Now we have progressed to the end of the seventeen day contingency period. What to do, what to do?

First a little review. The Residential Purchase Agreement developed by the California Association of Realtors states right there in black and white that the house is being sold in its PRESENT physical condition, meaning you (Seller) are under no obligation to make any repairs to the property. You do have a responsibility to maintain the property in the present condition as it was on the date of acceptance.

The Buyers have presented you with a list of items that need correcting. Usually these come from a recap page in which the Home Inspector summarizes all of the issues they have with the house. Understand that Home Inspectors are paid to find problems and no matter how insignificant the problem may seem, it will probably make the list. Also many homes here in Pasadena are eighty years old or more. Many have deferred maintenance and will surely require repairs. Condominiums and townhomes usually have fewer problems because they are newer construction and there is no access under the structure or in the attic. Inspectors cannot inspect what they cannot see.

When the Buyer presents a “Request for Repair”, you have a few options. Option #1 is to fix nothing. Option #2 is to fix everything. Option #3 is to fix some of the items and Option #4 is to provide a credit issued at the close of escrow in lieu of repairs.

Depending upon the request, most Buyers and Sellers usually agree to meet in the middle and fix some of the negotiated items. Usually these are minor issues and can sometimes be handled much easier with an offsetting credit. Why a credit instead of the actual repair? People’s perception of how an item may be fixed or corrected can easily be disputed. If actual repairs are to be made they should be performed by a licensed contractor and should provide a receipt and a warranty. Credits on the other hand cannot be disputed.

If both parties fail to reach an agreement, the Buyer can usually cancel the purchase contract and typically the Seller has to refund the good faith deposit. If this happens, you reset the clock and start over, so it’s always in everyone’s best interest to try and reach an agreement.

In my opinion the purpose of the repair list is not to make the house new again, but to address faulty or safety related issues. Most request’s are reasonable, but I have seen the Buyer ask the Seller to install all new plumbing at a cost of $3500. Much of what happens will be dependent upon the specific situation. How long has the house been listed for sale? What price did the parties agree to?

Of all the Buyer contingencies we discussed in part one, the Inspection Contingency can be the most difficult to overcome. The reason is money. A potential purchaser may weigh all the costs of buying the house along with the changes they would like to make and decide that they are spending more than planned.

In part 3, we will look at ways Sellers can insure their home inspections precede more smoothly. We will also examine opportunities to possibly reduce the number of days a Buyer has for an inspection.

Your house has been for sale now going on 60 days along with many other houses here in Pasadena and you just accepted an offer. Congratulations, time to start packing all those personal items, right?

You might wait a few days before making that trip to the box store and here’s why. When a Seller places a home on the market “For Sale”, they are 100% committed to sell it (most of the time, I have seen some exceptions). When a Buyer has a purchase contract accepted they are usually 50% committed to buy it. Notice a disparity here?

Our purchase agreement drafted by the California Association of Realtors provides for a seventeen day contingency period. Contingencies are provided to the Buyer for a number of issues including obtaining a loan, appraisal of the property, investigation of the condition along with insurability, other reports and disclosures made by the Seller or ordered from a third party, the preliminary Title Report, common interest or HOA documents and maybe even the sale of the Buyers property. This is the time in which a Buyer has to perform their due diligence. Home Buyers should be using this time effectively by obtaining as much information as they can about the property and its condition. If they plan to make repairs or changes, now is also a good time to be obtaining quotes from contractors.

When I mention this to FSBO’s they look at me and say “Huh”? A purchase agreement is a complex document involving hundreds of thousands of dollars, and unless you do it everyday you just don’t know what you don’t know.

During this seventeen day period, most Buyers will pay for a Professional Home Inspection, we strongly recommend it and most agents I know highly encourage it. These usually cost in the neighborhood of $250 to $500 depending on the size of the property and the scope of the inspection. This is analogous to going to your family doctor for a check up. If they feel anything warrants further investigation, they will refer you to a specialist. A Home Inspector will refer you to a plumber, electrician, soils engineer, fireplace specialist, etc., if they feel some area of the house warrants further investigation.

It’s been a short or long seventeen days depending on your outlook and now its time for the Buyers to make their decision. Do they go forward with the purchase or have they discovered something in their inspection process that may make them change their mind? After all, that word contingency means 50/50, maybe they will, maybe they won’t, who knows?

In the next installment of this story, we will take a look at how this ongoing saga can come to a conclusion. We will also look at ways a Seller can reduce this contingency period and their resulting anxiety.