The Dreaded Repair Negotiations

The Dreaded Repair Negotiations

It’s so exciting to get a contract and start the plans for moving! Final price negotiations have been completed, the closing date is set, and now you can call the movers. But wait! You still have the inspection.

In Texas, sales contracts are very buyer protective. There are many clauses which give buyers an ‘out’. Paragraph 4 mandates that the property must meet the lender guidelines...vague! The buyer needs to qualify for the loan. The house must appraise. Title work must be completed and discover no hindrances to funding. The list goes on and on but let’s just focus on repairs. Repairs can be very sticky issue but is an integral part of negotiations.

Prior to 1997, we, as agents, would set a limit in the contract as to the amount of costs the sellers would incur. For instance, a repair limit could be set at $1,000. That was a horrible setup because if you discovered that an A/C needed to be replaced you could have a reluctant seller and a deal could turn sour quickly. Most of the time I’d get an inspection report full of so many minor items that they’d be repairing everything to utilize every bit of the repair amount. A compromise needed to come about and the ‘option’ period was created.

The option period is also known as the ‘inspection phase’. It’s a period of time pre-negotiated, typically 7 to 10 days, which gives the buyer the unrestricted right to terminate and protect their earnest money. Option money, credited back to the buyer at closing, is anywhere from $50 to $200. This allows the buyer to inspect the property and potentially negotiate repairs. Granted, per the contract, the buyer can inspect the property at anytime with notice but it’s best to do it during the option period. That’s when their leverage is greatest to get repairs agreed upon.

Both the seller and buyer have leverage during the option period. If the buyer is too demanding, the seller can take his chances on getting another buyer (good in a hot market). For the buyer he/she can back out of the contract if the house is in need of too many repairs.

Let’s focus on the sellers. They are excited! They have their house under contract and they are planning the big move. In fact, they’ve already picked out the next house. Then the inspection comes in and there is a long list of repairs. My counsel to the sellers depends on the market conditions, how long the house was on the market, and if I have another buyer waiting. For the most part I like to keep it as a win-win situation.

My common advice is as follows: if the requested repairs are repairs which could affect the sale of the property to the next buyer, then its best to complete the repairs and close the current contract. I focus on the larger items and always remind the buyers to keep things in perspective; you’re buying a pre-owned house and it will need maintenance.

Congratulations on your contract but get past the option period; the inspection phase. Then you can start making your plans. There are so many steps involved with selling a house. A good agent can guide you from start to finish.

James DeLaGarza