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The Closing Credit That Protects Buyers (and Their Home)

There’s ALWAYS a debate when it comes to the best way to tackle closing repairs.

Should the seller complete the repairs? Or should they issue the buyer a credit at closing?

Now, arguments can be made on either side depending on the nature of the deal, the parties, and the repairs.

BUT, there is one thing everyone should agree on:

If the repairs are serious enough to be negotiated, they should be completed.

Why, as a buyer – after finding and securing the right home – would you risk the deal UNLESS the repairs were critical?

And yet, there are many cases (we’ve seen them!) where closing credits are issued and the repairs aren’t completed.

And that’s the BIG issue with closing credits…

…it’s a cash payment. And once the cash is in hand, there’s no assurance that the repairs will be completed.

Further, in many cases, the credit is issued as a discount on the purchase price – not a lump sum that’s available immediately. This, of course, makes it even harder to complete the repairs.

Now, there are a number of reasons why repairs don’t happen. Regardless, this is a lose-lose situation based on the premise of the negotiations: to repair defects that are detrimental to the home’s health and the buyer’s enjoyment.

Those defects will only get worse, which can lead to larger and more costly repairs down the road.

And don’t forget about the Realtors

We all know the most successful agents are the ones who take a long-term approach to build their business. Understanding the value of a lifetime client relationship (repeat business, referrals, etc.), they think beyond the transaction.

Agents on both sides, when negotiating, know full well that with credit there’s no guarantee the repairs will be completed.

It’s a little easier, perhaps, for the seller to stomach this given they are moving on (even if they may be overpaying).

But, as the buyer’s agent, you should want those repairs completed; if they aren’t, you’re going to deal with them down the road when YOU list the home. Those defects? They’re documented, material, and will probably be much worse when you sell 5-10 years from now.

A straight-up closing credit, on its own, is a short-term solution for all involved.

The 360° Win

If the seller is unwilling to complete the repairs, the surefire way to ensure they get done is to offer a repair credit to be held in escrow by the title agency (or lawyer, depending on the state).

Because the negotiated credit can only be used for repairs, it is much more likely that the repairs will be completed.

It’s a short-term solution with a long-term mindset – a win for buyers, sellers – and agents.

And don’t forget…

It’s one thing to negotiate credit; it’s another to negotiate enough credit.

Be certain that your estimate 1) is backed by contractors who are available to do the work and 2) doesn’t expire before the transaction is completed.

(With PunchListUSA, your estimate is backed by available contractors and extends 30-days beyond closing.)

This way, you can rest assured that the amount you’ve negotiated is sufficient and you’ll be able to complete repairs on your terms.