BY BRUCE CATHCART
Buying and selling homes seems to get more complicated every day. When I first started in the business we had a 1 page contract and as far as disclosures went, well, it was what you see is what you get and “buyer beware”! What was once a 1 page contract is now about 15 and the disclosure package can exceed 40 more pages. One of the more challenging issues in today’s real estate transaction is the Buyer’s Request for Repairs process. Some of the confusion regarding this may stem from the fact that the purchase contract states that the Buyer agrees to purchase the home “AS-IS in its PRESENT physical condition as of the date of acceptance”. So how is it that after the Buyer and Seller negotiate a purchase price for the property that the buyer in essence re-opens negotiations again by requesting additional repairs either to be made by the seller, or that the Seller reduce the purchase price, or the Seller “credit” the buyer additional dollars toward their closing costs? The answer, as they say, lies in the details.
Before a buyer decides to make an offer on a home they may see the home only once and spend maybe 15 minutes checking it out. In this initial viewing the Buyer basically decides if they like the floor plan, the general condition, neighborhood, upgrades and amenities and that’s about it before they rush directly from the home back to their trusted Real Estate Professional’s office to sign their offer! They certainly don’t take the time to check out all of the appliances, HVAC, electrical, plumbing, and mechanical systems or even read the Seller’s disclosures before trying to get a signed contract to purchase the home. Fortunately the contract allows for the Buyer to purchase the home “subject to” their complete and thorough inspection (or that of a professional home inspector) of the home usually with a due diligence period of 17 days. What Sellers must understand is that when a Buyer makes an offer on a home they are offering to purchase that home at a price that reasonably assumes that all of the aforementioned items and systems are in operable condition. Of course when the Buyer discovers that some of these items are not functioning properly they have the right to request that the Seller repair them or otherwise compensate the Buyer for accepting these items in their current condition. The Seller can refuse to make any repairs and thus begins the negotiation process again.
Before I share with you the ins and outs of the negotiations regarding the Buyer’s Request for Repairs (RFR) let’s take a look at the May data and see how the Coachella Valley real estate sales market is doing.
According to the Desert Area MLS as of 6/1/18 there were 1,091 pending transactions of residential properties here in the Coachella Valley in the month of May. That follows our seasonal pattern being down slightly from the 1,199 pendings in the previous month (April) but slightly lower when compared to the same time last year when we had 1,133 pending sales. In April there were 1,109 solds and again, following our seasonal sales pattern, we were down slightly in May with only 1,065 solds. That is just about the same as last year’s home sales in May (2017) when we sold 1,059 homes. May’s sales figures were good enough that our year to date solds for 2018 still lead last year’s year to date sales at 4,779 compared to last year’s total of 4,627. Last year was the best year in terms of total sales and dollar volume since 2005 and was a great year for the Coachella Valley Real Estate market. If we can just stay even with last year’s sales we’ll be on track to have our best year since 2005!
Our inventory of homes for sale went down again this month with 3,275 homes available on June 1, 2018 compared to 3,574 homes available on May 1, 2018. Last year at this time we had 4,050 homes available for sale. Inventory this year has been off by over 20% but surprisingly that has not significantly affected our sales numbers. So far it has not become a factor this year but if the total number of homes available for sale in the Coachella Valley continues to shrink it may become a serious issue. We’ll just have to keep a close watch the inventory of homes in the coming months.
My best advice to Buyers when making out their Request for Repairs list is to keep it simple and reasonable. Keep in mind that a Seller can say “no” to everything and there is a risk of losing the deal. Do not ask for purely cosmetic things like new paint, carpet, landscaping etc. especially if these are things that you should have noticed before writing your offer. Do not list nit-picky items, simple fixes or normal maintenance items that you can do yourself. Instead keep your list as short as possible and focus on health and safety issues, non-operable or malfunctioning systems, code violations etc. By being reasonable and requesting that only serious deficiencies be repaired by the Seller you will have a much better chance of getting everything on your list repaired in short order and without a stressful negotiation.
My best advice to Sellers when first receiving the Buyers Request for Repairs list is to take a deep breath, exhale, relax and read through the complete list without getting upset. It is not personal. Discuss the items on the list with your Agent and if the requested repairs are reasonable and are repairs that other Buyers would likely request, then agree to either make the repairs or credit the buyer an amount equal to the cost of the repairs or reduce the sale price of the home by that same amount. If the Buyer’s RFR list is unreasonable then respond by offering to make only those repairs on the list that are reasonable. If the Buyer continues to be unreasonable in their requests you will want to review your options with your Agent. Know that some Buyers may never be reasonable (or happy) and in this case you may just need to find a more reasonable Buyer.
If the Buyer and Seller are both reasonable the Request for Repairs process will go quickly and smoothly with the end result being both a happy Buyer and a happy Seller (and a happy Agent too!).
Join me each month this year as we keep a close eye on our Coachella Valley real estate market. If you have a real estate question or concerns please email me at the address below.
Bruce Cathcart is the Broker/Co-Owner of La Quinta Palms Realty, “Your Friendly Professionals” and can be reached by email at firstname.lastname@example.org or visit his website at www.laquintapalmsrealty.com.