After the buyer has done their home inspection and you’ve agreed on their list of repairs, it can be confusing for sellers as to the best time to make the repairs. If you make the repairs too soon and the buyer backs out, you might have done repairs for nothing. If you wait too long, they might not get done in time for closing. When should a seller do the repairs agreed to in the buyer’s repair addendum?
Has the Buyer Waived their Option to Cancel?
This can be another source of confusion for a seller. Just because a seller has agreed to a list of repairs, doesn’t mean the buyer terminated their option to cancel. Unless expressly stated in the repair addendum, the buyer’s option to cancel has not terminated until the time period agreed to in the contract for the option has lapsed.
Wait to Do Repairs Until After the Buyer’s Option has Terminated or is Waived
If the buyer is still under their option period, they still have the right to cancel for any reason, even if you have agreed on a repair addendum. It would be wise to at least wait until after the option period is over to make any repairs. This way, you have more assurance the buyer is planning to buy your house.
Pro Tip: If the Buyer Doesn’t Waive their Option, Include a Waiver in a Counter Addendum
In a negotiation with a buyer as to which repairs you’re willing to do, consider asking them to waive their option if they agree to the proposed repairs. The main purpose of the option period is for a buyer to investigate the house and negotiate repairs. Once that phase is complete and you’ve committed to making repairs, ask a buyer to fully commit to buying your home.
Does the Buyer Have a Financing Contingency?
If the buyer is getting a loan, they likely have some sort of financing contingency that allows them to cancel the contract if they can’t get the loan described in the Third Party Financing Addendum. Not securing financing is the second most common reason a buyer terminates a purchase contract. It would be wise to wait until the buyer has passed their financing contingency to complete any repairs.
Has the Appraisal Come Back?
The appraisal is usually the final hurdle during the escrow period where a buyer can renegotiate the terms of the contract. If the appraisal does not come in at or above value, often the buyer will ask the seller to reduce the sales price to the appraised value. Though a seller doesn’t have to agree to reduce the price of their home to the appraised value, a buyer doesn’t have to buy a house that doesn’t meet their lender’s property approval conditions. The property approval contingency is not tied to the financing contingency and goes all the way through closing. Though in this market we aren’t seeing too many appraisals come back at below value, it does happen. To be extra conservative, wait until the appraisal comes back before completing any repairs.
How Long Will it Take to Complete the Repairs?
If the repairs are extensive and will require days to complete, you might want to consider starting earlier to ensure they are done by closing. If the repairs are minor, I would wait until the buyer has passed all three of the milestones mentioned above where we most commonly see purchases fall apart.
Take into Account Contractor Schedules
Contractors may not be able to complete the work as quickly as you’d like. Often times they are booked out days or even weeks in advance. Start the interview process early to ensure you’ll have the repairs done by closing.
Remember: Repairs Must be Complete by Closing
Unless otherwise agreed to, all repairs agreed to by both parties must be complete by closing. Typically, a seller will be required to provide the buyer with receipts to prove the work was completed by a qualified professional. To avoid any delays in closing, it is usually a good idea to provide those receipts a few days before closing.
Consult Your Realtor for Specifics About Your Transaction
This advice is intended to be generic advice for a typical transaction, and is not intended to be construed as legal advice. Consult your Realtor or real estate attorney for specific questions about the sale of your house. Every transaction is different.
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