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I'm in the process of negotiating repairs on a home I'm in escrow to purchase. The seller is amenable to my repair request but since the repairs are significant (new HVAC, deck rebuild due to rot, fix drainage, etc.) I'd like to request that a specific trusted contractor do the work. My question is how should I write this up so that it ensures not only the work will get done but that the trusted contractor does it? I'm feeling that this is beyond what my Realtor can safely do. Do I need to have a RE lawyer do this?
What you need to do is ask for a price reduction or closing costs credit and do the repairs yourself if you want a specific person doing the work. The seller doesn't have to use your person. Your person might cost twice as much. Are you going to pay the difference if the seller obtains other quotes and your guy is significantly more?
What you need to do is ask for a price reduction or closing costs credit and do the repairs yourself if you want a specific person doing the work. The seller doesn't have to use your person. Your person might cost twice as much. Are you going to pay the difference if the seller obtains other quotes and your guy is significantly more?
The lender will only allow me to get a small amount back. Price reductions won't help much since the repairs need to be done now. If the seller wanted to get their own bids (they haven't) that would be fine so long as I could know ahead of time who contractor is so I can be sure substandard work isn't going to be done on the house. That's ultimately what my post is about - somehow getting legal assurance that X contractor will do the work. Otherwise I'd be agreeing to buy a house that is about to undergo major work and would have no control over the quality. That just doesn't make sense.
But it happens everyday. If you ask someone else to do work, you have to live with the quality they feel the urge to provide. I don't know what state you're in, but your contract should state somewhere in there about who can do repairs. In the Texas contract, it's specifically states that a licensed professional must do the work, so the seller can't just hire Uncle Joe to install something or Cousin Jack to do a repair. Repairs have to come with an invoice, and the invoice would state what the warranty period of the work is. If warranties need to be transferred to the new owner, it should state how many days they have to contact the people to make sure their information is on file.
Other than ensuring a "licensed professional" is doing the work, as I said before, you will have little control over that unless the seller is just lazy and doesn't want to obtain any other bids for the work and will just trust your guy. Probably not...
But it happens everyday. If you ask someone else to do work, you have to live with the quality they feel the urge to provide. I don't know what state you're in, but your contract should state somewhere in there about who can do repairs. In the Texas contract, it's specifically states that a licensed professional must do the work, so the seller can't just hire Uncle Joe to install something or Cousin Jack to do a repair. Repairs have to come with an invoice, and the invoice would state what the warranty period of the work is. If warranties need to be transferred to the new owner, it should state how many days they have to contact the people to make sure their information is on file.
Other than ensuring a "licensed professional" is doing the work, as I said before, you will have little control over that unless the seller is just lazy and doesn't want to obtain any other bids for the work and will just trust your guy. Probably not...
I understand. I'm open to them getting bids and selecting a contractor as well, but only if I get a chance to agree. My concern is having 20k worth of shoddy work done on the house that I'm stuck with. Just because you're a licensed contractor doesn't mean you're good.
I'm feeling that this is beyond what my Realtor can safely do. Do I need to have a RE lawyer do this?
It is always safest and best to have a RE lawyer draft the adequate and sufficient language.
Suggest to escrow the funds for work to be done, if it is allowable and permissive by title company and lender to do so. If they allow, then I would recommend to propose 1.5 the times (ie 150%) of the average of 3 written itemized estimates to be held and any remaining/all balance to be returned to seller upon completion of work or upon the ending of the escrow). An attny will be able to draft the instruction of the escrow.
The lender will only allow me to get a small amount back. Price reductions won't help much since the repairs need to be done now. If the seller wanted to get their own bids (they haven't) that would be fine so long as I could know ahead of time who contractor is so I can be sure substandard work isn't going to be done on the house. That's ultimately what my post is about - somehow getting legal assurance that X contractor will do the work. Otherwise I'd be agreeing to buy a house that is about to undergo major work and would have no control over the quality. That just doesn't make sense.
I don't know how this works when you don't use a real estate attorney to close, so forgive my ignorance. I'll give you an example of how we've done it and maybe others who live in states where attorneys aren't typically used for real estate transactions can better help you.
We had a septic tank at a property that we were purchasing and didn't know, and wouldn't know, until after closing the extent of the damage. The seller needed to close (bankruptcy) after many delays by the trustee and court ASAP.
The lawyers went back and forth and it was decided (after we supplied them with two quotes for what it would cost to have an entire new system put in IF that should be necessary) that $15K would be held in escrow for the time period of up to one year in order to have the tank/drain field/etc., fully inspected & repaired. The $15K was held by the seller's attorney.
Turned out the entire system needed to be replaced.
Once the work was done, all bills were submitted to the lawyers and unfortunately for the seller, he didn't get any of that $15K back - the total cost went over $15k.
We used who we wanted to & kept on top of the engineer, ran paperwork to the town, had to keep on top of the person from the county to approve the plans (chick went on vacation for 3 weeks, and no one picked up the slack for her when she was gone), it was pretty time consuming.
If you let the seller do the repairs for you (even if they use a contractor YOU want them to), can you be 100% certain that the repairs will be finished by the scheduled closing date? Does that even matter to you as long as you have a contractor you trust doing the work? Will you be able to get a certificate of occupancy and move in to the property without the repairs fully completed?
Are you closing with a title company? Does a title company do this for a buyer? I don't know. Can the seller bring a check for repairs made out to you at the closing? As opposed to dropping the purchase price or paying for a portion of your closing costs? Do you have the cash to make the repairs in either of those cases?
Last edited by Informed Info; 03-15-2014 at 07:20 PM..
Reason: Tarka posted first & seems to have it covered!
Perhaps you can say in your request that the seller get 2 or 3 bids from a licensed contractor and then you will pay the difference between their average bid and the cost your licensed contractor charges, and you take responsibility if your contractor does not complete the work on time ( pay them XX per day to cover their mortgage, taxes, etc.) and you will pay for any cost overages your licensed contractor has while completing the jobs.
Personally, I just ask for the seller to use a licensed contractor, and for something major like a roof a year guarantee. By a year you will know if it has issues or not and can get it fixed during the warranty period.
Write up the repairs and the contractor(s) you want to do them in detail.
And toss more good faith money on the table, non-refundable once repairs are initiated. If you breach, seller pockets your money for his trouble. When you close, you are credited for the extra deposit in the transaction costs.
Then, make sure you close.
Thanks for the responses and ideas. Am working to see if we can implement some of these!
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