Once you have negotiated a purchase on your new home, what should you do if some issues arise from your home inspection or appraisal? Should you have the seller address and repair the issues, negotiate a price reduction, or fix make the repairs yourself prior to closing. In this blog we will address these options in order to assist you with making a wise decision. Issues such as a new roof, gutters, sewer lines, new furnace, water heater, etc. are items that you can have the seller take care of, prior to closing. Make sure they hire a licensed professional in that particular field to ensure the repairs are properly addressed. Also make sure the repairs are contingent upon your approval. This will give you an opportunity to approve materials and inspect the repairs, ensuring issues are completed to your satisfaction.
When making repairs, the seller will most likely choose the cheapest size, color and quality material. On the flip end, the buyer tends to pick the most expensive materials. As the buyer, be reasonable in what you request. The buyer and seller should work together to guarantee the repairs are completed with quality materials at a reasonable price.
For minor repairs such as carpet replacement, painting, exterior issues, and smaller interior issues, negotiating a cash settlement may be wise. This will allow you to choose the materials and contractors on your own. In the old days, the buyer could negotiate a cash settlement to cover the repairs at the time of closing. With new loan requirements, in most cases, this is no longer possible.Today, most buyers will negotiate a price reduction equivalent to the estimated cost of repairs. This will give you the freedom to upgrade materials, and ensure quality repairs, eliminating the seller from the equation. The downside of course is, you must have the additional cash flow to cover the expenses on your own. Incurring additional expenses after the purchase of a home may not be possible.
Over the years, I have had several clients make the repairs themselves, prior to closing. Their out of pocket expenses were then deducted from the home’s sale price. This option ensures the repairs are done the way you want, prior to moving. However, this is a risky solution since you are investing in repairs on a home you do not yet own. The seller is not obligated to cover the expenses if the home purchase falls through. I have, unfortunately, seen this happen several times over the years.
Next time you have to negotiate repairs on a home you wish to purchase, remember to think through your cash flow, and available repair options. If you carefully weigh your choices, you will make wise decisions before purchasing your new home.
Happy house hunting!
David Kahler
The Kahler Team
Email: david@thekahlerteam.com
Cell: (605) 484-8080
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