I feel that many agents don't understand the NC Cost of Repair Contingency and when it comes into play during a transaction. I've heard other agents explaining it to their clients and they explained it quite differently than I do. Some agents actually think that the Cost of Repair Contingency is the maximum repair costs that the seller agrees to pay for after inspections.
In my opinion, the Cost of Repair Contingency is just an additional loop hole that provides the buyer a way to get out of the contract. The dollar amount of the repair contingency in no way affects the buyer's rights to inspections or to present a repair request to the seller. (Regardless of the cost of the requested repairs) Nor does it affect the seller's rights to either accept the the buyer's repair request or to deny all or part of the repair request.
I tell my buyers that the repair contingency protects them just in case the property inspections reveal problems with the house that causes them to change their mind about the purchase. Even if the seller agrees to repair EVERYTHING discovered during the inspection process, they still have the option to rescind the contract once they obtain an estimate for repairs that exceeds the amount of the Cost of Repair Contingency.
I generally recommend 1% to 2% of the sales price for the repair contingency, depending on the price range of the home. Sometimes a buyer chooses an arbitrary number, between $2000 & $5000, regardless of the price range of the home. The lower the amount of the Cost of Repair Contingency is, the more protection your buyer has and the greater the risk of the deal falling through for your seller.
Here's a situation that happened to me once that explains how the cost of repair contingency works. My buyer's home inspector found a major structural issue with the house they were under contract to purchase. A majority of the joists and sill plates were rotted, because the seller's left their crawl space vents closed year round. The seller said that their contractor proposed solving this problem by scabbing new joists and sills onto the existing rotted wood. The sellers agreed to fix EVERYTHING found by the inspectors before closing. My buyer clients knew that they would have to deal with this issue when they sold the house; they had a general BAD feeling about the house and didn't want to buy it any longer. The cost of structural and mechanical repairs exceeded the Cost of Repair Contingency amount in the contract, based on an estimate obtained by my buyer client. At this time the cost of repair contingency gave them an out, which they chose to take.
I look forward to hearing other agent's opinions and experiences regarding the NC Cost of Repair Contingency.
Cheryl Powell - ABR, Broker, Realtor - Remax Gold - Concord NC Real Estate
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Cheryl - You are 100% right.
You would be surprised at how many agents use this incorrectly. I always use a low dollar amount I start at $1,000 repair contingency when representing the buyer.
Recently a home was being sold As-Is(whatever) I had thrown in $1,000 cost repair contingency. The seller agreed to make all repairs but the buyers walked anyway because of the amount of damage to the property. I had to get a quote to supercede $1,000. The Listing Agent battled with me but ultimately the buyers were within the contract and did not breach the contract and therefore entitled to their EM.