Seller Pays For Repairs?!?!

14 Replies

I've been going over different contracts trying to decide which one(s) I want to use and I just stumbled upon a contract that said something that I've never seen and was wondering if anyone used a contract before that says the seller will pay for repairs? If you have, I'd like to hear how that kind of deal works out, if you'd be so kind! I assume this is nowhere near the norm.

You are right!  That is nowhere near the norm.  Usually the repairs are not done by the seller.  The buyer takes care of that after she owns the property. 

Although, if the seller is motivated enough and all parties agree to it then go for it.  But look for that to happen very often

Repairing things (at least in my latest transaction) was based on the Home Inspection. I was buying a property. My inspector did a thorough inspection. I negotiated with the seller to replace the roof because my inspector indicated it had hail damage and would be a possible problem with the city inspector. Also, the inspection revealed that there was a problem with Radon gas in the basement. I negotiated with the owner for him to pay half of the cost for the mitigation of the Radon.
After those things were accomplished we went to closing and I bought the property.

A seller paying for repairs happens all the time.  The most common reason is as a result of inspection but everything is negotiable.  The seller often wants to close just as much as the buyer does.

After contract repairs are negotiable, but, if sale is tight, it is hard to get Sellers to pay. Sometimes we raise the sales price to cover.

About the only "repair" a seller is required to do is to title, expenses related to conveying good title. Past that it is negotiable, while a buyer's inspection may reveal deficiencies, they will generally not be as critical as those noted by the appraiser. Lenders, other than FHA, will usually overlook small items, $100 or less. FHA requirements seem to sway with the winds requiring a pencil hole in a window screen being repaired or replaced prior to funding.

A lender may require repairs to be made by a seller as the buyer may not have sufficient funds and reserves after closing. Or, Realtors sometimes step up and pay for minor repairs, anyone can, a lender may not allow the buyer to pay due to funds required post closing.

Repairs required are unknown as to latent defects, you can't contract for either party to pay unforeseen expenses or expenses that are not ascertainable at the time of contracting, I'd say any contract that has such a provision was generated by some guru or slick type investor and will be unenforceable.

Both parties have the right to avoid a contract upon the timely discovery of economic conditions that they would not have entered into if those matters were know prior to contracting.

Some things, by law or custom, you can't just contract away or require agreement to.

When contracts do not meet generally accepted practice parts may be invalid or unenforceable, they also generate more scrutiny to the entire contract and effect other parts of the agreement. You can't require parties to perform, you can make them wish they had. If performance is court ordered, such orders will be based on the ability to perform as well, if performance is impossible or poses a great injustice to fairness they agreement may be avoided.

I suggest you find a state approved contract, use addendums (additional attachments) to come to specific agreements and stay away from guru, investor, non-lawyer type contracts.

Any contract, while it may remain evidence of the relationship of the parties prior to settlement or as to representations made, expires at settlement as its purpose has been served, a contract brings the parties to a settlement, nothing more. :)  

Sellers will often take care of requested "reasonable" repairs if you are dealing with an individual (not banks).  I would recommend defining the exact repair request in the contract.  If the unit is occupied,  care should be taken to not disturb the tenant any more than needed.  Often the tenant may not be so concerned over things the investor is concerned about.

Everything is negotiable in this business so if it's in the contract and agreed upon the 2 parties, then it is enforeceable and the seller can do repairs, give back in closing costs, reduce price, etc...

Very rare, and not a good idea. The only time I've seen this done, is for a house to meet FHA standards for financing, and has a cap. You would be arguing about necessary verses unnecessary repairs, repairs verses updating, etc. sounds good at a glance, to the inexperienced.

Originally posted by @Mitchell L.:

Everything is negotiable in this business so if it's in the contract and agreed upon the 2 parties, then it is enforeceable and the seller can do repairs, give back in closing costs, reduce price, etc...

Can you clarify that a bit better? Before you do, you might read my post above as it pertains to contracts. Sounds like a contradiction in saying that if 2 parties agree to something it can be enforced, that is not true in any state.

As just pointed out by Wayne, simply say seller agrees to make all repairs might get the owner rebuilding the house, that at some point is unenforceable. Repairs need to be specified, then if agreed to, you have an enforceable agreement, to a point within reason.

You might agree to fix the roof, if it's discovered that fixing the roof then involves fixing the top plate of a load bearing wall, which then includes costly foundation repairs, that becomes unreasonable as that is beyond the initial repair contemplated, so the roof may not be repaired. :)

I wanted to add that I recently had a contract on a property with some visible repairs needed, however the inspection (paid for at my expense) showed a long list of significant problems that changed the entire financial model/cashflow.  Seller agreed to only $1,000 repairs and thought that my initial negotiation (from 85k to 72k) somehow included whatever repairs are needed.  I cancelled the contract.  As someone fairly new to investing, isn't it best to negotiate the price as much as you can and then have it inspected and if problems found that are significant ask seller to further reduce price?

@Nick Sandt  - I wouldn't use that contract if it were me.  It's definitely not the norm and it sounds like a poorly written contract.  The section about "seller will pay for repairs" is too vague and would likely be unenforceable.  Afterall, who decides what repairs need to be done?

In order for a seller to be obligated to do any repairs, they typically need to be specifically listed and agreed to in the contract (or an addendum to the contract).

@Alan Day  


Interesting Blog about negotiating after the contract:

http://www.biggerpockets.com/renewsblog/2014/10/08...

I am working on a property using a VA loan. I am at about my max loan I can do & know that the VA has fairly strict inspection before giving the loan. My thought is to write the contract saying that the VA will have to approve funding and pass an inspection and then if the seller wants the deal they will have to fix the property so it passes VA. Although probably will entail some negotiation after the inspection.

@Kirk R.   The contract I'm referring to can be found at D e a n G r a z i o s i' s website. The other contracts I'm looking at were included in different eBooks/courses I've bought. 

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