“Can We Fix It? Yes We Can!”

 

So you’ve entered a contract to sell your property. There are some repairs to be done, some which require permits, but the Buyer is willing to pay for the work to be done. The Buyer really wants the home and agrees to pay for the permitting, the work, and the materials. But what happens when the closing gets delayed because the work is not complete before closing, or more work needs to be done after the initial project is started? Who is responsible for the delay, the additional work, and the costs associated with all of it? Well, if you’re a frequent visitor to Berlin Patten Ebling blogs, you know that the answer is often found in the language of the contract.

A typical clause in a real estate contract requires the Seller to “maintain the property, including, but not limited to, lawn, shrubbery, and pool, in the condition existing as of Effective Date, except for ordinary wear and tear and Casualty Loss.” When a Buyer and Seller agree to improve the condition of the property, at the Buyer’s expense, it is best to make it clear in the contract how that gets accomplished and what happens if it does not get done before closing. For example, even if the Buyer is paying for the repairs, like replacing an HVAC unit, the permits and the inspections by the County will all fall under the Seller’s responsibility, as the Seller is still the owner of the property. If the repairs will not be completed prior to closing, there should be specific terms about how the Buyers, as the owners of the property after closing, will get permits transferred to them taking into consideration the legally required timelines for the transfer of permits, usually thirty days.

But what happens if the sale does not close? The Seller could be left with unfinished work, at the request of the Buyer. While finishing the repairs or improvements may add to the value to the property upon re-listing it, that is not always the case. Further, the repairs could delay in re-listing the property causing the Seller to lose money. One way to lessen the potential impact on the Seller is to require the Buyer to pay a separate deposit for the agreed-upon repairs/improvements that will be returned to the Buyer or applied to the purchase price when the property goes to closing. In the event it does not close based upon the Buyer backing out of the deal, the separate deposit can be given to the Seller in order to finish the work that was started.

What do all of these “what ifs” have in common? A strategy to protect our client through preparation and proper paperwork. Every step in the sale and purchase of real property can come with obstacles. The important thing to do is try to anticipate potential pitfalls and draft a contract or appropriate addenda to ensure your client is as protected as possible in the event of a dispute, delay, or other issues with the closing. Should you have a request to make repairs or improvements to the property prior to closing, make sure you contact a qualified real estate attorney to assist you in drafting an appropriate contract or addendum.

Sincerely,
Mark C Mann., mmann@berlinpatten.com
Berlin Patten Ebling, PLLC

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.

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selby lights in bloom

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Real Estate Firm

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Getting Up Close and Personal (Property)

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DON’T BE CAUGHT WITH YOUR PANTS DOWN

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Helpful Closing Tips for Commercial Real Estate Sellers

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Paper House

What you need to know about an action for partition in Florida

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When is a Loan Commitment Not Really a Loan Commitment?

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Flood Insurance Reform Act of 2012

In 2012, Congress passed the Biggert-Waters Flood Insurance Reform Act of 2012 (“Act”) which requires FEMA, as well as other agencies, to change the way the National Flood Insurance Programs (“NFIP”) is run. The Act was designed to reduce the NFIP’s growing debt. Key provisions of the legislation require the NFIP to raise rates to…

Don’t Forget the Open Permit Search!

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Major Differences Between the As Is Contract and the Regular FAR/BAR Form

The As Is Contract and Regular Florida Realtors/Florida Bar Contract forms are essentially the same with the following exceptions: 1. Heading. Of course, the inclusion of “As Is” in the heading sometimes draws concern and can create minor angst for Sellers since they don’t want Buyers to get the impression that the Property is substandard.…

Addressing Exchange Rates for Foreign Buyers/Sellers

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House Bill 87 And The Impact Of Florida Mortgage Foreclosures

As you may have read, House Bill 87 (H.B. 87) was recently passed by the Florida legislature and proposes to make significant changes with respect to the Florida Statutes regarding mortgage foreclosure actions.  As of now, H.B. 87 will become new law unless Governor Rick Scott decides to exercise his veto power, which seems unlikely…

Marketable Vs. Insurable Title

In response to our blog last week, most of the feedback we received involved questions pertaining to the quality of title that one might get if they acquire REO Property. The answer to this question is not simple. In a non-REO setting, the requirement is generally for the seller to deliver marketable title (i.e. title…

Should I use An Attorney Rather Than A Title Company For Closing?

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Tips on Inspection Periods for Short Sale Transactions

As most of you have likely seen, the demand in today’s market for short sale properties is very high, with decreasing inventory and a large pool of buyers.  In fact, property prices are increasing in many areas because of this high demand, and short sale sellers are often receiving many offers – some possibly even…

The AS-IS Contract And Disclosure

When a transaction is an AS-IS sale, the seller often insists that the property is in “AS-IS” condition in an attempt to reduce repair limits/credits and possibly shift the responsibility for determining the true condition of the property to the buyer.  It is well known that the buyer is typically given a specified period of…

Should I Order A New Survey Or Rely On A Prior Survey?

Our clients often ask this question when they are purchasing residential property. You can only rely on the prior survey if the Seller has an existing survey accurately depicting the property and the Seller can sign an affidavit at closing that there have been no changes to the property since the date of the survey.…

What About The Flat Screen TV?

There is no question that home-technology has improved tremendously in recent years. As a result of this improvement, we have received a steady increase in questions and disputes regarding whether an item should be considered a fixture or personal property with respect to residential sales. For example, flat screen TVs and built in speaker units…

Substituting Contract Pages

We have noticed an increase in a practice, that if not done with full and proper disclosure, could lead to substantial trouble for the parties involved, including civil liability, license forfeiture, or worse yet, criminal sanctions.  The practice involves changing and/or substituting pages to a fully executed contract.   While we recognize the reality that…

Preventing Post Closing Issues

Many clients, their agents, and unfortunately some closing/title agents believe that the end of a real estate transaction occurs when it closes and funds.  Too many times we have seen post-closing glitches, oversight, or lack of follow-up lead to problems with the future sale of a property.  Over the last few weeks we have run…

Counting Time Periods When Using The FR/BAR Contract Form

Under the FR/BAR Contract calendar days are used when calculating time periods versus the CRSP-12 Contract form, in which business days are used. Consequently, it is much easier to count time periods using the FR/BAR since you don’t have to worry about excluding national legal holidays when counting your time periods.  You don’t count the…

Dealing With Entities As Buyers In Investment Properties

As most of you are aware, more and more investors are coming to this area to invest in distressed properties. The result is an increasing number of short sale contracts in which the buyers are entities (such as LLCs) rather than individuals. Typically, short sale lenders require the seller to provide a slew of documentation,…

How to Effectively Use an Attorney From a Realtor’s Perspective

We have found with our experience that most real estate professionals are not aware of how they can most effectively utilize an attorney throughout a real estate transaction to not only protect themselves, but to better serve their clients. Many real estate professionals (and/or even their clients) are under the assumption that they will receive…

Addressing Financing Contingencies

Under the Financing Contingency paragraph of the FloridaRealtors/FloridaBar-1 Contract and As-Is Contract (hereinafter collectively referred to as “Contract”), when can the Buyer or Seller terminate the Contract and is the deposit returned to Buyer? Prior to Loan Commitment Date, Buyer notifies Seller in writing that Buyer can’t obtain financing after using diligence and good faith,…

Berlin Patten Raises Funds for the American Cancer Society

Originally Published: 9/14/2012 Berlin Patten would like to thank our donors, sponsors, and guests for supporting our charity bartending event for the American Cancer Society on September 10, 2012.  Together, we almost doubled our fundraising contributions from last year!  We would like to give special thanks to Shane Rawley, owner of Shaner’s Pizzeria.  He and…

CRSP-12 and CRSP-12 Addendums Debut

Originally Published: 8/10/2012 Effective August 20, 2012, the FAR-9 Contract will be replaced with the Contract for Residential Sale and Purchase (CRSP-12). In addition, the Comprehensive Addendum (FARA-10) will be replaced with the CRSP-12 addenda. Please see the attached link to the summary list of the changes between the FAR-9 Contract and the CRSP-12 Contract.…

IMPORTANCE OF OBTAINING NEW SURVEYS AND HAVING THEM REVIEWED IN ACCORDANCE WITH THE FLORIDA REALTORS/FLORIDA BAR CONTRACT

Originally Published: 6/8/2012 The following are excerpts of a more comprehensive article previously published by Julie A. Horstkamp, Esquire, Berlin Patten, PLLC, Member of Sarasota Association of Realtors/Sarasota County Bar Association Joint Committee, and Chair of the Florida Realtors/Florida Bar Joint Committee. We receive a number of questions regarding the survey provision under the Florida…

And the Survey Says?

Originally Published: 5/12/2012 Survey review is a prevalent part of our practice whether we do so for purposes of property due diligence, removing or confirming title issues, etc. More often than not Buyers are unclear as to the necessary requirement that a survey must include to be used for purposes of removing title exceptions and…

“Collected” Funds

Originally Published: 4/25/2012 You might have noticed that more and more closing agents are requiring wire transfers from buyers to fund closings. Berlin Patten was forced to recently adopt this practice. Please note that no closing agent who has adopted this practice is doing so because they want to. Due to changes in banking regulations,…

23 Federal Laws that Apply to Real Estate Sales

Originally Published: 3/8/2012 RealtorMag recently published an article entitled “Federal Laws that Apply to Real Estate Sales.” The article provides a nice and concise summary of the multitude of Federal laws that govern the various aspects of real estate transactions.  Needless to say, there are many. For further information on how these laws impact your real…

Backup Offers

Originally Published: 2/22/2012 Most short sale addenda have provisions for backup offers if you check the appropriate box. It is our opinion that, generally speaking, you should not check the box permitting backup offers when dealing with a short sale. It creates too many unnecessary legal and practical issues. Most importantly, many lenders and their…
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