What Happens If Home Inspection Repairs Are Not Completed?

Recently, I was talking to some clients about their home inspection contingency. They were wondering what would happen if some of the items that the seller agreed to repair were not repaired by the time they went to settlement.

In medicine, there is therapeutic treatment which is treating an existing illness, and there is prophylactic treatment which is preventing an illness from occurring. As a Realtor, I like to think of my job as being prophylactic. I stay on top of all of the details of a transaction from the time the contract is written to after settlement to ensure that everything is being taken care of in a timely manner.

The first answer to my buyer’s question is that it shouldn’t be an issue because I will stay in touch with the listing agent to ensure that all repairs get done before settlement. The reality is that there are some repairs that might not get done in time either because of the scope of the work that needs to be completed or unforeseen obstacles. I was once representing sellers that agreed to replace and repaint the wood rot on the outdoor trim. An unusually long string of rainy days prevented the painters from completing the job prior to settlement.

The second answer to my buyer’s question is if something isn’t completed, such as the painting on my seller’s house, then funds can be escrowed. In the case of my sellers, we already knew the balance that was due to the painters so the settlement company deducted that amount from the seller’s proceeds at settlement and held those funds in an escrow account. Once all parties were satisfied that the painting was completed satisfactorily, the settlement company used the escrowed funds to pay the painter.

This solution allows settlement to occur on time while giving the buyer an assurance that the agreed upon repairs will be completed. The settlement company represents the contract so they are tasked with ensuring that the terms of the contract are adhered to before they release any escrowed funds.

This solution also works if deficiencies are found during the pre-settlement walk-through. The buyer, along with their real estate agent, will inspect the home one more time just before settlement to ensure that the terms of paragraph 7 of the Regional Sales Contract, which states, “…the existing appliances, heating, cooling, plumbing, electrical systems and equipment, and smoke detectors (as required), will be in normal working order as of the Possession Date,” have been adhered to. Every so often I have found something during a walk-through that isn’t in “normal working order.” With the help of the settlement agent, we negotiate with the seller to escrow funds from the seller to cover any repairs or replacements that are necessary.

Real estate is often like solving a puzzle. There is always an answer, sometimes you just have to think outside of the box to find it!