Who pays for the home repairs?

Hey u/Background-Safe-6747,

You’re getting a lot of conflicting answers here, but here’s the short one with a more detailed explanation to follow:

TL/DR

• If that $10K worth of needed repairs (not the same as “hidden damages”) is what’s estimated by you, maybe get a written estimate for the work from a contractor or two.

• The seller is not obligated to fix the issues with his own money unless that is what you have both agreed to in the Agreement of Purchase and Sale.

• You may be able to get financing that gives you cash back on closing, but probably not from one of the big banks. Talk to an independent mortgage broker to see if they have a lender that can do this at a competitive rate.

The longer answer:

• Clarification question: By “hidden damages,” do you mean that upon inspection the home needs about $10,000 more work input to it than you thought, or is there about $10K of intentional or unintentional damage that the Seller appears to have purposefully obscured from you? If it’s the latter, consider walking away from the deal, doing further inquiries or asking your Realtor to negotiate protective language into the Agreement of Purchase and Sale in case there is more obscured than you happened to find. A Seller intentionally hiding something is a big red flag for your future costs, safety and insure-ability on the property.

• Estimates – If you haven’t yet, try to get written estimates for necessary work if time allows during the conditional period and it can be negotiated. Laypeople (including Buyers, home inspectors and Realtors) have a tendency to over or under-estimate these costs and it really helps to be working with concrete numbers, both for your own costs and as a leverage point with the Sellers.

• Norms – There may not be a “norm” in terms of whether the Buyer or the Seller is the one who fixes the property, although I’m not sure what province you’re in and the answer may vary in your market. Here in Ottawa, and I suspect most places, all that you can rely upon is what is in writing in the Agreement of Purchase and Sale between the Buyer and Seller. Don’t rely on any verbal agreements, emails or even what’s written in the MLS. These may carry weight if it ever got to court, but you want to avoid the pain and expense of ever going that route.

• Repairs – My advice is almost always for you (the Buyer) to be the one to undertake necessary repairs on a property. If you leave it to the Seller they’re going to do it as cheaply and quickly as possible. Knowing that the work was done well by a contractor you chose is worth it for the extra hassle.

• Financing is going to depend upon quite a few factors, including but not limited to your borrowing ability, the type of lender, provincial laws and changing national lending laws, but you may be able to get a loan that gives you some room for contracting work. We used to call these a “purchase plus improvements” mortgage, but I haven’t had any clients need one lately so your lender may call it something different. Ask an independent mortgage broker, as the big banks tend to sell very “mainstream” financial products and may not have access to something that suits your situation. At the very least, the lender will want documentation of the repairs and estimates for their cost, which takes us back to the need for written estimates, above. If that’s not available, consider taking out a line of credit (secured or unsecured) for the $10,000 after closing, do the repairs and then refinance and add that back into your mortgage once complete if it makes sense to do so. The numbers will vary based upon your specific situation.

Source: I’m a Realtor in Ottawa, Ontario