The Oklahoma Real Estate Contract was modified in the fall of 2015 to remove a “repair cap” for home repairs. The repair cap was always a bit misleading because the amount was agreed to before inspections were completed. Then, the repair cap was intended to represent the maximum liability a Seller would spend on home repairs.
After inspections, if the total cost of repairs exceeded the agreed-upon repair cap, either party could cancel the contract OR we most likely renegotiated. Sometimes the Buyer would remove some repair requests or the Seller would agree to spend more than originally agreed. The form used by the Buyer to request repairs is called a TRR (Treatments, Repairs, Replacements).
If the total amount of repairs was less than the repair cap, Buyers often would ask for nominal repairs that were tedious because they wanted the full amount due to them.
The verbiage remains in the contract that allows Buyers to conduct inspections and request home repairs. A specific time period for this is spelled out in the contract. If anything unsatisfactory comes up during this time period, the Buyer may cancel the contract and be refunded their full earnest money amount. If the Seller does not agree to make requested repairs, they also can cancel the contract and put their home back on the market. It’s important to note that the Seller will have to update their Property Disclosure to include any defects found in inspections that they may not have been aware of when originally filling out that document.
Good Realtors try to keep a contract together during this second negotiation. By the time we reach the stage of negotiating repairs, the Seller has plans to move somewhere else and may have already begun boxing up their home’s contents. The Buyer has already spent money on inspections and perhaps an Appraisal. Best to keep cool heads and work out a compromise with which all parties will be happy.
Some Buyers will ask that a repair cap be written in the contract under “Additional Provisions.” This recently caused a lot of problems, because the Seller refused to pay any amount in excess of the amount requested. Additionally, the Appraiser wanted to know why we requested the repair cap – whether we knew or suspected that specific repairs were needed. Ultimately, the Appraiser requested a copy of the TRR and REQUIRED that all repairs be made prior to closing.
Most homes for sale are advertised to be sold in “normal working order.” Some Sellers will offer a Residential Service Agreement (home warranty) to compensate for an older furnace, air conditioner or hot water heater. And because areas of Tulsa (particularly midtown Tulsa) are currently experiencing a low inventory, I’m seeing more homes advertised to be sold in “as is” condition – which may or may not be acceptable depending on type of financing used. No property can be sold if the Appraiser includes conditions or requirements.
MOST home owners are reactive about repairs and don’t do as much preventative maintenance as suggested. I read somewhere that 3% of your home’s value should be spent annually on maintenance. So, that would be $9,000 maintenance for a home valued at $300,000. Personally, one of my air conditioners is ten years old and the other is 17 years old. Both furnaces are close to 20 years old. We have all units serviced each year, but we’re not going to replace them while they’re still functioning. Other large ticket items to review include the hot water heater and roof. In fact, the insurability of the roof can be an issue, so check out the age and number of layers – as well as condition. And don’t forget the gutters!
But if you’re not buying new or newer construction, you need to be prepared for maintenance, repairs and replacements. Make sure you factor that in when budgeting how much you want to spend on your home.
So, that sums up the changes to how home repairs are addressed in the Oklahoma Real Estate Contract! Remember that rules vary state by state, so this only applies to Oklahoma!
If you have questions about the contract or need assistance in buying or selling a home, please do call! 918-852-5036
Content written and published by Lori Cain.
Copyright 2011 Lori Cain All Rights Reserved - Originally Posted at: Midtown Tulsa Real Estate - Lori Cain
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Lori is a residential Realtor with eXp Realty serving the greater Tulsa area and specializing in downtown Tulsa and midtown Tulsa real estate.