"Is it just ME?" Correcting Inspection Issues Prior to Closing

Good morning Rich.  I'm going to play devils advocate for a moment with this one.  If for some reason your buyer clients didn't close on the home, who would pay for the work that was done?   It could be that the sellers do not have the money to pay out of pocket if it doesn't close and that is what is worrying them.  Since they didn't have the repairs done themselves but negotiated a credit to the buyer for them, this tips me off that they don't have the money to do this until they close on the home.

In my market area repairs are normally done after closing unless the repairs are lender mandated or there is something major that needs to be taken care of in the inspection report.

I am surprised though that in this market the seller isn't allowing this and adding a simple "bill the buyer" addendum to the work order if they don't get to closing.

I can see a seller not wanting someone making alterations to the home until it records.  There is always the "what if's".  What if it doesn't close?  What if they do some other damage or not make the repairs correctly? What if the buyer changes their mind after spending additional time in the home, rethinking their decision?

I have had the seller credit used to prepay taxes or maintenance fees.

I understand the the buyers are at the 6% cap that VA puts on seller credits...my question is this:  Would your buyer clients sign something that states they will be responsible for paying the contractors should the transaction not close?  If they do that, and the seller still does not allow this to be done, then it's red flag time. 

Rich,

It could be that the sellers have some concerns about mechanic's liens if the property doesn't close or they could have been advised that the "hold harmless" clause really doesn't protect them or they could just be stubborn.

I agree with a poster above, run it by the listing agent.

I'm with you Rich. Slap around the co-broke agent.  WAIT...that's the answer on another post.  But could apply here too.  Sounds like the seller's are hiding something. My guess is they think the problems are larger than they have been identified.

Rich-

In our market, if the buyers get a credit for repairs, they are not allowed to do the repairs until after closing.  I agree with Fred and Randy that if the property doesn't close, who is responsible for the cost of the repairs?  If there was an inspection done and the buyer hired a reputable inspector, wouldn't he have found the problems to be worse?

We have a tough time getting a "hold harmless" to let our buyers take possession of the garage before close.  I don't think the sellers are hiding something, just protecting themselves.

Rich,

I don't know any agents around the DC area who would give access prior to closing, even though it sounds perfectly reasonable.  And can't the title company can make a check payable to the AC folks at settlement for work to be done later?

Rich, I only had one client do something similiar. I had the listing and when the buyer had an inpection on a 1800 furnace their inspector told them it was cracked. So we had our own mechanical inspector out who cleaned it and said there is no crack. So the buyers wanted their inspector to recheck it after it was cleaned and the rust gone. My sellers did not want the buyers inspector back in the house to tear apart the furnace.

They finally agreed to let them, if I was present and I was. They had already moved.

I believe that's what the seller agreed to "cash at closing" for a repair credit and that's about it.

Any pre-closing repairs made would be the seller's responsibility and I don't believe the seller would have agreed to the "cash at closing" knowing that the repairs were expected to be made prior to closing.

Lenn "What does the contract say?" Harley

If I were the owner of a property on which buyers wanted to make pre-settlement repairs, I would want a sizeable "Security Deposit" from the buyers to cover the amount of the repairs and another few thousand $$ to cover damages should any occur during repairs.

A sticky wicket.

Rich - I'm actually with the sellers on this one.  Repairs should not be made by the buyers until after closing.  1) The seller is still responsible for the repairs because they still own the house.  No 'hold harmless' addendum will protect them, no matter how much one would want it to.  2) There are liability issues - if the contractors hurt themselves, it's the sellers who are responsible and it's their insurance that will be charged.  3) If the contractors do any additional damage or determine that more work needs to be done, there is the possible that the buyers will back out.  4) No deal is guaranteed until it is recorded.  5) The sellers agreed to a credit at closing - there is no reason the buyers need to be in prior to closing and the sellers have every right (without everyone thinking they are hiding something) to say no, after closing. Essentially, this is early possession.  We will not allow early possession and we let our sellers know this.  We've seen it all and it's now a black and white issue.  Just say no to early possession. 

I've had that happen Rich. Repairs ended up being made after the closing not before.

Hi Rich,

Yes, we have also had this experience.  Repairs to a home that isn't the ownership of the new Buyer yet is frowned upon always in our area.  In the litigious society we live in these days, nobody wants to be caught in a legal scenario. 

It's not uncommon in my area at all. We suffered a devastating hail storm this summer. It will be a year or better before all the damage is fixed. The storm hit a week away from closing. But instead of the sellers offering a credit to have the house fixed they stepped up fixed the problem and offered them the deductible on their insurance.

I think Lenn is right on with her comment.  I had an escrow where $6000 in repairs were done and the buyers backed out the day before close.  My seller kept the $1000 deposit, but it was little consolation to him as he gained a $5000 debt to the pest company.  As the listing agent, I would insist the buyers increase their deposit to cover the work, just in case. 

Hi Rich,

A few good people touched on it already, the sellers desire to minimize responsibility for repairs. I don't think it's necessarily a result of hiding something. How are your buyers taking it? It still sounds like a good home, and if it cleared VA inspection, the repairs needed must be minimal...

 

Yep Rich...It's just you on the this one.

While I have had a few sellers agree to let a buyer do repairs before closing, it is a rare thing.  Usually they want not only a hold harmless, they also want the money in hand to pay for the repairs if the transaction doesn't close.  That is, they want a non-refundable deposit equal to more than the estimate for repairs.

I have had very occasionally a seller allow a buyer to do minor repairs before closing.

I recently was called into the middle of a FSBO transaction to rescue both parties after repairs were made, and early occupancy was begun only to find out that the well went dry before closing.  That was a very long and tough transaction that we finally closed.  I worked on a consultant basis.  It was a nightmare that deserves it's own chapter in my memoirs.

Hi Rich,

Good topic with some very good remarks. I have a similar issue now where a buyer wants to get in and makes some repairs prior to closing. They're making the EM not refundable, which is rather large, which should cover any costs, but still concerned about liability.