Clarifying the “Cost of Repair Contingency” in Real Estate Contract Writing

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

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.

 

 

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About Michelle Nantz

There are many qualities and skills that go into being an excellent real estate professional: integrity, in-depth community and market knowledge, marketing savvy, effective negotiation skills, and a high-quality professional network ~ all of which are hallmarks of Michelle Nantz. In 2003, Michelle began her career in real estate, after a successful career in restaurant and hotel management with her last position as Regional Director of Operations running 56 hotels throughout two states. She owes her success in real estate and management to her expertise in people skills, managing, negotiating, and follow-up. However, it is Michelle’s dedication to quality service that she ultimately credits her success. Michelle shared, “In my experience as a Lake Norman real estate professional, I’ve found that providing the very best service is essentially about putting my clients first. This means keeping myself accessible, being a good listener as well as a good communicator, and responding quickly to their needs.” This “client first” philosophy combined with continual personal improvement and keeping up-to-date with the latest technologies is a cornerstone of both Michelle’s and Lake Norman Realty’s business philosophy. In addition to Michelle’s extensive real estate education and her experience in the local market, she is also an Accredited Staging Professional®, which brings additional value to marketing her clients’ homes. Michelle and her family have made the Lake Norman area their home for over 10 years. In her rare leisure moments, you’ll find Michelle with her three children and husband, or unwinding with gardening or reading. “I live and work in this community and only have the best interests of our community and its members in mind,” says Michelle. Her community activities include participation in Denver Days, Relay for Life and support for Christian Ministries and area schools.
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