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The Most Expensive Mistake Sellers Make Negotiating Repairs

Updated: Aug 30, 2022

The Baltimore Area real estate market is changing. Buyers are no longer finding it necessary to strip away standard contingencies in their offers to beat out the competition. Inspection contingencies are resurfacing and buyers are putting their hands out for corrections. As a seller, you need to be aware of the #1 most costly mistake sellers make when negotiating repairs in the Baltimore Area.

I've been in the Baltimore real estate industry since 2008. Prior to becoming a full-time realtor, I spent eight years operating a large rental portfolio consisting of more than 700 single-family homes in the Baltimore area. During this time, I learned what it really meant to operate real estate, how to boost income and limit expenses to realize the most profit possible. When I meet sellers in the Baltimore area now, they are aware of at least some strategies to generate the highest sales price possible. But often they aren't aware of the expenses that may arise and how to control them. It has become my passion to help Baltimore Area sellers earn more profit when they sell.

The Baltimore Real Estate Market Is Changing, And Standard Inspection Contingencies Are Returning

In recent years, buyer demand far exceeded our local housing supply in the Baltimore Area. When there are more buyers than homes available, the buyers have no choice but to compete with one another to secure housing. This led to buyers making offers that packed a punch in terms of price but were otherwise lean and mean. Baltimore buyers eliminated inspection contingencies or at the bare minimum, requested an inspection with the right to terminate the contract if there was a major defect in the home, but otherwise accepted the home as-is without requesting repairs.

Today, in July 2022, the Baltimore Area real estate market is changing. The buyer pool is shrinking, due in large part to the increased mortgage interest rate, making homes unaffordable for some and a move unappealing for others. The housing supply is still limited, but there are fewer buyers clamoring for those homes that are available.

With the competition easing, Baltimore buyers are finding it’s no longer necessary to strip away the standard contingencies from an offer in order to have a chance at being the winning bid. Standard inspection contingencies allowing buyers the ability to perform an inspection and request repairs from the seller are returning.

The #1 Way Baltimore Sellers Overspend on Repairs

As standard inspection clauses begin to return to the Baltimore Area real estate market place, I’ll share the number one way sellers overspend during the repair process : in a nutshell, it’s failure to recognize that there could be four different sets of repair requests presented to you in a staggered fashion. Sellers or their agents become reactionary - one request for repairs comes in, an agreement to make certain repairs goes out. The problem with this is you, the seller, have no visibility to what the next set of repair requests will be. With each incoming request you’re closer to the settlement date and pressure is rising to make the buyer happy so the contract doesn’t fall through. But to really control expenses, you need to collect all repair requests at once and make one determination on what will be done.

The Four Types of Repairs Requests I See in the Baltimore Market

The four types of repair requests I see in the Baltimore market can be categorized as follows :

1) Buyer-requested repairs after the home inspection

2) Termite-required repairs, if applicable

3) Lender-required repairs necessary for the loan to be issued

4) Program-required repairs for the buyer to obtain additional funds, if applicable

Buyer-Requested Repairs

Estimated Delivery Date to Seller : 5-14 days into the contract

With a standard inspection contingency, a buyer will indicate the number of days he/she requests to have an inspection done and submit his/her repair requests to you.

Termite-Required Repairs

Estimated Delivery Date to Seller : any time while the home is under contract Section 19 of the Maryland Contract of Sale provides the buyer with an opportunity to have a termite inspection done, at any time while the home is under contract. If a termite inspection reveals the need for termite treatment and potentially structural correction, this section of the contract requires a seller to pay for it, as long as it does not exceed 2% of the sales price.

Lender-Required Repairs

Estimated Delivery Date to Seller : 21 days into the contract

You may receive a separate list of repair requirements from the lender. This is most common when the buyer is obtaining an FHA or VA loan. Both of these types of loans require the appraiser to perform a safety-type inspection called a Housing Quality Standards inspection. Should the appraiser find any items that are considered safety concerns, the lender will require the repairs to be completed for the loan to be confirmed.

Program-Required Repairs

Estimated Delivery Date to Seller : 14-21 days into the contract

In the Baltimore Area there’s no shortage of programs available to help home buyers. If the buyer is using a program to obtain additional funds for his/her purchase, it’s possible the program will perform their own inspection, which could also result in a list of repair requests required by the seller. In many instances, the buyer needs those additional funds to be able to afford the house. So if the repairs are not done, the purchase cannot resume.

How Baltimore Area Sellers Overspend on Repairs

When the seller or the seller's agent becomes reactionary to repair requests, the seller is destined to overspend on repairs. Suppose your budget for repairs is $3,500. Consider the termite repairs. You may not think you have termites, but they are common in the Baltimore Area. Unless you are steadfast about obtaining all repair requests at once, you could have initially agreed to spend $2,000 on buyer-requested repairs, then be presented lender-required repairs where you spent $1,000, then be given program-required repairs which put you back $500. You've already committed to $3,500 in repairs. Now, the week before settlement you are notified that there were termites in the property. You're required to pay for remediation efforts as long as they don't exceed 2% of your sales price, which is $350,000. The termite remediation quote comes in at $1,250 and you are going to end up overspending.

What you should have done was collect all the repair requests at once. You could have budgeted $1,250 for the termite-required repairs, $1,000 for the lender-required repairs, $500 for the program-required repairs, leaving you with $750 to dedicate to the buyer's requested repairs, and still stay within budget. Best of all, you could have presented all of this information to the buyer at once so that he/she understood why you have to make a specific decision on what you can afford to fix for him/her.

Don't Overspend, Stay Within Budget

If you don't collect all the repair requests at once, you're signing up for an stressful transaction entailing a surmounting list of repairs and expenses. On the other hand, if you do collect all repair requests at once, you are sure to stay within budget.

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