The current housing market still strongly favors sellers. Here’s what to consider if you’re weighing a sale.
What is corrective work?
Corrective work consists of any maintenance or repairs a buyer requests to be completed before closing on a house or building.
When people are purchasing a house, there are several stages they go through. These include initial offers, possible counter offers and negotiation of terms, among others. One of the final stages of the process is an inspection of the property.
Usually, neither the buyer nor the seller knows whether any corrective work is needed on the property when the initial offer is submitted. Therefore, many offers outline how these repairs are handled if it’s determined that they’re necessary.
There are a couple of ways to resolve the problem:
- Sellers may choose to personally oversee the corrective work either by hiring a reputable licensed contractor or doing small repairs themselves.
- Sellers may agree to cover the closing costs with buyers taking over any needed repairs.
- Sellers may issue a credit to buyers at the closing to cover the costs of the corrective work.
Generally, lenders require repairs to be made before closing to ensure the security of the mortgage loan, as the house itself is often used as collateral.
Learn more about closing costs before buying your next home.
Corrective work example
When you’re buying a $200,000 home, one of the last steps in the process is the home inspection. Upon inspection, if it’s discovered that there’s a roof leak or that the electrical wiring isn’t up to building code, the repairs could cost upwards of $20,000.
This drastically impacts the actual value of the investment, as well as whether you choose to close. It also affects the results of the lender’s appraisal, which in turn decreases their willingness to approve a mortgage on the property.
Depending on your circumstances, you could request a credit toward the corrective work be issued upon closing, or you could request the seller make all repairs before closing. With the latter, the property would have to be inspected again to verify the issues are resolved before completing the sale.
Is buying a house in your plans? Use the Bankrate new house calculator to determine what you can afford.