Usually, buyers and sellers negotiate a compromise that allows their transaction to move forward.
BUYER 1 – WANTED REPAIR MONEY
This doesn’t always work out. Buyer 1 knew the cost of the repairs and tried to get the seller to lower his price. The buyer did not want the seller to do the repairs because he did not have control over the quality of the work.
The seller decided to stand firm with his price and wasn’t willing to compromise. Consequently, the buyer walked away.
SELLER’S RESPONSIBILITY TO FUTURE BUYERS
Sellers should be aware that a buyer’s inspection report can be problematic for them because if the deal doesn’t close, they could be obligated to tell subsequent buyers about any defects mentioned in the report.
BUYER 2 – AGREED TO LET THE SELLER MAKE REPAIRS
Buyer 2, after allowing the seller to make some repairs, is going through with the purchase – even though some of the repairs were not made correctly. They are considering the remaining repair’s costs as part of purchasing the new home.
BUYER 3 – CONTRACT WAS “AS-IS” AND KNOWS HE HAS TO MAKE REPAIRS
Buyer 3 went into his purchase with his eyes wide open and did the proper inspections. The buyer was allowed to make inspections, but his contract stated that any inspections were for “informational purposes only”, i.e., to inform the buyer of the property’s condition. Of course, this type of contract only benefits the seller.
The buyer discovered there were roofing issues. The contract, however, was “as-is,” and there was no room for negotiation.
Unbeknownst to the buyer, however, his financing was contingent upon the roof passing the home inspection. The finance company even wanted the buyer to make repairs before purchasing the home.
SHOULD THE BUYER MAKE THE REPAIRS BEFORE CLOSING?
Unfortunately, Buyer 3’s experience is not uncommon today. Banks are getting stricter. Some options, if the finance company/bank will allow it, is to escrow the money for the cost of repairs.
If the finance company insists on the repairs, you can amend your contract with the seller and include the cost of the repair in the purchase price. Then if they are willing, request that the seller make the repairs. The downside to this, however, is that if you fail to close on the property, you may lose your funds.
At the discretion of the seller, you may be allowed to make the repairs yourself. However, the seller must cooperate with this scenario – but many sellers and listing agents may not let you do this. In addition, if a permit is required for the repair, you won’t be able to do this because, in Florida, a Notice Of Commencement must be signed by the owner prior to getting a permit. The Notice of Commencement contains detailed information about the project such as property owner, financial institution, jobsite address, contractor, etc., and protects the property owner’s title to the property. Also, an open Notice of Commencement could cloud title on the property making it impossible for you to get title insurance.
BUYERS BEWARE – READ YOUR CONTRACT CONTINGENCIES
Buyers and sellers should always read the inspection and repair contingencies of your real estate contract and make sure you understand them. The contingencies will determine who is responsible for what, what negotiating power you have, the scope of inspections and repair clauses.
The contract may say – no repairs, only repairs to certain items, who will do the repairs, and may even have a maximum amount for the cost of repairs.
Some contracts benefit buyers; others benefit sellers
To illustrate the point, there are contracts that allows the buyer to obtain a general home inspection and then give the seller a copy of the inspection report, indicating which repairs are to be made or stipulating a dollar amount credit in lieu of repairs.
Some contracts state that the seller can then make the repairs, agree to the credit or propose another arrangement, which the buyer can accept, negotiate or reject. This is best for the buyer.
Other contracts state that buyers can insist only that true defects or building code violations be corrected.