A typical home buyer in Tucson goes through two rounds of negotiations with the Seller. The first decides the price and terms, like how long of an inspection period, the closing date, and who will pay for certain fees.
Round two of negotiations is the fun part. Once a buyer is done inspecting a home, or when their time runs out, the buyer gets to open negotiations anew and ask for repairs to be made to the house.
Actually, the buyer has a couple of choices at the end of their inspections:
- They can walk away from the deal with a refund of their earnest money, at their sole discretion (as long as timelines are met).
- They can decide to buy the house and proceed with the deal without any repairs
- or they can ask the seller to make repairs to the house.
What kind of repairs can a buyer ask for? Well, pretty much anything. The only two no-nos are asking to reduce the purchase price or asking for money. There’s a loophole for that though: you can ask a Seller to do a list of repairs OR to give you money towards your closing costs, but you can’t just ask for the money and not the repairs. Okay?
Okay. So the buyer fills out a form (fondly known as the BINSR, pronounced ben-zer), and asks for repairs. What now?
Typically, the Seller has 5 days to respond, although that timeline could have been negotiated to a different number in the original contract. Default is 5 days though. The Seller has three options:
- They can agree to do all the repairs, having them done in a “workmanlike manner“
- They can say, heck no, I’m not doing any repairs,
- They can come back with a counter-offer to the repair request. Maybe the Seller will do 3 of 5 repair items, and give a $400 credit to have something else done yourself.
Once the Seller responds, the Buyer has 5 days to decide if the Seller’s response is good enough for them. If the Buyer is unhappy with the Seller’s response, they can cancel the contract, and walk away with their earnest money (typically). If the Seller’s response is acceptable, then the deal moves forward toward closing.
By the way - the Seller has to have any agreed upon repairs completed 3 days prior to close of escrow. Don’t procrastinate if you’ve got to get repairs done! If you’re a Buyer, you better be in there at least 3 days prior to closing, checking to make sure the work was done properly.
(As always, the rules and timelines depend on your individual situation and contract. What I’m describing here is typical, but if you’re under contract now to buy or sell a home here in Tucson, you should go ask your agent for more specific advice!)
Photo via Flickr by marchenland
September 13th, 2007 at 7:38 pm
Sage advice Housechick.
-Athol
September 13th, 2007 at 7:46 pm
[...] gives a great summary on how repairs are handled. Home Buying Negotiations Round Two: Repairs Required [...]
September 14th, 2007 at 5:33 pm
Kelley,
You mentioned that one of the no-nos was to ask to reduce the purchase price. Is this a legal no-no in Arizona?
I ask because my buyers and I, in essence, did this two month ago on a property they wanted in WA. There was $15k in repairs for siding and water in the crawl space that needed to be addressed. Buyer and Seller agreed to drop the purchase price so Buyer could have the work done with their product of choice and contractor of choice.
September 14th, 2007 at 7:56 pm
Hi Jason - let me reiterate my standard disclaimer that I’m not a lawyer, but this is my understanding, our brokerage’s standpoint.
The contract in Arizona says the buyer can ask the Seller to correct any items of which the buyer disapproves. The buyer asking for a reduction in price in place of asking for any repairs would be considered an attempt to renegotiate the contract, not a request to correct any disapproved items.
However, it is fairly common here to ask the seller to do XYZ repairs OR give a closing cost credit - but you’ve got to give the seller the option to do the repairs, not solely ask for the money. Most people don’t ask to reduce the price - if you get a $3000 credit from the Seller, that’s $3000 the buyer doesn’t have to come up with NOW. A $3000 reduction in sales price is a pretty insignificant drop in the monthly mortgage payment.
That said, if a Seller and Buyer agree to a price reduction in lieu of any repairs, that’s their choice and their agreement - as long as the lender is okay with it.
In the situation you describe, I might have recommended getting quotes for the work by the Buyer’s choice of contractor, and having checks cut at close of escrow to pay those contractors, or doing an escrow hold-back for the bid amounts, if that can be agreed to by all parties - and the lender. With our average sales price, a $15k closing cost credit would probably exceed the usual 3% contribution allowed by the Seller. Depends a lot on the financing situation.
September 16th, 2007 at 2:00 pm
[...] Housechick gives a great summary on how repairs are handled. Home Buying Negotiations Round Two: Repairs [...]
October 15th, 2007 at 1:44 pm
[...] we discussed the second round of home buying negotiations: Repairs. Let’s go back and look at the first round: Price and [...]