After 26 years in the real estate business, I can still honestly say I love what I do. If I had to pick a part of my job that’s the most difficult and least enjoyable, it’s dealing with home inspections. The majority of the intown areas I sell in are made up of older homes, on which inspections can often be an issue.
Several years ago, the Georgia Association of Realtors completely revamped the way inspections are handled in our contracts. Previously, there was an inspection clause which was generally good for seven days. In that time, the buyer would have the home inspected, and present the seller a list of items to be repaired, per the inspection report. It was spelled out in the contract that this included only latent defects, meaning things that weren’t obvious when the buyer viewed the home. It also didn’t cover any cosmetic repairs, or requests to bring the home up to today’s codes.
The seller would either agree to the repairs, or negotiate which ones they were willing to do. If the buyer and seller could not agree on repairs during the inspection period, the buyer had the right to void the contract and get his or her earnest money returned.
Now contracts are completely different in terms of inspections. Instead of a specific inspection clause, buyers have an agreed-upon due diligence period (generally seven to 14 days), during which they can void the contract and get their earnest money back for any or no reason at all. So, a buyer still generally gets an inspection done during that period, and if there are any issues that they’re concerned about, they can ask the seller to address them, or compensate them for the needed repairs.
There are no restrictions or guidelines whatsoever for what a buyer can ask for. I’ve encountered some recently where the buyer was basically asking the seller to renovate the home, bringing a 60-year-old home up to today’s codes. The seller can still say no to any or all repairs, but they risk the buyer walking away at that point, so often a compromise is reached.
In terms of negotiating repairs, I usually advise both buyers and sellers to try to come up with a dollar amount settlement, rather than have the seller have the repairs done. From the buyer’s perspective, you have to figure the sellers are going to do a repair in the most economical way possible to sell the home, which is not necessarily the way a buyer would want it done. From a seller’s perspective, it can be a lot of work to get the repairs done in a short amount of time, and then they run the risk of the buyer not being happy with the repairs, causing a last-minute issue before closing.
Cash settlements definitely make all of that easier, but there are some concerns to be considered if you go that route. Lenders no longer allow credits to the buyer at closing, and very few will allow payments to be made directly to a vendor at closing. It’s also not permissible for a seller to give money to a buyer outside of the closing statement.
So, the way we generally handle this is by having the seller contribute the agreed-upon amount of money toward the buyer’s closing costs. This too has limitations. Depending on the type of loan the buyer is getting, sellers are often only allowed to contribute a certain amount toward the buyer’s costs, usually about 3 percent of the sales price.
If all of this seems overwhelming, you’re right. Sometimes it can be, but with the help of a professional Realtor, a reasonable inspector and a reasonable buyer and seller, it’s just part of the process that leads all parties to the closing table.
