There can be a number of reasons a limit might be put on repairs. As an example, the seller could have little or no equity left and doesnâ€™t want to get into a negative cash flow situation.
Section 1 repairs in excess of $2,500.00 do not make a house a lemon. Iâ€™ve encountered MANY homes with extensive Section 1 damage that, once repaired, have been marvelous homes. There are, however, two concerns I would have if I was representing you:
1. If the purchase agreement specifies that Section 1 repairs are to be paid by the seller and that a Section 1 clearance is to be a part of the contract, your lender may require a Section 1 clearance before they will fund the loan. Many lenders in todayâ€™s lending environment will not accept a partial clearance. If the repairs exceed $2,500.00, you would have to pay the difference to have the repairs completed before escrow can close.
2. If the seller is only willing to pay $2,500.00 for Section 1 and the amount of repairs is higher, you have a right to walk away within the Inspection Contingency time period. HOWEVER â€¦ you will have already paid for the Termite, Property and Roof Inspection reports and possibly the appraisal. This can come close to a thousand dollars paid out by you.
The question you personally need to answer is this: â€œBased upon the two concerns listed above, is this a risk you are willing to take?â€