prior inspections? The very very short answer is YES. The Texas Association Of Realtors Seller’s Disclosure Notice requires that inspections are disclosed and copies provided that were done within the last 4 years. This means any kind of inspection done by people who normally do inspections of any kind, not just home inspectors.
Also, if your home was under contract for sale and you were provided a copy of the potential buyers inspection when they requested repairs, you should also disclose that. Sellers will often balk at that because they didn’t pay for or request it but it could be a huge liability if you fail to disclose a material fact that would have prevented the buyer from purchasing. As you will find out in the video below, you don’t necessarily have to disclose it but you will want to!
