REINCheck

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VO [00:00:06] You're listening to REINCheck with Andrea Rice Contracts and Industry Specialist at REIN, where you get the latest member news and information delivered straight from the source, REIN MLS.

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Andrea Rice [00:00:21] Hello and welcome to REINCheck. My name is Andrea Rice, and today we are checking in with a member of REIN Sales Managers Advisory Committee, Kelly Corbett. We are going to be discussing the last part of a three-part series designed to bring clarity to the Standard Purchase Agreement. We'll be discussing repairs in the cap and what actually falls within the cap as far as repairs are concerned and what does not. So, Kelly, thank you so much for being here today to discuss this topic.

Kelly Corbett [00:00:53] Thanks, Andrea. It's good to be here.

Andrea Rice [00:00:54] Yes, thank you. And, you know, let's go ahead and just dive right in. We'll start with paragraph 13 of the Standard Purchase Agreement. Like I was saying before, we're going to talk about repairs and this paragraph covers inspections and repairs. In this part of the REIN contract references an amount of repairs that are not to exceed the caps. So can you explain to us really what is the cap and what is included in the cap?

Kelly Corbett [00:01:25] Sure, paragraph 13 talks about that the seller shall be responsible for the cost of repairs and a total amount not to exceed blank, and if it's left blank, it's typically one percent of the purchase price. That would be your cap. Under this paragraph, what falls under it is A appraisal and required repairs. B wood destroying insect infestation, moisture inspection repairs. C drinking water, well and septic. And D walk-through inspections.

Andrea Rice [00:02:03] Ok, and do you find most time people will or agents will leave that blank and it defaults to the one percent, or do you find, you know, is the one percent pretty typical or do you find some other variations?

Kelly Corbett [00:02:16] We actually do see variations, and it depends upon the buyer, what they're looking for. Typically, we'll see one percent, but on your higher-priced homes, you will start to see maybe two or three percent of the purchase price.

Andrea Rice [00:02:33] Oh, wow. Yeah, that's interesting. So that's good to know and, you know, just to keep in mind for agents that, you know, it does default to one percent, but that's totally up to them what they put in there. All right, and some of these repairs that fall under the cap, even if the buyer waives that repair saying, I don't want it, it's not necessary. They can't always waive those repairs, is that correct?

Kelly Corbett [00:03:03] That's correct. Typically, we see this with lender-required repairs, even if these items were waived by the buyer as part of the property inspection contingency removal addendum. The seller is also responsible for the cost of the reinspection on lender-required repairs. We find that noted in paragraph four of the purchase agreement.

Andrea Rice [00:03:27] OK, so, you know, I was selling a home a few years ago, and we already negotiated everything that we were going to do as far as repairs. But then it came up that our lender was saying, oh, you have to put a railing here. And the buyers, they didn't care. They're like, I don't care if there's a railing there or not. But it really wasn't up to them at that point, from my understanding. We had to put it in regardless of what they wanted. So, I guess in that instance, that would be an example of one of those repairs that you can't waive that falls within the cap. Would that be correct?

Kelly Corbett [00:04:08] That's correct. We would typically see that as a lender-required repair. And the reason that they're asking for a railing they consider that a safety issue. And so they are going to require that.

Andrea Rice [00:04:24] OK, yeah, that makes sense and, you know, just from my personal experience, it wasn't something that I really even saw coming. But, you know, as we're talking about this and repairs and, you know, I just mentioned, we'd already talked about inspections, there's actually some confusion about whether home inspection, luxury items, those types of things count toward the cap. Can you tell us where home inspection and walk-through repairs found?

Kelly Corbett [00:04:57] Sure, I'd be happy to. Home inspection repairs do not fall under paragraph 13. This tends to be a common misunderstanding among some realtors. There is no cap on home inspection repairs. The seller and buyer agree to correct certain items and move forward. The walk-through will be for those items agreed to in the PICRA. Any items that were waived are not part of that walk-through inspection. Example, If for some reason the HVAC was working during the home inspection and now it's not at walk-through, the seller would need to have it repaired in working order to close. This would be an example of an additional cost to the seller subject to that cap.

Andrea Rice [00:05:43] OK, that makes sense. And I guess that's probably why there's sometimes confusion because I guess they can kind of overlap in that sense. But like, really just think of these as distinct areas of repair, right? You have these cap items, you have home inspection, you have walk-through. And while they could potentially overlap like they're three different things. Is that right? Is that how you.

Kelly Corbett [00:06:11] That's correct. And the best thing is to do is really that we're communicating that with our buyers and sellers. We need to be educating them about the contract. First, we negotiate the price, the terms, and the one percent cap for any of those items listed under paragraph 13 explaining to our clients that the home inspection items will be a separate negotiation and an additional cost to the seller on the agreed-upon items to be repaired. These home inspection items do not fall under the cap and there is no limit on the cost of home inspection repairs. So we want to make sure that we're communicating effectively with our clients.

Andrea Rice [00:06:57] Yeah, I think that you know, exactly what you said that really clears it up. And like you said, communication is so much of the key. And in everything we've talked about really in this three-part series about the purchase agreement, it really comes down to communication, communication, communication, you know, between the agent, the buyer, the seller. Yeah, I mean. I think that clears a lot of things up, is there anything else you would like to add about the cap or anything that we've discussed?

Kelly Corbett [00:07:32] Take the time, in the beginning, to make sure your clients, what your buyer, seller, understand each step of the process. Our clients don't do this every day like we do, and we need to slow down and make sure we're effectively communicating with all parties, because at the end of the day, somebody wants to sell, somebody wants to buy, and we want to get everybody to the closing table and make it as easy as possible.

Andrea Rice [00:08:00] Right. Yeah, I agree, and. But that's really what it comes down to, is just keeping everyone informed and like you said, you know, the agents do this every day but the buyers and sellers don't. This may be their first time buying a home or their first time selling a home. And it's kind of different whether you're buying or selling. So maybe you bought in the past and you understand that part, but now you're selling and you didn't even realize, oh, there's these repairs I might be responsible for, like, I didn't know that going into this selling process. So, yeah, I think that's an important statement, Kelly, thank you. Well, Kelly, thank you so much for being here today. I hope this has cleared up some of the confusion we've had locally about what the cap is and what's included. And I thank you for being here. I want to thank everyone out there for listening. And I hope you enjoyed this last episode of our three-part series designed to bring clarity to the purchase agreement. If you missed any of the other previous episodes, I invite you to go to REINMLS.com/podcast and listen to our other episodes. And if you have any suggestions for our Sales Managers Advisory Committee, please send those to SMAC@reininc.com and I will make sure that your suggestion gets on an upcoming meeting agenda. Thank you and have a great rest of your day.

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VO [00:09:27] You've been listening to REINCheck with Andrea Rice, stay in the know from those who know. Delivered straight from the source, REIN MLS.

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