Home Selling in Dana Point>Question Details

John Adler, Home Seller in San Clemente, CA

Question for Agents & Brokers: Am I required, when selling my home, to pay for items discovered in a home inspection which are considered code

Asked by John Adler, San Clemente, CA Fri May 28, 2010

items? The inspector discovered electrical issues. I stated in the agreement that the home was sold as is in its present condition. If we go further, can the buyer say to me that these repairs are required and code items should be paid by the seller? If so, why? Is this Law?

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John Adler:

There’s an additional issue at hand here. When you sell a home, you are selling it with the understanding that you are selling systems in the house that were built to previous versions of the building code. This includes electrical, heating, plumbing and so on. All codes have changed over the years – but that does not mean you have to upgrade your home to the new codes in order to sell it.

As an example, if you sell a home built in the 60’s, you are selling it with the electrical codes in place at the time it was built. It is probable that outlets are not grounded, there are no GFCI outlets, there is an older version of Romex, aluminum wring, an outdated electrical panel … all of these things are considered normal in a house of that era. It is not normal for a seller to have to upgrade these things to conform to current codes in order to sell a home. In fact, any improvement in these systems is considered an upgrade, not a repair.

Normally buyers can ask for repairs but NOT upgrades.

And sellers can always say no, no matter what a buyer asks for and no matter the condition of the property.

The only items that HAVE to be remedied are state requirements (strapped hot water heater, smoke detectors) and any local “point of sale” ordinances (in some places here, we have to do a sewer lateral, install an earthquake shut-off switch on the gas meter, provide a building permit record, etc.).
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1 vote Thank Flag Link Fri May 28, 2010
When a home inspection reveals problems or any type a buyer may request the Seller to repair, replace, or compensate them in some manner. The Seller can agree, negotiatie or simply refuse. At that point the buyer may decide to terminate their contract if this is a provision of the sales contract you've both signed. (It is in every contract I've ever seen, but I will admit it's been decades since I last saw a California contract)

Code issues are typically considered improvements, as building codes change every single year and there's not a home out there that isn't new that is current with all codes. Typically when I as a broker have a seller in your position my response on their behalf is as follows, "This is an improvement , the property met all applicable building codes at the time it was built." In some cases I check with my own inspectors or electricians, contractors etc to confirm when the code the home inspector is referring to came into existence before issuing this response.

Some contracts I've worked with allow the buyer to terminate for any reason or no reason whatsoever during what is typically referred to as a "diligence period" other contracts I've worked with are not so broad in the terms a buyer may terminate for and as long as the home met all applicable codes at the time it was constructed and the systems are "serving the prupose for which they were desgined" a buyer cannot simply terminate a contract. I would advise a conversation with your listing agent and/or an attorney regarding the terms of the contract you signed.

While you listed the house "as-is" did the contract you signed with the buyer have this clause in it? If so I would remind the buyer of this, if not you may point it out but it has no legally binding meaning and should have been written into your contract. If it is in the contract then hopefully there's enough earnest money on deposit that if the buyer does consider terminating the contract they have a to consider losing this money.

You are at a point where you need to decide what it's worth to you to hold this transaction together and try to negotiate with the buyer or take your chances, refuse to do anything, and see what happens, but be prepared to lose this deal and then find another buyer.

Below is a link to an article I posted here on Trulia on my Blog specifically about home inspections, you might find it interesting to read.

I wish you the best of luck and hope you're able to work things out and maintain the transaction.
0 votes Thank Flag Link Sun Apr 15, 2012
This is not the Law you are free to decline the request for repairs, ask the buyer to pay it or split it with the buyer it is really up to you. A skilfull agent should get you through this matter easily. Should your home fall out of escrow and you need a new agent please remember my guarantee If I cant sell it I will buy IT!


OCJOHN
949 218-0280 voice or text
john@ocjohn.com
0 votes Thank Flag Link Sun Apr 15, 2012
Hi John,

You are not obligated to pay for anything. The term "as-is" does not mean that the buyer has to accept whatever condition they find the home in either. So sometimes to keep a transaction moving, you might decide to make some repairs....but it's entirely up to you.

The only thing you are obligated to do are the items negotiated up front, which might include smoke detectors, water heater strapping and/or termite clearance. On all other matters....it's entirely negotiable.

I'm assuming that you have closed some time ago, since you asked this in February....but the answers might be helpful to other sellers.....we'd love to hear from you on how it all worked out!

Karen
0 votes Thank Flag Link Tue Jul 20, 2010
Hi John,

When you are selling your home, you do not necessarily have to complete a repair and even upgrade things like electrical and plumbing.

If you bought your home sometime ago you bought it with the current code requirements met at the time of purchase. Codes change all the time. As an agent I would advise you to think about agreeing to any items that may present a health or safety hazard, but you are not legally required.

The only things you are legally required to address are the smoke detectors, water heater earthquake bracing, and any other mandatory state or federal retrofit requirement.

Carefully consider what is being requested by the buyer and what the potential cost would be. Your agent should get in touch with the buyer's agent to get a feel for what would be a deal breaker for the buyer. And then you can go from there.

I hope this information is helpful to you.

Best Regards,

Michael G. Grimm
949-58-5825
0 votes Thank Flag Link Tue Jul 20, 2010
John -

You've received some great, honest answers. Now the most important step is to move-on. If the cost of the repairs is not enormous, you're best bet is to provide a Fixed-Amount Credit to the Buyer through closing. They can then get the issues corrected using a contactor they choose and it will be completed to THEIR satisfaction. This is important because you may correct the issue and they may not be happy with the work. Put the responsibility on the buyer to have it corrected.

This is not the time to argue over a few hundred dollars. You will lose that much everyday you do not close.

Best of luck, don't look in the rear-view mirror, just keep moving forward.

Best of luck,

Thom Colby
Broker / Owner
Thom Colby Properties
Newport Beach, CA
"MOVING LIVES FORWARD (TM)"
0 votes Thank Flag Link Fri May 28, 2010
Hi John,

In CA, there really is no such thing as "AS IS", the Buyer always has the right to investigate the property and make a decision based on findings.

Also, don't beat yourself up, stating "Seller will make no repairs" is a double-edged sword. On one hand, it means you will not have additional out-of-pocket costs; however, it also throws up a big red flag of concern in the eyes of the Buyer, which can lead to your property not even being looked at by that potential Buyer.

Best, Steve
0 votes Thank Flag Link Fri May 28, 2010
Hi John,

"Am I required, when selling my home, to pay for items discovered in a home inspection which are considered code items?"

With the exception of Water Heater and Smoke Detector statutory compliances (covered under Para 4B(2) of the CAR Residential Purchase Agreement), no.


"The inspector discovered electrical issues. I stated in the agreement that the home was sold as is in its present condition. If we go further, can the buyer say to me that these repairs are required and code items should be paid by the seller? If so, why? Is this Law?"

You are not required to repair anything; however, this is really a question of how comfortable you are with post-transaction liability exposure. If the issue(s) in question are safety related and are not fixed you are leaving yourself open for serious liability. You should first get a quote for the repairs to determine estimated cost before making your decision either way.

If this deal falls through you will have to disclose the existence of the electrical issues to the next buyer. At this stage it's best to try and come to some agreement with the current Buyer unless you believe you would net more money by taking the house off the market, making repairs, and re-listing the property for sale. You might also consider a closing cost credit instead making the actual repair as costs can escalate once the work starts based on what is found.

Best, Steve
0 votes Thank Flag Link Fri May 28, 2010
I would like to thank you for your comments! Question: We negotiated our lowest price originally and the buyer knew this. Maybe my only short fall was that my agent did not put into the agreement that I would not be responsible for any repairs. I wish she would have done this and I have told her so! We had no prior knowledge of any electrical issues and we have lived in the property since 1978. I assumed when we put in sold as is in it's present condition that all parties would understand that it meant just that!
0 votes Thank Flag Link Fri May 28, 2010
Hello John,

Please take a look at the purchase contract Page 2 Item 4B(2) see who is selected there buyer or seller and if the discovered electrical issues fall under this category. Please note that it says if required as a condition of closing escrow under any law.
0 votes Thank Flag Link Fri May 28, 2010
A buyer can ask for anything through a Request for Repairs. Whether you choose to have it completed or pay for them to have it completed is your choice. I suspect they stil have their contingencies in place an can back out based upon the inspection. So, ask yourself do you want to sell or not.
Further, are these inspection / code issues somethin that you knew about and did not report on the TDS? If you did not disclose something you knew about - get it fixed and revise your disclosures.

Remember, if you have been told about an issue, you and your agent now MUST disclose it to any future buyer.

Thom Colby
Broker / Owner
Thom Colby Properties
Newport Beach, CA
0 votes Thank Flag Link Fri May 28, 2010
It all depends what it says in your contract as to who is to pay.

Since you said "As Is", the argument may be as is as of when? That may be the issue.

The municipality just wants it done. They usually do not care who does it, but they may have a timetable.

Get your real estate agent to research and be prepared with the info. You are now in a negotiation.

Good luck,

Fred
Web Reference: http://fglick.com
0 votes Thank Flag Link Fri May 28, 2010
I dont know of a "law" that will make you do the work or not do the work. If you knew the work was needed and didnt disclose it, you could be held liable whether you were selling it as is or not.

If you didnt know then it is your choice whether you want to sell your home or not. Say you dont want to fix it or creditthe buyer and the buyer backs out, you now need to disclose this information to any future buyer which will reduce teh amount of potential buyers, or you will have to fix it anyway in order for any other buyer to get a loan.

So it depends on how much you want to sell. You can offer to split teh estimate but the fair thing is to do teh work whther you want to hear that or not.

good luck with your sale
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Fri May 28, 2010
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