Selling Tip: Fix Any Working Order Defects (Paragraph 7 Items)

It is very likely that the prospective buyer of your home will include a contingency in his offer that allows the buyer to pay for a professional home inspection of the premises. Upon completing this inspection, there may be items of repair that the purchaser wants a seller to address prior to settlement. Paragraph 7 of the basic contract obligates the seller to deliver the premises in substantially the same physical condition as of the date the contract is signed. Additionally, the seller agrees to deliver the home with all plumbing, electrical, heating and air conditioning and mechanical systems in working order. Finally, the seller agrees to deliver the property free of trash and debris and broom clean. Beyond these items, referred to as “paragraph 7 items” or “working order defects”, the seller has not specifically agreed in advance to the repair of any other defect that may be discovered on a home inspection.

In short, things are supposed to “work” as they were intended to. There are many potential components in your home that may fall under this clause. Many are items you may not have thought about in a long time, such as:

Even broken doorbells can cause issues during inspection.

1. Humidifiers
2. Clock and timers on ovens and stoves
3. Ice makers in refrigerators
4. Extra refrigerators in the garage or basement
5. Toilet fill valves
6. Minor or major plumbing leaks at drains, stems and valves
7. Stuck shut off valves and slow drains
8. Electronic air cleaners
9. Built-in radios and intercoms
10. Amateur wiring and miswired outlets and sockets
11. Gas grills and fixtures installed outside the house such as yard lights
12. Fountains, sprinklers, doorbells etc.
13. Washers and dryers that do not complete cycles
14. Air conditioning that does not adequately cool
15. Heat exchangers on gas fired furnaces
16. Garage doors and their reversing mechanisms
17. Attic fans
18. Missing keys for doors that have a locking mechanism (if it is designed to lock, it doesn’t operate correctly if you can’t lock it)
19. Shower floor lead pans

This is only a partial list of the most common issues directly covered under paragraph 7 that we deal with everyday. Additionally, it can be effectively argued by a purchaser that items that are not operating in the manner intended for their operation are unsafe. This could include such items as mismatched electrical panels and entry cables, flues and piping related to your furnace and hot water heater, and extremely dirty chimneys.

It was like that when we bought the house.

Selling Tip: Get repairs done before the buyer has an inspection done

It is not the time for (the buyers’) confidence to be further eroded by discovering a long list of defective items.

It is very common for a homeowner to simply not know of defects in their property. It is also very common for an owner to say “it was like that when we bought the house.” Neither is a legitimate excuse. Paragraph 7 makes clear that the “buck stops here.” Therefore, it is very advisable for a seller to repair those items known to be defective prior to the home inspection being performed. Emotions always run high during a real estate transaction. Buyers are at their highest anxiety levels during the home inspection, often questioning their own judgment for the decisions that have been made. It is not the time for their confidence to be further eroded by discovering a long list of defective items.

Selling Tip: Beware of selling items in your house “As Is”

A seller will occasionally ask to convey an item in “as is” condition. The conveyance of an item or two in “as is” condition may not significantly affect the prospective purchaser’s enjoyment of the home. But it may erode confidence somewhat and cause an even more careful analysis of the problem. “Why doesn’t it work? Why didn’t they fix it? What else might be wrong?” Better to eliminate the concern before they ever know of it by repairing the problem whenever possible.

More Items to Consider Before Inspection

Very few homes are inspected without discovering some minor problems. By virtue of signing the standard sales contract, a seller will have pre-obligated himself to the repair of paragraph 7 items.  Additionally, many other items may come up on the inspection that are not specifically related to “working order” defects, such as:

• Chimney deficiencies to the concrete cap, brick spalling and top brick deterioration
• Clogged exterior gutters and underground downspouts
• Leaking roofs and poor roof flashing
• Eroding and leaning retaining walls
• Deteriorating walks, steps and stoops
• Loose railings and bannisters
• Warped doors
• Broken windows, windows painted shut, and torn screens.

In general, a seller could argue that those items that can be easily identified by a visual inspection by the purchaser should not be a part of any list of repairs submitted. However, many purchasers simply do not know very much about houses and their conditions. Therefore, any of the above items and many more may come as a surprise to a purchaser. That’s why they have an inspection. In many home inspection contingencies, you will be given an opportunity to say “yes” or “no” to repairs other than paragraph 7 items. If you say “no” the purchaser will have a right to declare the contract null and void. Needless to say, this can be a stressful time for all involved. It isn’t very hard to see why we are so interested in dealing with as few issues as possible. Thus, we make the strong argument for repairing defects prior to entering into a contract for the sale of your home.

Selling Tip: Beware of Termites

At some time in the past, your home may have had an infestation that was treated.

Termites are a whole other issue. Paragraph 16 of the basic contract says that the buyer shall select a termite company to perform an inspection of the premises. In the event a live infestation of wood boring insects is discovered (that could be carpenter ants, powder post beetles, or termites), then the seller shall pay for extermination and provide written proof of such extermination to the purchaser. Additionally, if any damage has occurred to the premises as a result of such insect activity, seller will pay for the damage to be corrected by a licensed carpenter.

Termites are so common that every home is required by a lender to be inspected. At some time in the past, your home may have had an infestation that was treated. However, it is often the case that the minor carpentry repair was not undertaken. Most of these repairs fall into the category of nuisance repairs but they are very important, both contractually and to insure that the purchaser’s loan is approved.

Occasionally, a repair is so minor that a licensed carpenter will sign an affidavit that states they are of no structural consequence. Sometimes the lender will require that a certified structural engineer make this determination. That costs money.

If you have lived in your home for many years without having a termite inspection you are at greater risk for infestation and/or repair. If you are under warranty for an annual inspection with a termite company you are at much less risk, however you are not necessarily “home free.” It is possible that a termite infestation that took place long ago and was treated nonetheless caused some minor damage that was deemed too small to worry about way back then. It may still be required to be repaired when you sell. Most repairs cost between $50 and $500.

If you bought recently and have paperwork regarding past termite activity, treatment and/or repair, pull it out and review it prior to selling your home.

Selling Tip: Get a Radon Test

Finally, it would not be unusual for purchasers to make their contract contingent upon a radon test of the premises. These often can be done by the home inspector and usually take 5 to 7 days. Cannisters are placed in your home for a short time and then analyzed in a lab for their “picocurie” count. Every home has some level of radon in that radon is a naturally occurring gas. However, if a home has a radon level above the EPA action level (considered 4 picocuries per liter), then you may be asked to undertake corrective measures to bring the level down below 4 picocuries per liter. Many contingencies allow the seller to say no to repairs but that could result in the buyer declaring the contract null and void.

To refuse to allow a test may insulate you from the knowledge but may scare off a serious and well intentioned buyer.

As a seller, once you have knowledge of a radon test result it is your obligation to reveal such result to a future potential buyer. Therefore, you will have to deal with it one way or the other. To refuse to allow a test may insulate you from the knowledge but may scare off a serious and well intentioned buyer. The good news is that corrective measures are available that will guarantee a level under four picocuries. A sub slab ventilation system can be installed for under $1,000 that almost always eliminates the problem. Occasionally, a less expensive alternative can be implemented. Looming on the horizon are tests for lead based paint as well.

These are days of environmental concern. We must work together to fully disclose and overcome these concerns. We encourage all sellers to discuss these issues with their Stuart and Maury representative. Together you can chart a course that will make your transaction smooth and pleasant.