HOW much money can I save by requesting repairs?
Today I am going to be talking about requests for repairs. I will be approaching this from the buyer’s agent and buyer’s viewpoints so that you can better understand the point of a request for repair and how that’s negotiated.
So I’m going to use an example:
A few years ago I sold a property that is on Avalon Court in Pacific Beach. At the time, it was listed for $1.495 million, so just shy of $1.5 million. We ended up negotiating it to a sale price of $1.387 million, and it sold and closed. But between the time that we entered into escrow and the time it closed, we, of course, had inspections done.
I’m going to start first by just reading a sentence or so from the MLS, it says, “Steps to beach, the stunning remodeled duplex boasts a three bedroom, two bath with an open floor plan.” And it goes on to say, “Second unit is a one bedroom, one bath, and may convey furnished with the right offer.” What the agent is saying to us on the listing was that it was in great shape. It was a property that had been flipped, meaning that an investor had bought it with the intent of fixing it up and turning it back over again. The buyer turned out to be yet another investor who wanted it as a long-term rental. That was my client.
As we entered into inspections, we had a long list of key findings from the home inspector of things that weren’t right with the property, even though it had just been flipped and that it was supposedly fixed up. To give you an idea of how long this list was, here’s this request for repair, which looks pretty simple:
It just says on here, “See addendum,” and then this is all the list of repairs:
You don’t have to read the list in its entirety but what I want you to know is that this was a pretty long list. There were a bunch of little things, as well as things that were more major, like making sure that the three-prong outlets were actually grounded and installing outlets that were not installed correctly so that there wouldn’t be a fire.
The next step, after we had had the home inspection and received a list of those items, was that I had a general contractor come in and help us come up with a list of those items that needed to be fixed as well as an itemized cost for items. So these are all the items and you can see below:
He and I went back and forth. I actually didn’t have a price on that one item so that’s why it’s highlighted in yellow. But we went back and forth and got prices next to each of those items. When I turned it back over to the seller and to the listing agent, he had an itemized price list. The listing agent had the seller sign this, and you’ll see on here it says in the X-Box that the seller agrees to all of buyer’s requests.
So the seller agreed to all of the buyer’s requests. Then we went back to do another inspection and when we went back to do an inspection, we found that the seller hadn’t actually done all of the fixes he was supposed to do but now time is getting short. So we took a subset of the things that hadn’t been done and came up with this subset list and they actually credited the buyer for those items and the sale proceeded forward. So at the end of the day, the buyer ended up with a credit for $1,100 and they got, of those 23 items, all but about eight of them done during escrow. So this is just to give you an idea of what it can look like on the large end.
On the small end, there might be two or three items, but they might be bigger items and take a little bit longer to do, and the seller will just credit the buyer with closing costs during escrow for those items instead. So, they’re not really crediting for that item to be fixed, whether it’s the heater unit needs to have an igniter changed or something else that has to be done in the house, whatever that is, it’ll show up as a closing cost credit, instead. That’s what escrow will see, but that money is obviously used towards closing costs so that the money that the buyer would have had to have brought in for closing costs can then, after close of escrow, be used to fix up the property. So hope that makes sense to you. If you have any questions, I’m always here for you. Give us a call, happy to help you, looking forward to working with you.