What if the House Needs Repairs?

Resolving Home Repair Issues
Some of the most active conversations in the Home Buying & Selling
Forum deal with repair issues, and I'm always surprised how little
buyers and sellers understand about the way that topic is covered in
their contracts.

Every offer to buy a home should contain a repair contingency, a
clause that states both the buyer and seller's options if repair
issues are discovered during the home inspections. It's critical to
understand the repair contingency, because once an offer is signed it
becomes a contract that's legally binding for everyone whose signature
appears.

Sample Repair Contingency

Here's the repair contingency from the standard offer to purchase
that's widely used by North Carolina agents (7/2004). Consider this a
basic example, because the wording in your state is very likely
different and clauses are always subject to change. In some states
repair issues are handled before the contract is finalized.

13. (c) Pursuant to any inspections in (a) and or (b) above, if
any repairs are necessary, Seller shall have the option of completing
them or refusing to complete them. If Seller elects not to complete
the repairs, then Buyer shall have the option of accepting the
Property in its present condition or terminating this contract, in
which case all earnest monies shall be refunded. Unless otherwise
stated herein, any items not covered by (a)(i), (a)(ii), (a)(iii) and
(b) above are excluded from repair negotiations under this contract.

That spells it out very clearly. The seller can elect to repair
problems found by the buyer--or not. The paragraphs named at the end
of the clause refer back to the home inspection contingency, which
dictates items that are expected to be working properly at closing,
and to details about inspections for wood destroying insects.

There's a separate addendum, or attachment, that can be used to
establish a repair agreement between the buyer and the seller.

If you do not understand any aspect of an offer, find someone who can
explain it to you. Keep asking questions until you are sure you
understand what you are signing.

Put Some Expenses on Hold
If possible, buyers should delay as many expenses as possible until
repair issues are known and resolved. Why spend money for a title
search, survey and other expensive closing costs until you know the
house will be yours? Get your inspections out of the way early so that
you can negotiate repair issues and get on with the business of
closing.

Unresolved Repair Issues
Known Problems Become Material Facts: Unless the buyer makes
unrealistic demands, it's often in the seller's best interests to
negotiate and make repairs. Why? Because once a problem is known, it
becomes a material fact that must be disclosed to all future potential
buyers.

Sometimes sellers think they can up the price of the house in order to
cover the repair, but if the house is already priced correctly that
doesn't usually work. An overpriced house sits on the market instead
of selling and the sellers continue to make payments instead of moving
into a new house.

Banks Might Not Lend: Problems that are noted on an appraisal might
throw up a red flag to lenders, causing them to ask for a structural
inspection to verify that there are no problems with the house. The
bank might refuse to lend until repairs are made

Scheduling Repairs
Repairs Made Before Closing: If the seller elects to make repairs
before closing, take your home inspector back for a recheck as soon as
you receive word that repairs are complete. Do not wait for the final
walk-through, because you don't want to find out on the day of closing
that repairs have not been made, or have been made poorly.

Repairs Made After Closing: There are a few basic scenarios for
repairs made after closing:

* The seller can give you a lump sum at closing to cover the cost
of repairs.

* The seller can prepay a repair person to do the work.

* A portion of the seller's proceeds can be held in trust after
closing and used to pay for repairs. A signed agreement should be in
place to ensure that repairs are made.

The method you use depends on the complexity of the repairs. Simple
items, where you feel the estimate you've received is sufficient,
could probably be paid as a lump sum. Extensive repairs often uncover
more issues as they progress and nearly always cost more than
anticipated.

Buyers should consult with an attorney to make sure their interests
are protected before agreeing to make repairs after closing.

http://homebuying.about.com/od/reale...air_issues.htm


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Ablang wrote:

13. (c) Pursuant to any inspections in (a) and or (b) above, if
any repairs are necessary, Seller shall have the option of completing
them or refusing to complete them. If Seller elects not to complete
the repairs, then Buyer shall have the option of accepting the
Property in its present condition or terminating this contract, in
which case all earnest monies shall be refunded. Unless otherwise
stated herein, any items not covered by (a)(i), (a)(ii), (a)(iii) and
(b) above are excluded from repair negotiations under this contract.

As a seller, there's no way I'd ever accept such a clause. It's way too opened
ended and allows the buyer to walk away from the deal at the last minute using
the excuse of a minor defect. Put a floor in (ie estimated repairs more than
$1000) or something like that and its a bit more balanced.

"As a seller, there's no way I'd ever accept such a clause. It's way
too opened
ended and allows the buyer to walk away from the deal at the last
minute using
the excuse of a minor defect. Put a floor in (ie estimated repairs more
than
$1000) or something like that and its a bit more balanced. "

The buyer can't walk away from a minor defect at the last minute for
two reasons. First, a decent contract specifies the time period in
which the inspection must be done and any defects presented and it's
always within a couple weeks of the signing of the contract, not at the
last minute. And second, if it's a minor defect, as provided in this
contract section the seller can simply fix it and then the buyer can't
walk.