Repairs, Credits, & Price Reductions

June 23, 2021

Repairs, Credits, & Price Reductions
More often than not, a home inspection leads to findings that merit repairs. A buyer and seller have a few options when negotiating a resolution. Below is an explanation of the benefits of each option.
 
A reduction in price only helps a cash buyer. Since most buyers are using financing to fund the vast majority of their purchase this doesn’t come into play too often. For a buyer using a mortgage, the reduction in price will only put a portion of the money back in the buyer’s pocket as the majority of the purchase is financed. Reducing the price would simply mean that the buyer would use their own cash to make the repairs. A lower price also means a lower tax basis so a cash buyer gets this ancillary benefit as well. The cash buyer can then higher anyone they choose to complete the work after closing.
 
Taking a credit comes in the form of credit for closing costs. A buyer uses the seller’s credit to fund their closing costs, and keeps their own money in their own pocket. This credit cannot exceed a buyer’s total closing costs. This credit allows for the buyer to hire anyone they choose to complete the work after closing. One downside could be the work costing more than anticipated. On the flip side, it’s possible the actual work could cost less than anticipated.
 
Asking for a repair by a qualified professional is always a good option. Being very specific with the description of the work is very important in this situation. We don’t want any gray area. A seller might not complete the repair how the buyer wanted it completed so there can be a risk. Lining up repairs can take time so repairs could delay the close of escrow. You’ll also want records and receipts of any work that the seller completed prior to the close of escrow.
 
Any combination of these resolutions will work. It’s a matter of trusting the quality of repairs, the timing, and the amount of money a buyer is eligible for when dealing with credits. Working with a savvy Realtor, like the ones at Market Real Estate, will mean you’ll get the best possible outcome when dealing with repairs.

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