Can a Home Buyer Terminate on Closing Day?

It’s closing day and the buyers walk the home before heading to the attorney’s office. But not all is right when the door swings open. What happens if the seller didn’t make the agreed upon repairs? What happens if the HVAC isn’t working? Can a home buyer terminate on closing day because of condition and refuse to close? Maybe. The most common problems are changes in the home from contract to close and agreed upon repairs.

Substantially the Same

The GA Association of Realtors (GAR) contract stipulates that the property will be in substantially the same condition as it was on binding agreement date.  Briefly: “Seller warrants that at the time of closing, the Property and all items remaining with the Property, if any, will be in substantially the same condition (including conditions disclosed in the Seller’s Property Disclosure Statement or Seller’s Disclosure of Latent Defects and Fixtures Checklist) as of the Offer Date, except for changes made to the condition of Property pursuant to the written agreement of Buyer and Seller.”

In other words, the home should transfer with the included items and in the same overall condition as it was when contracted. Everything agreed to in subsequent amendments to the contract should be completed. “Same overall condition” does not imply the home is to be pristine or professionally cleaned. It is expected to be free of debris, trash and personal belongings of the seller. The entire contract includes the disclosures. The seller’s disclosure can indicate issues that may or may not be present on binding agreement day but may be present on closing day. Consider...

The seller discloses that the crawlspace holds water during periods of heavy rain. The buyer is put on notice and can research this and move forward however they choose. If it’s dry on the binding agreement date but saturated the morning of closing, the buyer remains obligated to close. The seller disclosed this to the buyer, they were advised of it and whether or not the buyer acted on that info is up to them.

The morning of closing, the buyer finds that the HVAC system isn’t operating. If this wasn’t disclosed by the seller or otherwise addressed, then the buyer has the reasonable expectation for it to function. That most likely means restore it to the same operational level, not fully replace it (unless that is required). The seller is expected to present the home in substantially the same condition as of the offer date.

Two simple examples, there are literally hundreds of others that can pop up; mechanical, structural, cosmetic, landscape related, fixture/appliance related, what transfers and what doesn’t…the list can be exhaustive. The real estate sales contract is a legal, binding agreement and each party must understand their requirements.

Make Repairs - or Not

Of all the things that can go wrong with a purchase, resolving issues with agreed upon repairs is among the most common. The best way to avoid this slippery slope is to negotiate an adjustment to the purchase price. This avoids the seller having to arrange repairs and the buyer having to worry about subpar or incomplete work. How well this phase goes is most dependent on the agents; negotiating repairs, writing stipulations that are specific and thorough, and ensuring that everything is completed as agreed to falls directly on both agents. Indifferent, inexperienced and/or poorly trained agents are often the source of trouble.

• Every repair stipulation should address “who, what, when, where, how”
• Where is the repair? Give a specific location as possible
• Who is doing the work and who selects the party? Owner? Handyman? Contractor?
• What are they doing? Wall repair? Sanding? Prime or finish paint?
• When is it to be completed? At or before closing? How many days? Paid receipts?
• What's the plan if undone or incomplete?

A perfect recipe for conflict is wall repair. TV mounts, mirrors or similar mounted things have lag bolts removed. Is the wall patched? Patched and sanded? Primed? Painted to match the existing wall? Is original paint available? Will it match…no it won’t. Popcorn – stipple ceilings – are another tough one. Matching the stipple pattern and the color is almost impossible. In each example, the repair is likely to be noticeable and can become a point of contention. It may be repaired per the contract but remain an eye sore. A stipulation needs to be well crafted to avoid issues.

In almost all cases, repairs like this which are made in good faith and according to the contract will be considered “complete”. It’s up all parties to understand and set expectations when negotiating.

The Bottom Line

Several key points bear repeating but the single most important one is to work with experienced agents. That’s not a sales pitch, experienced agents will get and stay ahead of potential issues; no one wants to swing through the home headed to closing only to find potential disaster waiting.

• Sellers must be honest, candid and forthcoming on the disclosures
• Buyers must understand Caveat Emptor
• Agents must understand how to write effective stipulations
• Contracts are legal binding documents
• Always act in good faith per the contract

Most transaction have hiccups, most are also handled amicably and civilly. In almost every situation, proper contract construction and management will avoid the major issues. Never, ever, forget that a real estate transaction is a significant business transaction, treat it that way.

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• repairs (2)
• closing issue (1)