In real estate, it is not an unlikely possibility that a contract to purchase a property will be renegotiated once it is accepted. Regardless of whether the buyer or seller, who, if in the position of least benefit, are most likely to try and renegotiate their real estate contract if they think that they can get a better deal. That is why a contract, despite the many lines and seemingly ambiguous language, should be written succinctly and read thoroughly before signing. That said, things along the way do come about that a contract may not address thoroughly, or may actually be unforeseen, and require the contract to be amendmended, or renegotiated.
There are portions of the contract that may leave itself to renegotiating, but depending on who wrote up the contract to purchase, addendums, or any amendments, the one who specified certain conditions are often the ones who are at risk if there is a need to go to court to clarify any ambiguous issues. But we try to avoid that as much as possible. And yes, going to court could mean attorneys, legal fees, loss of deposit, perhaps 2 times the amount of the deposit, or even the loss of the house, etc. etc., but that's for attorneys to work out. We are only trying to make a small change to a contract where, if possible, everyone wins, and attorneys are no where in the picture.
Renegotiating contracts are not impossible, it is just a matter of knowing what the circumstances are that may necessitate renegotiating. Here are examples of why renegotiating a contract to purchase a home may occur:
1. Loan approval may take longer
2. Natural disaster/or storm occurrence
3. Title work may be a hindrance
4. Repairs maybe too costly for seller or buyer
5. Appraisal is too low
The above instances are not extremely unusual to the home buying process where renegotiating some aspect, or all of the contract may occur. Most parties to a contract are most likely to renegotiate contract for good cause.
But if, and that is a big if, there is a question of renegotiating a contract, what could be the possible circumstances, and how, if possibly should the buyer or seller in need, approach such a possibility? First, let's discuss why this would be potential situation.
Once a contract has been accepted, both buyer and seller retreat to their respective corners, so to speak, and begin preparing to meet the terms and conditions to which they have committed to by their signatures. Some of those terms and conditions could be for the buyer, for example.
The buyer has committed to apply for a loan and be ready to go to close in 45 days; the buyer has further agreed to have loan approval in 5 days before closing, and the buyer has also committed to having their inspection completed within 10 days. These are an example of some of the highlighted responsibilities in agreement to purchase for the buyer, other conditions may apply.
For the seller, they agree to provide utilities for the inspection; the seller agrees to transfer an existing termite contract to the buyer, and, to provide access to a separate but inclusive structure on the grounds of the subject property, which, until the acceptance of the contract was not immediately accessible.
Once the contract is signed, real estate professionals are obligated to assist their clients to meet the goals of the respective contract. For buyers and sellers, real estate professionals are often coaching, prodding, and updating as needed to ensure the deadlines, terms and conditions are in place. However, sometimes, something happens. Something unforeseeable, or unavoidable. For the real estate professional, it is a matter of knowing, and moving quickly to see what options are available, as the circumstances dictates.
For the buyer, for example, that loan process that was agreed to earlier, is now running longer than expected. For the seller, the utilities could not be turned on afterall because the water and the gas have been turned off for too long, requiring an inspection by a licensed plumber, and a possible unexpected expense for the seller. If both parties are in an equal position, such as pointed out here with problems on both sides of the contract, it could be an easy fix. Both agents can generally work out the details with the cooperation of the buyer and seller and get both buyer and seller to sign off on an amendment. But when one of the parties has the advantage, then it becomes a matter of skill as to how best to review and revise the terms and conditions as agreed to earlier. What are the possible options?
Whatever the options when only one party is at a disadvantage during a real estate transaction, renegotiating the contract becomes a matter of who either has the greatest urgency, or the greatest desire to keep the deal in play. Here is an example, using one of the examples above.
The issue of the utilities being off for longer than they should have been befor they could be turned on is not an unusual situation. Many homeowners turn off utilities in properties that they no longer occupy. This minimizes expenses that come with having an empty house. It is their property, but paying two housenotes, and additional utilities for more than one house becomes an expense many homeowners would like to avoid.
In the instance where water and/or gas has been turned off for a minimum of 6 months, (New Orleans and surrounding areas), utilities cannot be turned back on unless a licensed plumber has pressure treated the lines for leak. The potential cost could run from $1500 to possibly $2000, depending on the circumstances. To the buyer who needs the untilities turned on, this is not necessarily an expense that they will want to incur. For all the buyer knows, there maybe damages and a need for repairs that they may discover, and may not want to take on anyway. But to the buyer, why should they spend upwards of $2000.00 to find out if that type of problem exists? Most buyers may not, but several have.
If on the other hand, the seller wants to sell the house, do they chance loosing a potential buyer by not paying to have the plumbing pressure-tested? The $1500-$2000 cost maybe worth it if the house has been sitting on the market for over a year. The probability of their being a problem with the plumbing is a matter of rolling the dice. Yes, there could be a leak in a gas line, a crack in the sewerage line, or low water pressure. But those are the possibilities that a seller has to assume the risk when the water and gas are turned off. However, it is possible that nothing is wrong with either line, and the $1500-$2000 will be well spent by the seller. What are the options?
Is this an opportunity to renegotiate for either the buyer or the seller? Let's check.
A. If the seller does not want to pay to have the utilities pressure tested, the buyers can:
- choose to pay the cost themselves; agreeing to walkaway from the deal if the repairs exceed a given price point; or,
- offer to split the cost of the pressure test and any needed repairs, up to a certain price point or,
- decide to withdraw their offer and a return of their deposit and search for a new home.
B. If the buyer does not want to pay to have the utilities pressure tested, the seller can:
- Offer to pay to have the utilities pressure-tested, with a condition that they would pay up to a certain price point in repairs
- Offer to pay to have the utilities pressure-tested, with a condition that should repairs be needed, the seller will only pay up to a given amount in repairs as needed , or,
- Refuse to pay to have the utilities pressure-tested, and see what the buyer wants to do.
These are just some of the options that buyers and sellers often have to decide between when faced with the challenges of buying and selling a home. The outcomes are often worked out, often to the benefit of both buyer and seller, with the assistance of their real estate professionals. To say how this situation would be resolved would suggest that this is how to resolve all other situations. But that is not so. Each situation has certain other dynamics involved. For example, a buyer's or seller's market, how much would the property be worth if the buyer decided to go forward and pay for everything, or how much value would be retained if the seller decided not to repair anything. There are too many dynamics that are involved to make a definitive statement as to how this situation should be resolved.
Renegotiating a contract is not often a contentious situation, but given the process of homebuying in itself, one can only imagine how the blood-pressures and butterflies may start acting up under any given set of circumstances. The thing to remember is, that each side wants to come out on top, and that it is possible for both sides to win, when a proper contract can be renegotiated to fair and equitable terms.
(No portion of this blog or this site should be concidered legal advice, please consult with your attorney should you have any questions).
Labels: addendums, Amendments, attorney, Contract to purchase, cracked pipes, plumbing leaks, Renegotiating contracts
