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Pat Baker, Real Estate Pro in Needham, MA

What happens when a buyer is about to close on a property, you are now at the final walk through and the seller has not done the agreed repairs?

Asked by Pat Baker, Needham, MA Sat Jan 8, 2011

What are the buyer's/buyer's attorney options this late in the game? Go forward with the closing on the property and the attorney holds back a specified amount of money in escrow until the agreed repairs are complete. There should be documentation from a professional, ie, electric panel repair. Another example could be the seller may not have gotten everything out of the property. This scenario could work then as well.

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I am assuming the agreed upon repairs are in writing. I so the options are close without the the repairs, wait and close after the repairs (may have other ramifications ie: mtg commitment, already sold other home etc) close and have attorney hold back money. All of the above except the 1st take the agreement of all parties. If they can not agree than it leaves you little choice but to sue, which makes the 1st senerio the cheapest (in most cases)

Louis Wolfson
Representing Greater Bostons Finest Builders and Communties
Web Reference: http://www.LouisWolfson.net
0 votes Thank Flag Link Sat Jan 8, 2011
Glad it worked out, we do like happy clients.
0 votes Thank Flag Link Mon Jul 2, 2012
All is well we closed 1/20 despite the 3 title issues which were clear and everything was done. One happy home owner.
0 votes Thank Flag Link Tue Feb 1, 2011
Pat:

When I am representing the buyer and have asked a seller to do repairs prior to closing I always let the seller know that there will be two walk throughs.
1. The first walk through will be done 7 days prior to closing to allow the seller time to complete any thing that is not done to the standards the buyer expects.
2. We then do our second walk through the morning of the closing, and if the work is not complete we close, but ask for a hold back of double the cost of the completion of the work. Because we had taken our time to do a prior walk through we only allow the seller 48 hours to complete the work.
3. If the work is not completed within that time frame then the buyer keeps the money and does the work at their expense and keeps the overage for their pain and suffering.

I have found this format to be very motivating for the sellers. Best
0 votes Thank Flag Link Sun Jan 30, 2011
The seller is bound to the purchase and sale agreement contract. I always suggest repair items and clean out clauses be added to the purchase contract, even if in a rider, and signed by the seller. As long as you have this protection, you should call your closing attorney and ask their advice. I have run into this on a few occasions, often on new construction punch lists. In some cases we have delayed the closing. Depends if your lender is willing to close. If your rate is about to expire, the seller will also have to assume your rate lock extension fee. Hopefully it works out without coming to that!
0 votes Thank Flag Link Thu Jan 27, 2011
The buyer's broker should be checking in the days and weeks leading up to the closing to make sure the repairs have been made and seek proof in the form of receipts, etc. A good buyer's broker won't just leave it up to a legal clause in a contract to protect their client. A buyer's broker should be working right up to the closing to make sure his or her client has a seemless closing and can move in when they have planned.

You can do a hold back. Or delay the closing a few days until the work is done. I was at a final walk through where seller had left some trash, etc, in the house. The other broker and I carted it out ourselves. The point is to try and see the client through to a seamless transaction.

Sandy Balzer Tobin
Accredited Buyer Representative
Sandy.Tobin@nemoves.com
Web Reference: http://www.SandyTobin.com
0 votes Thank Flag Link Thu Jan 27, 2011
Interesting that there are so many out of state replies, since MA is one of few Atty closing states.
The issue is a contract atty issue. If the repairs were written in the contract ( and if they are not... fire your Buyer Agent and R.E. Atty ), then the seller has breached the contract.

Usually a holdback can be arranged, since not closing is a lose-lose. You may have another deal pending on this one... the seller doesn't get their $$ and everyone ends up in court. My suggestion is to have the atty for the buyer go over the contract language with the atty for the seller... since they know the consequences. It is truly high stakes poker though, and one that a skilled atty can walk you through.
0 votes Thank Flag Link Sat Jan 22, 2011
Oh Pat, I have had this happen to me before. What I did was prepare a quick estimate of what the repairs would cost to complete. I then insisted that the Seller put that money in an escrow account to be held by the title company. I also added a convenience fee (which the seller agreed to) for the buyer's time and trouble to have the repairs completed on their own. What a pain for you and the buyer.
0 votes Thank Flag Link Sun Jan 9, 2011
Hopefully the items to be repaired were in writing (either attached to the PS or as a separate agreement). if so, a hold back or an extension on the closing are options.
I agree with Christine, this highlights why having an exclusive buyer agent is so important when purchasing real estate.

http://territory.com
Web Reference: http://territory.com
0 votes Thank Flag Link Sun Jan 9, 2011
Pat,
This question highlights the importance of having a good buyer agent and buyer attorney representing the buyer during the buying, negotiation and closing process. The first step would have been to make sure that these details were covered in the Purchase & Sale agreement which, ideally, would have specifically stated what was to be done and what would happen if it was not done. Assuming that at least that the repairs were itemized in the Purchase & Sale agreement, then the buyer has a few options - (1) they can refuse to close and either postpone the closing or back out of the agreement. Ideally we all want to make the deal go through so postponement would be the better option but I would want an agreement among the parties of what was going to happen. Delaying the closing may have ramifications as far as the mortgage is concerned so it is important to touch base with the mortgage company if this is the route chosen. (2) Assuming the Seller does not really want to postpone or cancel, they could get a credit from the Seller so they can handle the repairs themselves. However, this requires quick work to determine the right amount of credit. (3) The closing attorney could hold back some or all of the Seller's proceeds until the work is done to the Buyer's satisfaction - again requiring an agreement of all the parties and the closing attorney. If there are a lot ofrepairs, then it is best to set a date by which the repairs will be done in advance of the closing & have an inspection or walk through at that time so as not to wait until the last minute. As for items left behind, then the options are similar but the most common is to get a crdit or payment from the Seller to compensate the Buyers for their efforts in having to remove the Seller's property. In all cases, the most important thing is to have a well-written purchase & sale agreement to protect the buyer in the case of this situation.
0 votes Thank Flag Link Sat Jan 8, 2011
If work has been agreed to be done, the selling agent should schedule a walk through at least one week prior to closing. Then the buyer would have a chance to get their own contractors in to give a price and get a credit at closing. Holding money in escrow gets hairy because after a buyer moves in, the disputes on what is wrong and how to fix it can go on and on without satisfaction. The key is to make sure this language gets into the purchase and sale agreement because it really is the only time you have everyone's attention. Specify when the work needs to be completed, what happens if it doesn't and how it will be settled at closing. Being proactive is the key to smooth closings!
0 votes Thank Flag Link Sat Jan 8, 2011
I am assuming it is not a short sale since you are going to be out of luck since the seller is not making any money and will likely not spend any either.

I have seen repairs being made an hour before closing too many times. I have gotten the seller and buyer to agree to escrow funds for the repairs to be made later, but as Scott said everyone must agree and some lawyers hate it because its more work for them because they must hold funds for a period of time. Your other options is to delay closing, nothing gets a sellers attention more than changing the closing date because they were not ready with the agreed repairs.
0 votes Thank Flag Link Sat Jan 8, 2011
Both sides have to come to a mutual understanding. An option could be that the seller gives the buyer the cost of the repairs at settlement and then the buyer takes care getting the items repaired if it was written into the contract that the seller was supposed to make these repairs. Another option is to delay closing until the seller agrees to make the agreed on repairs.
0 votes Thank Flag Link Sat Jan 8, 2011
Not sure about your state, but in the State of Wisconsin, the title company actually held the estimated amounts in escrow.
Web Reference: http://www.lindacefalu.com
0 votes Thank Flag Link Sat Jan 8, 2011
You can not just withhold money unless teh seller agrees to it. You need to work with the listing agent to get the seller to realize they are in default. The problem will be if it is a short sale, the seller will not care. If teh seller is receiving proceeds from the sale, they will care if you threaten to not close and go after them for damages. The liisting agent is the key and the type of seller will be how willing they are to be reasonable
0 votes Thank Flag Link Sat Jan 8, 2011
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