25 May What happens when the property you’re looking to buy on terms needs repairs?
We tend to focus on nice, move-in-ready homes that don’t need significant repairs or maintenance—but that doesn’t mean repairs are out of the question or uncommon. Sometimes there are a few underlying issues with a home, and that shouldn’t stop you from buying it on terms.
If you do find yourself with a property that needs a few repairs, here’s how we recommend handling it.
Let’s say you find a nice, move-in-ready home but find out that the chimney needs some repairs. (This is an actual situation that occurred recently with one of our Associates.) There are essentially three questions that you need to ask the seller in situations like this.
The first question is, “Can I assume that you’re going to handle those repairs before I purchase the property?” Because—and you can say this to them—we all know that the seller would have to take care of this if they were going to sell the home conventionally. Just let the seller talk, and see what they say.
Usually, that first question solves this problem entirely. But if they say no, the question then becomes “How much are you willing to take off the purchase price if I were to handle those repairs?” Again, let them talk and hear what they have to say.
Now, one of these two questions will usually solve the issue. But let’s just say, hypothetically, that they continue to push back. It has happened before. In this worst case scenario, you could say to them, “Alright. Why don’t we split the cost of these repairs?” and see what they say.
Now, between you and I, you’re not going to actually pay those costs yourself—you’re going to pass them on to the buyer. But if you can get more money off the purchase price, or equity you’ve locked in, then you’re going to create more equity for yourself while also putting the buyer in a better position. They’re the ones that will have to make those repairs, and they should be rewarded for making those repairs.
So those are three questions that you can ask to a seller when repair questions come up. And this can be for anything from a simple repair like we mentioned here, or a massive renovation. It’s mainly just important to understand where the seller is in their process of actually fixing the repairs.
And if the seller still won’t budge after that third and final question, you may want to consider moving on from the deal. Not only does it affect the deal financially, but it’s most likely a red flag that the seller will cause additional problems as you continue to work with them.
If you have additional questions that you would like us to answer either on a Thursday Q&A video or in these blogs, please email firstname.lastname@example.org.