Understanding the Request for Repair Process
In most states, the offer to purchase real estate says the purchase is “as is.” Nonetheless, offers also typically allow for buyers to inspect the property, review reports and seller's disclosures and cancel the agreement if the buyers are not completely satisfied with what they find.
Let's take a look at how the process works.
Request for Repair Timeline:
- Buyer and seller agree on an offer price & terms.
- Buyer performs inspections and reviews disclosures as part of buyer's inspection contingency.
- Buyer learns of items in the home that are not up to current code, are not working and/or deferred maintenance.
- Buyer submits to Seller a list of repair items via a request for repair form or amendment to the purchase contract.
- Buyer sends an explicit message: “Fix these things or I'm canceling the contract.”
- The seller agrees to the fix-it list, counters it or rejects it.If the buyer doesn't like the answer from the seller, they can cancel the contract and receive an earnest money refund.
Is Agreeing to Repairs the Right Move?
More often than not, sellers agree to some repairs. This decision is typically wise because it can be costly for sellers to begin marketing again and find a new buyer. Plus, now that the seller is aware of issues, they may have to disclose those issues to the next buyer per applicable disclosure laws. In addition, the repair list dollar amount is usually relatively small in the scheme of the total transaction.
Cash Alternative to Repairs:
Sometimes the buyer submits a list of things to be repaired, and other times, buyers ask for a cash credit in lieu of repairs. From a seller's perspective, a request for cash credit is usually preferred to making the repairs as long as the amount requested is reasonable.
When you offer cash, that means you don't have to deal with the hassle and stress of dealing with the repair process prior to closing. Even if the buyer has requested repairs be done, it can be a smart move to counter the repair list and offer the buyer a cash credit. A cash credit in lieu of repair can also eliminate any concerns/disputes regarding the quality/craftsmanship of the repair (i.e. a seller completing the repair vs a licensed professional).
Smart Sellers Minimize Repair Requests:
It's smart to complete your seller's disclosure packet and to get your own inspection done before you list to help expedite your sale. By providing buyers with disclosures and your inspection report before they even put in an offer, you have the potential to increase your chances of a smooth and successful transaction with minimal surprises or unexpected turns. You can also get more well-thought-out offers since the buyers have a better idea of the condition of the home when they put in an offer (less change of additional repair or cash credit negotiations).
If you take this route, the “as is” language in the offer has more teeth. It becomes very difficult from a moral perspective for the buyer to make repair requests because the buyer knew the condition of the property prior to writing the offer. That means the cost of any repairs were presumably reflected in the offer price.
Having inspections done in advance also allows the seller to repair anything that needs fixing before they go into escrow. For example, if an inspector notes a leaky roof, a wise seller would know that all buyers are going to want the roof fixed and can have that work done. By contrast, if an inspector notes that a water heater is nearing the end of its useful life, the seller can simply inform potential buyers to factor this eventual water heater replacement into their offer.
Now that you understand the request for repair process, you know how to do your homework ahead of time, go into your home sale confidently and be prepared for all potential outcomes.
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