3 Days to Closing - Seller backs out of repairs

3 Days to Closing - Seller backs out of repairs

Washington, DC · Member since 2017 · 21 posts · 4 votes
BP, We are three business days away from our closing date and the seller (4:00pm on a Friday) calls my agent and asks for us to provide a price in lieu of making repairs as originally promised. As an investment property my lender says I can only receive a max of 2% of the sales price for seller concessions so including the repairs in that doesn't help since my closing costs are higher than 2%. My agents says I have two options: 1.Ask for sales price reduction 2. Get a GC to provide a price and have seller make a check out to them that's held in escrow (prepaid). If I had more time option 2 would be preferred since a small reduction in sales price wouldn't change my out of pocket expenses enough to cover the repairs. The repairs that are absolutely necessary (in my mind are): Fix / sister roof rafter that is completely split Replace basement seller door wood enclosure that has rotted and shows termite damage (no new termite activity) Fix electrical GFCI outlets near sinks. Gas flue isn't sloped correctly for combustion air to exhaust properly Remove debris from ductwork (brick/ mirror chucks, etc. seen when vents were removed) which prevented air from circulating. I plan on calling to get estimates today. While none of these are big ticket items there may be a premium to get so little work done by a number a trades if a GC has to do it as part of prepaid escrow. Their O&P alone could pay for the duct cleaning. If I had to guess this work is between 5K-7K not including GC Mark ups / O&P. I'm an architect used to working with commercial contractors maybe residential GC don't have significant markups... What would you do? Any creative ways used to get these paid for upfront without using seller credits? Thank you Jasmin
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Real Estate Agent · Garden City, NY · Member since 2016 · 3k+ posts · 1k+ votes
9y

@Jasmin Mcduffie

If this is an investment property, you should have negotiated the price down in the beginning. Asking for the seller to fix things holds up the closing if the repairs aren't done on time. You also stand to get a bigger discount when there are condition issues versus just getting repairs done.

Price reduction isn't a seller concession. A seller's concession is just permission to add closing costs onto the final loan. If the seller is offering a price reduction instead of making the repairs, just take the reduction.

When buying investment properties, you have to have rehab funds available, even if the property is turnkey you still might need to make adjustments. Given the amount of repairs you're mentioning, it sounds like this place needs some work.

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  • Real Estate Agent · Garden City, NY · Member since 2016 · 3k+ posts · 1k+ votes
    9y

    @Jasmin Mcduffie

    If this is an investment property, you should have negotiated the price down in the beginning. Asking for the seller to fix things holds up the closing if the repairs aren't done on time. You also stand to get a bigger discount when there are condition issues versus just getting repairs done.

    Price reduction isn't a seller concession. A seller's concession is just permission to add closing costs onto the final loan. If the seller is offering a price reduction instead of making the repairs, just take the reduction.

    When buying investment properties, you have to have rehab funds available, even if the property is turnkey you still might need to make adjustments. Given the amount of repairs you're mentioning, it sounds like this place needs some work.

  • Washington, DC · Member since 2017 · 21 posts · 4 votes
    9y
    Christopher Phillips The property is turn key not a rehab project. The items I listed that require repair aren't the type of things that are readily visible during a walk and were identified by the inspector. Unless you're suggesting an inspection type evaluation should be done prior to making an offer on a turn key condition property. I have a feeling the seller (LLC) didn't intend to make the repairs and just stated they would to delay the process and waited this long to "change their mind" to limit my options. I have funds to make the repairs, I'm just trying to evaluate my options for getting the seller to cover these while lowering my out of pocket expenses since getting additional concessions isn't an option. Thanks for your feedback
  • Real Estate Agent · Garden City, NY · Member since 2016 · 3k+ posts · 1k+ votes
    9y

    @Jasmin Mcduffie

    That's why I mentioned before that even turn key properties still should have some expectations of repair money. Even if only $1,000 to $2,000.

    Once you find those items during the inspection period you negotiate a price reduction. Most sellers will become pretty dodgy about doing repairs. It means getting three bids for everything and using licensed contractors.

    The other option, if the repairs were agreed to and amended in the purchase agreement and not completed, you should speak to your lawyer about moving the closing date until they are done or holding back money in escrow until they are done by the seller and to your satisfaction.

  • Rental Property Investor · N Palm Beach, FL · Member since 2015 · 19 posts · 8 votes
    9y

    @Jasmin Mcduffie I would look to get a price reduction for the estimated repairs. I would feel more comfortable having my contractor do the work so I know it gets done correctly to my standards. 

  • Real Estate Investor · Sunny Isles Beach, FL · Member since 2013 · 788 posts · 333 votes
    9y

    This wasn't on one of my investment properties - but a family friend was purchasing a local house and I was casually providing some feedback on the process. The sellers were claiming work done in the basement/attic was permitted (it wasn't) . . . then during the radon test they opened every window in the house. This had to all be sorted out during an extension of inspection period - sellers can try all sorts of things to try to resolve before inspection closes. I would request an extension of closing date here.

  • Kenneth GarrettPro Member
    Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes
    9y

    @Jasmin Mcduffie

    The work that needs to be done seems minor to me even the roof rafter unless there is more to it than just one rafter .  If its a truss roof it needs to be engineered even for this fix.  I believe you should always ask for purchase price reduction since the work that gets performed is not the highest quality.  Don't have them do the work reduce the price accordingly.  This is part of your negotiating.

    Good Luck.   

  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    9y

    @Christopher Phillips As long as they are financing, negotiating a price concession isn't going to help their out of pocket cash position much. Let's assume that the repairs are $7K as they've estimated. If they're financing 80%, a $7K price concession only reduces their out of pocket cost by $1400.

    @Jasmin Mcduffie Since the delay is the fault of the seller, I would ask for an extension on the close of escrow until they do the repairs they agreed on then I would have the property re inspected to assure the repairs are done and done correctly. We sell turn key properties and would never expect anyone to close if all the repairs aren't done.

  • Real Estate Agent · Garden City, NY · Member since 2016 · 3k+ posts · 1k+ votes
    9y
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