As a real estate professional, you will often come across sellers who are reluctant to do repairs on their home — either before listing the property, or after a buyer-requested home inspection. Your sellers may simply want to sell and move on. They may not want (or be able to) invest any additional money in their home.
Of course, a seller’s reluctance to do repairs before listing the home may not be the best course of action . . .
If the property could be unsafe for viewing
If there are issues that make the property potentially unsafe for showing, these need to be dealt with immediately. A rickety deck or railing, unstable floors, or other clear structural damage would all fit into this category.
If the property isn’t inspection ready
As the listing agent, you may notice issues with a home that may be “red flags” to potential buyers. It could be visible dampness in the ceiling, unpleasant odors, unfinished construction sites around the home, or signs of obvious neglect and lack of maintenance. You may want to suggest repairs to your seller that could help the home sell for a higher price. Read more about 10 open house red flags every real estate agent should address with your seller
Strategies to Make It Work
If you’re selling a ‘renovator’s delight’, there’s no problem in being upfront about the property needing a lot of work. Your seller may want to sell the home “as is.”
An inspection by a licensed builder does tell the buyer what they’re in for, and it can be useful to the seller if they’re unaware of defects. This is positive for both you and your seller, in terms of protecting yourselves against potential liability. If your seller pays for a home inspection, results of that inspection usually need to be disclosed to the buyer if they could affect the value of the property. (Check disclosure requirements in your state.)
What about Repairs Indicated after a Buyer-Requested Inspection?
Defects identified during an inspection could be serious defects, such as the roof requiring urgent replacement, or they could be relatively minor in comparison, such as some small cracks or chips in walls and tiles. If the buyer is pursuing an FHA-insured loan, most repairs will need to be made before closing.
In other situations, whether a seller should undertake repairs depends largely on the seriousness of the defects identified, the willingness/ability of the seller to incur repair costs, and the motivation of the seller to close the sale.
The Impact of a Seller Who Refuses Repairs
When you lose a buyer after a home inspection where the seller refused to make certain repairs, there are implications for the future.
Disclosure laws exist to protect buyers, by ensuring they have sufficient information to make an informed decision about a property. In most states, you need to disclose all “material defects” which you are aware of.
When an inspection finds problems, those problems are communicated to the seller and to you. If the seller refuses to make the repairs, those very same defects will likely need to be disclosed in any future agreements with prospective buyers. This could impact the sales price of the property — and even put a future sale in jeopardy.
Trying to sell a property when a seller is reluctant to do repairs can be a challenge for real estate professionals. It will likely reduce the price the property will sell for. And if the property isn’t priced right, it can also take longer to sell.
Reducing Your Risk
As a real estate professional, you might encourage sellers to undertake repairs, where:
a) Defects pose a threat to safety
b) Defects are serious enough to affect the sale of the home (alternatively, the property could be discounted so the new buyers can undertake repairs themselves)
c) Where repairs can help to achieve a better sale price for the seller, offering a good return on investment.
A real estate E&O insurance policy can help protect you against lawsuits, including those related to injuries that occur at open houses and showings.
CRES offers premium coverage tailored specifically for real estate professionals, so you can customize your policy to suit your individual business needs. With CRES Real Estate E&O + ClaimPrevent®, you’ll also have access to Legal Services 7 days a week to help you deal with issues before they become claims. To find out more about CRES Real Estate Insurance options, contact us at 800.880.2747.
This blog/website is made available by CRES Insurance Services for educational purposes to give you general information and understanding of legal risks and insurance options, not to provide specific legal advice. This blog/website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Claims examples are for illustrative purposes only. Read your policy for a complete description of what is covered and excluded.