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Posted by on Jul 10, 2012 in Listing Agent Practices, Thinking of Buying?, Thinking of Selling?, Tips, Advice & Links | 10 comments | Print Print

Repair Requests

The C.A.R. purchase contract designates a 17-day contingency period. 

This enables the buyers to conduct investigations about the subject property and review all pertinent information about what they are buying.  It also allows time for the appraisal and loan approval to be completed.  At the end of the 17th day, buyers are asked to release all contingencies, and put their deposit at risk.  Should the buyers cancel escrow after signing off all contingencies in writing, the deposit goes to the sellers. 

The contract allows the buyers to submit a request for repairs to the sellers.  The sellers don’t have to fix anything, or even respond to the request.  But the buyers don’t have to buy either.

How the agents handle this process makes the difference.

Most dig in for the battle, figuring that their job is to defend their clients’ honor at all costs.  When you see properties coming back on the market 15-20 days after you saw them go pending, you know what probably happened.  It’s embarrassing really, that we can’t all just get along, and handle this part of the contract efficiently.

The sticking point always seems to be whether the repairs requested are worthy.  Sellers and listing agents go into evaluation mode, and quickly discard the expensive repairs and opt for a couple of cheapies.  Unless the buyers are in love with the house, the fight is on.

My alternative solution:

1. On Day One, the listing agent tells the sellers that there is a second negotiation coming, and to expect that the buyer will want more. 

The euphoria of getting an accepted offer wears off quickly, and once their home inspector tells them that the house is falling down, buyers will want retribution.  Buyer’s remorse is a real event, and this is where it rears its ugly head.  But if the sellers and listing agent expect it to happen, then there is no big shock or upset when the buyers come back with their requests.

2.  Settle on a credit, rather than actually fixing stuff. 

This saves a lot of aggravation for both sides in trying to determine exactly what fix is needed, and if it was done properly.  Sellers are notorious for cutting corners, and/or running out of time with their move.  Make it easy on both sides, and arrange a credit to be applied towards the buyers’ closing costs.

3.  Don’t worry about whether the credit will be the exact amount needed to fix stuff.

Sellers want to get quotes for repairs, turning the battle into whose contractors are right about the costs.  This can drag out for days or longer – but it is much more effective to come to a quicker conclusion.  Buyers are feeling vunerable, and if this battle turns into full turmoil, you can lose the deal over trival items.

MAKE THE DEAL – know this process is coming, and handle it promptly so it doesn’t fester.  You’ll never see one of my listings have a problem on this topic, because I’m all over it.  Giving this process the respect it is due is half the battle - yet many listing agents want to shrug it off.

 

10 Comments

  1. so after the buyers release the contingencies after 17 days and decide to bail after that, does the title company have the right to release the deposit to the seller?

    Do you need to get a release of contract from the buyer in order to enter into a new contract with another buyer? Seems the buyer could really tie up some serious time here.I guess if the deposit is real low they could make a sellers life h@ll.

  2. seems like all the laws in this state are geared towards the favor of the buyer. 17 days don’t mean squat until both parties sign off on all contingencies – and if there is a loan contingency, don’t expect that to come through before the 17 days. I feel like asking for higher Earnest Money Deposit will weed out those who are testing you vs those who are sincerely interested in purchasing the property they make the offer on.

  3. 1. No, both parties must sign off to release the deposit before escrow will act. Yes, you are supposed to get the previous buyer to cancel before closing with someone else. Attorneys have a funny way to get disgruntled previous buyers to do the right thing.

    2. Yes, the contract and laws in general seem to favor the buyers, but I don’t mind giving them ample opportunity to cancel. Better now than having to face lawsuits after escrow closes.

    I don’t have any problem getting lenders to approve loans in 17 days. It has been the standard for years now, and they are used to it. You have to get off to a fast start the first day to do it, so no napping!

    The higher earnest money is touchy. I want it to be low enough that they will give it up without much of a fight in case there is a problem after contingencies are released.

    If the deposit is $20,000 or higher, buyers will make sure everything is perfect before releasing contingencies – they won’t live with anything uncomfortable. Possibly losing the deposit becomes the focus, not buying the house.

  4. To increase buyer committment, I like to have it in the contract that upon releasing contingencies (17days), the buyer(s) shall increase their earnest money deposit. It definitely reinforces the buyer’s committment when they have to write a second check. Not only is their original deposit now non-refundable, but their additional deposit is as well! This happened to me and my wife as buyers, and I can’t tell you how much we actully appreciated it–we sat down on the 17th day and said–we are now committed–and the sellers arranged to move-on comfortably. Happy Sellers, Happy Buyers, Happy Agents.

  5. 1. “No, both parties must sign off to release the deposit before escrow will act. Yes, you are supposed to get the previous buyer to cancel before closing with someone else. Attorneys have a funny way to get disgruntled previous buyers to do the right thing.”

    So basically if the buyer wont sign to release the deposit from escrow to the seller for breach you have to get an attorney involved to get the deposit?

    What do you do when a buyer wont sign a release of contract and leaves you hanging?

  6. We closed escrow on our retirement home about a year ago. During escrow our home inspector discovered that the fire sprinklers had been recalled, and that the spa heater didn’t work.

    We requested escrow credits for both. The sellers were OK with a fire sprinkler credit, but balked on the spa heater credit because they didn’t use it. We dug in our heals, and the sellers reluctantly gave us a spa heater credit. Unfortunately, the spa heater credit poisoned our relationship with the sellers.

    Your thoughts?

  7. If you are going to make requests, you have to be comfortable with conflict, specifically, causing people to get upset and over-react.

    For some people, that’s a problem.

    Our homes are very personal to us, and sellers usually get offended with repair requests.

    If the agents would do their job well, and forewarn the participants that it is just business and part of the contract, it would go a long way to resovling the conflicts in advance.

    But they don’t, instead they get their own clients riled up by insisting on battling it out on the evaluation/minimization/attack-back trail.

    The times that I sense that my buyers are uneasy with conflict, I suggest we don’t make a request, or something very minimal.

    There is nothing wrong with having a cordial and rewarding relationship with the seller, and it might trump squeezing them for a few bucks.

  8. What do you do when a buyer wont sign a release of contract and leaves you hanging?

    They have it in the contract under paragraph 14F, in bold:

    Release of funds will require mutual Signed release instructions from Buyer and Seller, judicial decision or arbitration award. A Buyer or Seller may be subject to a civil penalty of up to $1,000 for refusal to sign such instructions if no good faith dispute exists as to who is entitled to the deposited funds. (Civil Code 1057.3)

    I have never seen this imposed, but when it gets held over the offender’s head, it usually works.

    P.S. I’m not sure why they capitalize Signed.

  9. Thanks Jim!

    In my mind when the buyers prepares an offer they have already inspected the property themselves, and they assume that the dishwasher, water heater, furnace, etc. are all in working condition. If the inspection discovers defects in mechanical systems, repair requests seem to be in order unless the sale is as is.

    On the other hand, carpet stains, cracked tiles, necessary exterior paint jobs or other similar visual defects that should have been evident to a careful eye are off limits. In other words, buyers and their agents can’t know about mechanical defects that the sellers are privy to when they negotiate the sales price

  10. thx jim thank you for answering the questions.

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