How To Handle Repair Addendum When Selling A House

The home buying process is long and complicated. And while certain aspects are fun – like touring homes and finding precisely what you want – other elements are pure drudgery. The due diligence and repair process that follows an accepted offer would fall into this latter category. But the better you understand how to handle this phase of the process, the less frustrating it should be.

Understanding the Process

It's helpful to start with an overview of the process so that you know what to expect. Even if this isn't your first purchase, it's nice to have a refresher. So here's a basic gist of how it goes:

Offer. You find a house you like and you put in an offer that you deem to be acceptable. You do so without a full understanding of the condition of the home, other than what's visible and apparent to your untrained eye. You draft the offer letter with a repair contingency that gives you the ability to hire an inspector to gather more information.
Acceptance. The seller receives your offer and agrees to the terms. This means the house is officially under contract. You then have a certain amount of time to order an inspection. (Usually somewhere between 7 and 10 days.)
Inspection period. During the inspection period, you're able to have inspectors, contractors, pest control professionals, and other licensed individuals over to the property to analyze different aspects of the home and provide suggestions on how to proceed.
Repair requests. Once you gather a list of all the possible issues and defects, you develop what's called a repair addendum that you send to the sellers. You can include anything you want on this list, but the contract will stipulate what the seller must repair and what's optional. Typically anything related to roof leaks, HVAC, plumbing, electrical, foundation, and appliances are required to be fixed by the seller if the offer is to proceed. Anything cosmetic or non-essential doesn't have to be fixed. (However, sellers will often fix certain items if they fear the buyer would back out.)
Agreement or split. Once you present your repair requests, the seller will either say yes to everything, no to everything, or yes to some things. If they say yes to everything, it's simply a matter of deciding how the repairs will be covered. (Will the seller fix them right away, or offer a credit to you at closing?) If they say yes to only some of the items, you can either choose to proceed or walk away.
Proceed to close. Once all the repairs are addressed and/or concessions are offered, you're ready to proceed to closing.

In this article, we're going to discuss what happens once you've had your inspection performed by a licensed home inspector and he's presented you with a list of items that he recommends be addressed if you're going to purchase the home. Read on to learn more.

What to Ask for in a Repair Addendum

Deciding what to ask for in your repair addendum is always a big issue to work through. A lot of it depends on the state of the market, whether buyers or sellers have the most leverage, what the contract price is compared to the value of the home, etc. But regardless of these factors, you'll almost always want to make requests for the following:

Major leaks. Whether it's a roof leak or a pipe leak, water intrusion is never a good thing. You'll want to have this fixed before it creates even more damage and issues to the home.
Mold or mildew. The presence of mold and mildew – which is directly connected to high moisture content – is a both a structural problem and a health issue. You need to find the cause of the mold or mildew and deal with it right away.
High radon levels. Did you know that radon gas is the second leading cause of lung cancer (and the number one cause in non-smokers). If you run a radon test and the levels come back above the recommended threshold, you should have a mitigation system installed.
Termite damage. Is there active termite damage to the home? Don't let this slide. Identify the areas affected and get treated and bonded. Depending on the extent of the damage, some work may need to be done.
Major mechanical issues. Any serious mechanical problems to major systems – like water heater, HVAC, appliances, plumbing, or electrical – need to be addressed.
Foundation issues. If there are any foundation problems discovered during the inspection, you'll want them to be taken care of. In fact, they'll likely have to be addressed before the lender releases funds.

Other Tips and Suggestions

The inspection/repair period is where most bad deals fall apart. There's money, emotions, pressure, time-constraints – tons of different factors that can compromise a deal. In order to increase your chances of having your contract proceed to closing, keep the following tips in mind:

You aren't buying a new home. If you're buying a home that was built in 1995, you need to realize that you're purchasing something that was constructed 25 years ago! If you're expecting it to be brand new, you're going to be sorely disappointed.
Stick to the big things. In light of this previous note, don't ask for small fixes. If you come across as being petty and cheap, you may comprise your negotiating power on larger repairs. If it's something you can inexpensively fix with a couple of items from Home Depot, don't bother requesting a repair.
It's all about how you ask. Sometimes it's all about how you deliver your requests. If you're kind and understanding, you'll likely experience some reciprocation.
Know your rights. Talk with your agent about your rights and understand your options. When can you walk away/not walk away? In which case do you lose your escrow money? Deal with these issues on the front end so that you can make an educated decision.

Buy and Sell With Green Residential

At Green Residential, it's our mission to represent our buyers and sellers in a manner that makes them feel supported, cared for, and protected. If you're looking for an experienced agent who will have your back throughout the home buying or selling process, please don't hesitate to contact us today!