The due diligence period (the time the buyer has to inspect the property and decide to back out of the deal with no penalty) is now finished on The Second Chance House. This means that the buyer finished their inspections, appraisals, and got their financing approved, and we’re ready to go to closing.
The process was very smooth until the last 24 hours. The inspection completed a couple days ago, and I happened to meet the inspector over at the property as he was locking up to leave. He mentioned a couple issues that I (or my GC) should have caught during our rehab, and then a couple minor issues that I would expect the buyer to rectify if he so chose. The inspector was very thorough (I’ll be using him myself on future inspections), and all-in-all, the results were about what I expected; we missed a few little things here and there, but overall the quality of the rehab was top-notch.
About 24 hours before the end of the due diligence period, we got a demand from the buyers to fix a number of issues, including both those that I really needed to fix (safety issues) and some that I didn’t feel I needed to rectify for the buyer.
Among the four issues that I didn’t dispute (and actually apologized for, as I should have caught them myself):
- Having an improper connection from the gas line to the furnace (a “flex pipe” instead of a solid pipe);
- Having a spliced electrical connection in the attic that wasn’t properly secured in a junction box;
- Having a mis-wired electrical outlet (reversed hot/ground wires);
- Having an exterior door installed with the hinges on the outside (making it easier to break in).
While none of these issues were major hazards, the fact that I had just done a full rehab on this house means that any safety issue that arises I will happily fix without question.
The buyer then asked for several other issues to be rectified, including replacing a torn vapor barrier in the crawl space, venting a bathroom fan out of the house instead of into the attic, and adding more insulation to the attic area. I countered that I was not going to fix these issues, as they were not violating any building codes and were not safety concerns.
According to the agent, the buyer was very distressed over the fact that I was refusing to add insulation to the attic. We explained to the agent that during our original negotiations, we agreed to a relatively low purchase price (10% below the list price, which was already a relatively low asking price) in exchange for the buyer not coming back after due diligence and asking for unnecessary repairs. While I wouldn’t say that insulation is an “unnecessary repair,” it certainly isn’t a major issue that needed to be rectified prior to purchase or by the seller (me).
Anyway, we refused to add the insulation, and the agent freaked out. Personally, I was willing to take the (small) risk that the buyer would back out of the deal over this, just to stand my ground. After some back and forth, the agent requested that we split the cost of the insulation, and that I take half out of his commission. This told me that he was pretty serious about this issue getting resolved (I was VERY surprised he was willing to give up part of his commission for this), so I agreed.
It will cost about $600 to adequately insulate the entire attic space (1000-1200 square feet), and I’ll split that cost with the agent. The other repairs will be minimal, and I expect to have everything completed on Monday.
Hopefully we will close this week, and we can begin the healing process with these agents (we’ve had some rough patches with them, but I think it will all be okay and lead to a good long-term relationship)…