Most real estate purchase contracts include an investigation contingency. This allows a period of time for the buyer to do their due diligence about the property before deciding whether or not they want to move forward with the purchase. That due diligence will typically include a series of inspections of the property as well as a review of reports and disclosures. No house is perfect and the inspections will ALWAYS find a list of things to be addressed. 

At the end of this time period, the buyer has the option to either exercise their contingency to exit the transaction, release their contingency and move forward, or submit what we call a “Request for Repair.” I typically advise clients to focus on any health and safety issues and any big ticket items that wouldn’t have been obvious or expected based on the age of the home.

Despite the name of the form, this request isn’t just about repairs. Rather, it’s an opportunity to ask for the seller to take some corrective action (like complete repairs) or to reduce the purchase price or to provide credits to the buyer at closing. So, what’s the best one to ask for? Well, it depends… Here are some things to consider. 

Repairs Done By The Seller

Pros: In theory, this will save you the cost and headache of doing the work and means the house is in your desired condition before you close and get the keys.

Cons: You are leaving it in the hands of the seller who may not do the work exactly how you would like it done. It could delay the closing process. Sometimes the repairs recommended by your inspectors are urgent, but oftentimes it’s something that could wait. So maybe you're better off negotiating for $$$ and then deciding if and when you want to do the work down the road.

If you do end up going this route, make sure to re-inspect the property before close and be prepared to push the close date until you confirm the repairs are complete!

Purchase Price Reduction

Pros: Getting a price reduction saves you money on the purchase, allowing you to re-allocate those funds towards the repairs needed on the property. You can do it when you want, how you want, and with whoever you want. Your purchase price will determine your tax basis, so you’ll save a little bit there too. Plus, if you are able to get the purchase price under the appraised value, you will start with more equity in your new home.

Cons: If you are getting a mortgage, with say a 20% down payment, then 80% of your purchase price reduction get’s amortized over the course of your loan… and won’t be felt or be available for use in the immediate term. Also, although you will likely have estimates for the needed repairs to base your request on, you never know what could happen once the work begins. Some things may end up costing you more than you thought and possibly more than you asked for.

Credits at Closing

Pros: There will be a variety of fees due at closing to cover the service providers that were part of the purchase process - they can be anywhere from 2-5% of the purchase price - and a credit from the seller can offset those costs. Since it means less money out of pocket from you at closing, you’ll be able to redirect those funds immediately towards any repairs or improvements you want to do on the home. 

Cons: If you’re getting a loan, the amount of credits you can receive will be limited by the actual amount of closing costs you incur. 

Regardless of which path you choose, remember that the seller isn’t obligated to give you anything. So as with anything else, this is going to be a negotiation and you should be thoughtful about what you ask for and get your agent’s advice on how to proceed.