Expert: liznarr - 5/7/2004

Question
In the process of selling a duplex.  Accepted offer on 4/12/04.  Potential buyer was pre-qualified for mortgage.  Contract had a 15 day remedy clause.  Potential seller requested no remedies.  Now I'm hearing, as of today, 5/7/04, buyer or mortgage company, don't know who at this point, has requested thru my agent that gutters need repaired.  My agent says they have passed the remedy time frame.  Do I have any recourse?  If buyer decides not to go thru with sale, is he in breach of contract?  Help!  Need advice  Need to get this closed ASAP

Answer
Hi Mike,

Thanks for writing All Experts.

You said that “…potential SELLER requested no remedies.”  I am assuming that you meant to write that the potential BUYER requested no remedies.

If, during the 15-day remedy period, the Buyer did not request any remedy/repairs, that would take care of the BUYER'S inspection/remedy period and any request of his for remedy/repair.  You would have no obligation to make any repairs should the Buyer change his mind AFTER the remedy period and then asks for repairs.

When a Buyer is obtaining a mortgage on property, an appraisal is required by the lender.  If the mortgage company appraiser noted that the gutters need repairing and also made the gutter repair a “condition of” the appraisal, then “someone” needs to correct the gutters to satisfy the appraisal contingency … or the lender will not fund the loan at closing.

A Buyer's remedy period and a  LENDER'S APPRAISAL REQUIREMENT  to correct defects are two separate matters.  If a Contract is contingent on financing and the Buyer cannot obtain a loan and does not close, a Seller has no recourse … unless, however, the Seller could prove, as an example, that the lender committed some type of fraud and/or was conspiring with a Buyer to have unnecessary repairs made.

If your Contract is contingent on the Buyer obtaining a loan, and neither you nor the Buyer agrees to repair the gutters, then the lender will not fund the loan and there will be no closing; and, again, you would have no recourse in my opinion.

I'll interject a question here for you:  Does your Contract address who is responsible for any lender-required repairs?

Technically speaking, since it is the Buyer who is obtaining the loan, the BUYER should meet all the requirements of the loan, including the gutter repair.  The BUYER contracted with his lender for the loan, and you are NOT a party to that Contract.  Had the appraisal requirement come in PRIOR TO the end of the Buyer's remedy period and the Buyer requested you to correct the gutters within the remedy period, there would be no issue now.

However, here is where an additional negotiation period comes into play if you want to sell your duplex.   You can do one of several things:  First, you can play hardball with the Buyer and inform him you will not correct the gutters as this is a condition of his lender, and hope that the Buyer will agree to pay for the gutter repair himself.

Or … second, you can suggest that you will split the cost of the gutter repair with the Buyer.

Or… third, you can agree to bear all the cost of the gutter repair yourself.

Some factors for you to consider are:  How long was your duplex on the market before you ended with this Contract?  If you do not successfully negotiate this gutter repair now, how long do you think it would take to find another qualified Buyer?  Did you reduce your price drastically when you entered into this Contract of Sale?  What is the cost of the gutter repair?  Do you feel the cost for the gutter repair is excessive?  Will all or a portion of the gutter repair “break the bank?”  And, finally, if you were to lose this sale as a result of not agreeing to pay some or all of the gutter repair, would you regret that decision later?

Not having any more facts than I do and not knowing the condition of the duplex and any possible reduction from list price to contract price (but assuming that the gutter repair is not an excessive amount of money), if I were your agent I would probably recommend that you not be too rigid at this point and try to negotiate this expense with the Buyer.

There just simply comes a point in time when several hundred dollars is not worth a migraine headache and putting your property back on the market and possibly going through a worse situation with another Contract of Sale later if you don't negotiate this one to a successful conclusion.

As a last resort, if your printed Contract did not address any lender-required repairs … and since your agent apparently did not address this issue for you in the Contract of Sale and add in any wording for you that the Buyer would be responsible for payment of any “lender-required repairs” … ask your agent to participate in the cost of the gutter repair … either entirely, or half with you, or a third (with both you and the Buyer).

I hope that the above gives you some guidance for completing the sale of your duplex.  Good luck to you, and please don't forget to rate my answer.

Feel free to write again if you have additional questions.

Regards,

Elizabeth Narr