So You Don’t Want to Make Any Repairs, Eh?

One of the age old adages of Real Estate is that everything is negotiable.  By and large, it is true.  However, another adage to bear in mind is that there is a time and a place for everything.  Let’s examine the sticky issue of seller repairs during the course of a typical transaction, for example.

Buyer’s aren’t the only ones who can experience a healthy degree of remorse after consummating an agreement to purchase a home.  The phenomenon also extends to sellers who are convinced that they have undersold their property.  Hard to fathom that anyone who watches the news these days and has an idea of what is going on in the current market would think it is possible to undersell right now, but it happens.  While a remorseful buyer may look to the home inspection as an escape hatch to get out of a purchase they no longer wish to make, a remorseful seller may decide to stonewall all buyer inspection requests because “they are already stealing the house.”

There is also the case of a seller who has received a subsequently higher offer.  Legally bound to the terms of the contract with the first buyer, the higher offer can only be placed in backup status.  As such, some sellers with a better backup offer in hand will be inclined to stonewall the inspection demands of buyer number one in hopes of chasing him/her away.  This would enable the more favorable terms of the second contract to be moved to the forefront.

Well, in each case, there is a problem with the strategy.  A seller cannot retroactively change a purchase agreement to an “as is” transaction.  The time to address such terms is during the initial contract negotiation.  Unless overridden with constructive language, the boiler plate of the AAR (Arizona Association of Realtors) purchase contract warrants that certain systems of the home are in working order upon the close of escrow (receipted proof of any/all corrective work is required to be furnished to the buyer 3 days prior to closing).

Section 5a of the AAR Purchase Contract:

Seller Warranties: Seller warrants and shall maintain and repair the Premises so that, at the earlier of possession or COE: (i) all heating, cooling, mechanical, plumbing and electrical systems (including swimming pool and/or spa, motors, filter systems, cleaning systems, and heaters, if any), freestanding range/oven, and built-in appliances will be in working condition; …

In other words, the seller is contractually obligated to make any repairs necessary to ensure that the systems referenced in the passage above are in fully functional condition at closing (or possession, whichever comes first).  I am not an attorney, but according to the suits in our downtown corporate office, “functional” is to mean “as intended upon original installation.”  In other words, your A/C may work, but if it has a temperature split outside of the ideal range, you are most likely technically obligated to repair the component that is preventing it from functioning in accordance with original specifications.  Faulty wiring (double taps in the breaker box, reversed polarity, etc), non-functioning fixed appliances, leaky shower valves … you are on the hook for those repairs.

Let me reiterate, I am not an attorney, so please do not refer to anything stated in this post for legal guidance.  I am but a simple Realtor with a simple message:

Unless you struck the seller warranty language out of your original purchase agreement (good luck with that in this market unless you happen to be an asset manager for a bank and willing to discount the price of the home dramatically), there are certain repairs you are stuck with, lest you be in breach of the purchase contract.

That’s where fun new topics such as specific performance lawsuits come into play.

Read the contract to which you are agreeing, and don’t let your agent dismiss the fine print as “just boilerplate.”  That boilerplate contains specific rights and responsibilities of which you need to be aware prior to ratification.  The Devil is always in the details.