What do relo buyers need to know about negotiating repairs?
When buying a home in Texas, negotiations don’t necessarily end once the buy and seller have reached agreement on the sales price and terms of the contract. In fact, negotiations are often more of a two-part process.
That is because the sales contract allows the buyer to pay the seller a fee, which gives the buyer the unrestricted right to terminate the contract within a specified timeframe, known as the option period. It is during that option period that buyers are expected to have inspections performed on the property.
In Houston, the typical inspections are mechanical, structural, and termite, but can often include additional ones, such as stucco or mold inspections, depending on the particular property.
Based on the subsequent inspection reports, the buyer’s agent generally prepares an amendment to the contract requesting that the seller make specific repairs. And, although the buyer can ask for repairs, the seller is not obligated to agree to repairs. It is all subject to further negotiation and agreement between the buyer and the seller.
Cyndy Fremaux, a Realtor with Martha Turner Sotheby’s International Realty, said that it’s important for home buyers to understand that negotiations on the initial contract and negotiations for repairs are two completely separate negotiations.
“I try to help people understand that if they are offering a certain amount of money for the house, that they shouldn’t offer that amount based on what they think might be wrong with the house,” Fremaux explained. “They should make their offer based on a fair market price for that house, then do the inspections and renegotiate based on what the inspectors find.”
So, Fremaux reviews the inspection reports with her clients to help them determine which items might be cause for concern and should be addressed in the amendment.
She said that it is best for buyers to look at the items that are likely to cost the most to repair, such as the roof, HVAC systems, and water heaters, as opposed to presenting the seller with the inspection report and asking for every item to be repaired.
“If it’s not a new house, buyers need to understand that there may be aesthetic imperfections, or some leaky faucets, or loose doorknobs and things like that, which I typically urge a buyer not to ask for. Our goal is to make the transaction a mutually good thing for both parties, so that neither party feels like they are being taken advantage of,” said Fremaux.
She added, “Even a house that has very few real issues, will usually have a 25- to 35-page inspection report. So, I always caution people not to pay attention to the number of pages in the report, because there may just be a ton of little tiny things included that the buyer doesn’t even need to worry about.”
Amanda Anhorn, a Realtor with Greenwood King Properties, said that she often advises her clients that it might be better to ask for a reduction in sales price or a credit to the buyer at time of closing in lieu of repairs.
“We would always rather have the reduction in sales price or a credit to the buyer’s closing costs, because it’s just very clean,” explained Anhorn. “That’s because when you have a seller doing the repairs, there’s always a grey area as to whether the repairs will be done to everyone’s satisfaction.”
If the seller insists on doing the repairs and that is agreeable to the buyer, Anhorn said that it is very important for the buyer’s agent to be as specific as possible in the language that is used on the amendment.
For example, she said that if there is a leak under the master bathroom sink, that the amendment should state that the repair is to be made by a licensed plumber.
“Then, we ask for all of the paid repair invoices at least a week before closing, so that the buyer can have the inspector reinspect. If the inspector still doesn’t like it, I write in my amendments that the seller has the option to try to fix it again or give the buyer a dollar amount in lieu of repairs, but if the parties cannot come to an agreement, then the buyer may terminate,” Anhorn said.
It’s important to note that one of the big-ticket items can be stucco repair, which can cost tens of thousands of dollars.
Anhorn pointed out that this is something that relocation management companies are well-aware of, so when they are involved in the buyer’s home purchase, they tend to discourage them from buying a stucco home. But, if they want to buy one anyway, that it must be real stucco and not synthetic.