As foreclosures and short sales exploded onto the real estate landscape, business as usual almost disappeared. Transitions and severe changes were forced on the procedures involved in the sale of homes and buyers and their agents struggled to keep up. One of the most significant changes was the way Requests for Repairs were handled.
 
Or NOT, in most cases.

As “distressed” properties appeared on the market, “AS-IS” sales moved from being a quaint sideshow to the main event. Historically, most transactions allowed the buyer to ask the seller for repairs. It was a normal part of almost every deal – once inspection reports and disclosures were reviewed, there was usually a “mid-point” negotiation where the buyers asked the sellers to make repairs. Using the Request For Repairs form, these negotiations became an integral part of the contract.

Enter the banks.

Unwilling to spend any more money on properties already in the red, banks and their asset managers or short sale negotiators refused to pay for any repairs. They forced “AS-IS” stipulations on buyers along with a “Don’t like it, leave it” mantra.

It was a rude awakening for many buyers who, after viewing a distressed foreclosure, wanted new carpets, holes patched, appliances installed, roofs fixed, termite clearances and the like. Banks said, “NO!” In many cases, due to FHA property condition stipulations, buyers with FHA loans had to look hard to find a home that would actually make it through the lender’s scrutiny.

With the flood of foreclosures receding, we are once again seeing “normal” sales appear like the first flowers of spring … and they come with the possibility of requests for repairs. Problem is, it’s been so long since we’ve been able to ask for remedies to problems that many buyers are totally unfamiliar with the process.

Consequently, we’re seeing “requests” that are totally unrealistic.

It’s time to reexamine the rules of engagement.

Rule #1: It IS reasonable to ask for roof and termite clearances.

Buyers have historically asked for roof and termite clearances. To facilitate this, most roof and termite inspections actually come with costs associated with the found damage so that everyone knows, up front, how much the repairs and resulting clearance will cost. With regard to termite reports, in the bay area, it’s customary for the seller to cover Section 1 repairs (any active infestation of termites or other wood-destroying insects or organisms like dry rot fungus typically resulting from water intrusion). Buyers have historically covered Section 2 items (items that, if left unmitigated, could lead to Section 1 damage). (Click here for an explanation of Section 1 and Section 2 items)

When it comes to roof reports, good roof inspection companies will offer a warranty along with their recommended repairs to ensure that the roof, once repaired, will remain watertight for a specified period of time. Warranties range from 6 months to 2 years, depending on the condition of the roof and the company doing the inspection. Occasionally, a roof will be in such poor repair that it will be impossible for a roofing company to provide meaningful short terms repairs. In these cases, they will categorically recommend a new roof. If it is determined that a new roof is required, buyers will want to factor this into their negotiations.

Rule #2: It IS reasonable to ask that the home’s primary systems be working correctly.

While the roof and termite reports deal with specific issues, the property inspection deals with the overall condition of the property’s systems (electrical, plumbing, HVAC, foundation, etc.). As such, a property inspection report is broken down into separate categories for each system in the home and provides an overview of the system’s condition along with any specific issues identified. Property inspection reports DO NOT come with the associated costs to remedy any issues found.

It is reasonable to request that the home’s primary systems be functioning correctly (electrical, plumbing, heating). You want to make sure you can turn on lights and use the outlets without getting a shock. It’s OK to request that toilets flush properly, sinks and showers operate correctly and all the plumbing is watertight. The heater should be working correctly, foundation should be sturdy, windows and doors should be able to be opened, closed and locked and so on.

Rule #3: It IS NOT reasonable to ask for upgrades.

It is NOT, however, considered acceptable to ask for upgrades. Homes are built to the building code in place at the time of construction. As an example, homes built in the mid-20th century did not require electrical systems to be grounded. Typically, outlets in these homes accept two prong plugs: hot and neutral. As the 20th century progressed, increasing consumer protections instituted better electrical building codes. Receptacles in homes built to newer electrical codes accept 3 prongs: hot, neutral and ground. When buying an older home, you are buying an electrical system that is not in compliance with current electrical codes. In fact, depending on the age of the home, it may contain knob and tube wiring, screw in fuses, 50 amp services and the like. While it is OK to ask the seller to ensure that the existing electrical system is working correctly for the date it was built: it is NOT acceptable to request that the electrical system be upgraded to current codes.

When buying an older home, you are buying it with the applicable building codes as of the day it was built OR the day any permitted upgrades were constructed.

With this in mind, you should not be asking sellers to upgrade galvanized pipes to copper or PEX tubing, install new furnaces if the old ones are still working safely (even if they are the old gravity style furnaces), seismically retrofit foundations, replace single pane windows with dual pane products and so on.

You also should not be asking that the sellers remove products with materials deemed hazardous.

If you believe the home contains asbestos, you may order an asbestos inspection, but you cannot reasonably request that the asbestos be removed. In reality, a significant number of homes in the bay area have asbestos in some form in the home (ventilation or furnace ducting, acoustic ceiling texture, sheetrock mud, floor tiles, fireproofing materials, roofing and siding, some textured paints and so on). The same thing applies to lead-based paint: you can inspect, but sellers cannot be expected to remediate old lead paint.

Rule #4: It IS NOT reasonable to ask for cosmetic changes.

Thinking of asking your prospective bride to get a nose job before you will marry her? Or lose 50 pounds? What are the chances of that happening? Right. Any relationship based on these types of requests is doomed to fail.

In the same way, requests for cosmetic changes to a home are considered tacky …

And you can totally expect the buyer to turn a deaf ear to such requests. I’ve seen buyers request that houses be repainted, carpets be replaced, wood floors be refinished, pools be removed … and so on. And in 100% of the cases I’ve seen, these types of requests were not only refused, they insulted the seller in the process. And as I’ve learned from experience, the more amiable you can keep the entire escrow process, the better your chances are of being satisfied with the outcome. When buyers and sellers start going head-to-head, no one comes out a winner.

Follow the rules and keep it realistic: if you ask too much, you run the risk of alienating the seller … and ending up with nothing at all.