Property Sold with Right to Request Repairs Exhibit

In this very hot, multiple offer Seller’s market, Buyers are looking for ways to distinguish their offer from the rest.  One of the tactics is to eliminate the Due Diligence period, and instead include a Property Sold with Right to Request Repairs Exhibit.  Even if the Seller has listed the property “as is,” the Right to Request Repairs Exhibit can be included in the Buyer’s Offer.
Sellers often like the idea because the Buyer’s right to terminate is limited to the repair or replacement of defects. The theory is that there’s a lot less chance of a buyer termination for defects than the due diligence open right to terminate for any reason.
 
The Process
Exhibit GAR F273 lays out the process. It is not dissimilar to the process for an Amendment to Address Concerns (F704).

1. The Property Sold with Right to Request Repairs  for defects is included as an Exhibit to the Purchase and Sale Agreement.
2. Buyer and seller agree on an offer price & terms.
3. Buyer performs inspections and reviews disclosures.
4. Buyer provides Seller with: (a) a signed written amendment to this Agreement requesting Defects to be repaired and/or replaced; and (b) a copy of all reports of Inspectors describing those Defects.
5. If Buyer does not timely present the written amendment and inspection report(s), Buyer shall be deemed to have accepted Property “as is.”
6. Buyer and Seller shall have an agreed upon number of days from the Binding Agreement Date, the “Defect Resolution Period,” to attempt to negotiate the defects to be repaired and/or replaced and sign an amendment to the Agreement.
7. The seller can agree to the fix-it list, can counter or can reject it. Or the Buyer can elect to buy the property “as is.”
8. If neither party timely accepts the other party’s last offer or counteroffer or Buyer does not elect to buy Property “as-is,” the Agreement terminates and the Buyer receives an earnest money refund.

​Agreeing to Repairs
More often than not, sellers agree to some repairs. If a seller is made aware of latent defects, they would have to disclose those to the next buyer per disclosure laws.  
Cash Alternative to Repairs
Sometimes the buyer submits a list of things to be repaired, and other times, buyers ask for a cash credit in lieu of repairs. From a seller's perspective, a request for cash credit is often preferred to making the repairs.  The Seller doesn’t have to deal with the repair process and can eliminate any concerns/disputes regarding the quality/craftsmanship of the repair.
Smart Sellers Minimize Repair Requests
It's smart to complete your seller's disclosure packet and to get your own inspection done before you list to help expedite your sale. By providing buyers with disclosures and your inspection report before they even put in an offer, you have the potential to increase your chances of a smooth and successful transaction with minimal surprises or unexpected turns.  
Downside for the Seller Accepting a Right to Request Repairs Exhibit
Stuff happens. What if a Buyer wants to terminate the contract without any valid defects and “enhances” the reports, alleging defects that may or may not be there, just to get out of the contract.  The Seller can be left in a position of defending allegations of defects and then having to disclose the allegations to future prospects.  To overcome a false allegation, the Seller then would have to hire another inspector and present both reports to prospects.  The situation can devolve into a standoff and even litigation.  A costly mess. 
These things happened often in the days before GAR instituted the Due Diligence periods. That’s why Due Diligence periods were created.  With Due Diligence, the Buyer can terminate for any reason.  No allegations, no problem.  Or, the parties can agree to address the concerns.  In the long run, consider whether the Right to Request Repairs or a Due Diligence period is the best route for your client.