There are many Buyers that do not understand the Reason why the Cost of Repair Contingency has been added to the NAR Contracts. The Cost of Repair Contingency provides protection to the Buyer and depending on the Homes Price and Age, it is important to set the Dollar Amount appropriately.
Cost of Repair Contingency ... Important Part of Good, Strong Investment
Prior to the addition of the Cost of Repair Contingency, if the seller was willing to make all of the repairs that came up in the home inspection, the buyer had to move forward and close on the home. NO MATTER how worried the buyer became after finding their dream home was going to require such a repair. Off the top of head, maybe it would be a cracked slab foundation or any problematic foundation repair, high moisture readings in the crawlspace, flood damage, extensive wood rot, poor construction, etc. If the seller said they would make the repairs, there was no way out!
With the Cost of Repair Contingency, the buyer can now set a dollar amount for possible repairs that would be unacceptable to exceed. For instance, if you are buying a $200,000 house built one year ago, you really would not expect that a well maintained home would have repairs that added up to $10,000 and it would probably be unacceptable if it did. Would it be acceptable to you if it had $5000 worth of repairs, $2000 worth of repairs? This dollar amount is set by the buyer with the help of a Well Trained and Experienced Realtor. Each house is different and there is no rule of thumb.
Once the home inspection has been completed, if that ugly, scarey repair comes up and the price to complete the repair is above the Cost of Repair Contingency amount that the Buyer set in the contract, the Buyer has the right to get a bid on the work, provide the information to the seller within a certain time period and terminate the contract while keeping their earnest money.
Obviously, a higher dollar amount for the Cost of Repair Contingency is better for the seller and a lower amount is better for the buyer.
Setting the appropriate dollar amount for the Cost of Repair Contingency is important business and requires some consideration, so pass it over too quickly.
