Three Things to Remember about Repair Amendments

Note: This is a chapter in my new ebook called The Ultimate Guide to Buying (and then Selling) Your First Home.  I will post a chapter a week.  If you like what you read, you can pick up a copy here for the price of a candy bar!   Buy a candy bar or be a real estate guru!   This chapter is about some things for buyers to remember when putting together a repair amendment.    The last chapter to be shared on this blog you can find here.

Steve and Sally met me at the local coffee shop, so we could discuss at length what they wanted to put into the repair amendment to send to the seller.   I started out like I always do with a bit of a quick lesson/lecture.  “When buying your first home, you might think this is a small step, but for many it turns into the most stressful.  There nothing as divisive between a seller and a buyer than this step in the home buying process.  A seller does not want to be told that his house needs repairs and will resent the repair amendment.  Some sellers think it is a petty request while others feel buyers expect too much for a house that has been lived in.   Buyers will start to question the wisdom of buying the property if it requires repairs while other buyers will feel overwhelmed with the negotiations, which can be heated at times.   First time home buyers should know that all properties require maintenance to keep the home in top shape and often sellers will not have enough time or resources to keep up with them all.  All homes will require repairs.  It is best to get used to this idea.” I took a breath while both Steve and Sally looked nervous.   I stressed to them that we will do our best to minimize the stress, but it is almost unavoidable. I told them that there are three things to keep in mind as you put together your repair amendment.

1. Be aware of all the tactics available to you –   I told the young couple that there are a few tactical decisions that need to be made when writing up a repair amendment.  The most common approach to a repair amendment is to ask the seller directly for the repairs to be made before you will buy the property.   The seller can then reply with their own list, usually marking out the ones they will not do.  It is not uncommon to go back and forth on these list of repairs two or three times before a final list can be finalized.   You could also ask for an allowance to be given to you at closing to do the repairs yourself.   This tactic has the advantage of you being in control in how the repairs are made and who makes the repairs.  Many sellers do not like this approach because it can be difficult to know how much the repairs cost, and many feel the buyers allowance request is too high for the repairs needed.   A third tactic is to ask the seller to reduce the sales price of the home to account for the repairs.   Sellers tend to be cautious of this for the same reason of the allowance, they don’t want to overpay for your required repairs.  The best way to combat this seller’s fear is to provide a list of repairs to the seller with estimated prices so they can see what it would cost them to do it themselves.    You would need to call out specialists to give you a quote on the repairs, but this is why you have an option period.   By arming your seller with this information, it is more likely the seller would agree to the allowance or sales price reduction as many do not want to bother with the repairs on a house they will be leaving soon.

2.Don’t play games with repairs –   I told Steve and Sally a story to exemplify my point with not paying games with repairs.   “One day a good looking real estate agent received a repair amendment from the buyer, who had beaten out numerous others to win the bid for this home.   The repair amendment listed 26 things over two pages.  The agent sat down with the seller to go over the list, which they narrowed down to eight items.   It took the two of them over an hour to do this.  The seller then went out to get bids on all the different repairs to see what it would cost.  He was satisfied with the resulting bids, so the handsome agent sent the repair amendment back to the buyers.   Within an hour, the listing agent received a phone call from the buyer’s agent confessing that their buyer never really wanted to do the repairs, but instead wanted to reduce the sales price to cover the repairs, wasting the two days it took the seller to figure out what the repairs would cost.”  Sally asked if I was the handsome agent and I told her that my wife thought as much.   I then told them that the moral of this story is that as a buyer ask for you want.  It is always better to be upfront on the repairs, otherwise the seller might say no to all repairs, and you must decide to take the property as-is or walk away.

3.  You can handle smaller repairs – I ended my list of three with a bit of advice on how to filter through the inspection report.  How do you know which repairs to request the seller to do?  When it comes to repairs, it is always better than to think long term benefits versus short term pain. I always advise buyers to ask for the larger repairs to ensure that these are done. The buyers can handle the smaller repairs like leaky sinks, plugs with a crack in them, missing light bulbs, etc. Of course, if you don’t want to do the small repairs ask for the seller to do them. However, be forewarned that the seller might mark off the larger repairs and keep the minor ones in the list. In my opinion, it is always better to get the big-ticket items (like foundation, roof or serious plumbing or electrical issues) done by the seller because this will save you money and heart ache in the long run. You can handle the pain of doing a few minor repairs if you get the bigger stuff repaired by the seller.   Steve was shaking his head.  He felt strongly that they should ask for both types of repairs.  His brother did it that way with his agent.  I responded that there are those agents who would argue that it is the burden of the seller to make these repairs, so you should ask for everything of the seller and then start to negotiate.  This is a perfectly fine tactical approach to take with the seller.  Hopefully, the seller will take the high road and fix the more expensive repairs versus the smaller ones.   Your approach is dependent on how much risk you can handle.    If you like to the roll dice, include all the repairs.  If you don’t, do it the way I think it should be done.   In the long run, it is your future home, so you should do what you gut is telling you.

Steve wanted to protest again, but Sally beat him to it and said that they are not really risk takers.  She felt strongly that we should only pull out the larger repair jobs and ask for them.   Steve reluctantly agreed.  Thirty minutes later, we had a repair amendment with three large items and two smaller ones that Steve insisted he did not want to be bothered to do.   I put together the amendment and sent it over to the other agent.  The other agent got back to me an hour later saying his seller wanted some time to price the repairs and they would get back to us in a couple of days.   I was fine with this.  When we on the next to last day before the option period ended, I emailed Steve and Sally with my usual disclaimer about the end of option fast approaching.  Steve replied that he understood so they wanted to know some real reasons to walk away from the property.