Draft a Better Repair Clause

I made a long form video on home inspections — how they lead to negotiations, and what those negotiations look like in the agreement.

A few Realtors have come to me asking about repair clauses, so that's what I want to focus on here.

First, a piece of free advice: when you're representing a buyer, push for the price adjustment whenever possible.

It keeps your client in control of what gets fixed, when, by who, and to what standard.

But... I understand that this isn't always an option.

And when you're stuck working with a repair clause, the drafting really, really matters.

After looking back at a few of the better repair clauses I've seen, this is the framework that most of them follow:

1. Scope of Work

They detail exactly what work needs to be done. The issue, the location, the required fix. No vague language like "repair the roof".

I love clauses that reference and attach the home inspection report. It usually includes pictures and a detailed description of the issue.

2. Standard of Work

They define the quality of the work. Who has to do it (a licensed contractor, a qualified trade), whether permits are required, and whether the work needs to comply with applicable codes.

The more you set objective standards, the stronger the clause becomes.

3. Timing

They set hard deadlines that gives the buyer options before closing. Using "By closing day" leaves no room to respond if there are issues.

I like to see at least a week before closing. Repairs almost always take longer than people expect, plus it leaves time if things were not done right.

4. Inspection

Really good clauses give the buyer the right to inspect the completed work. Inspection catches issues while there's still leverage to deal with them, instead of chasing the seller after the deal has closed.

In my experience, there's a clear correlation between smoother completions and well-drafted clauses that build in time to inspect the repairs.

5. Remedy

The clause needs to define what happens if the work isn't done, isn't done on time, or isn't done to standard. Without a defined remedy, the clause doesn't have much weight behind it.

This is the hardest piece to draft well. The remedies I see most, in order of severity: termination of the APS (which effectively turns the clause into a condition), a holdback (may need lender consent), or language allowing the buyer to complete the work after closing and charge the seller back (which lets the clause survive merger). Each has tradeoffs. The right one depends on the deal.

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You'll notice I haven't dropped a sample clause here.

Every deal is different. A clause that works on one will create problems on another.

Anything I put on the page today will get lazily copied and pasted and quoted back at me on a deal where it didn't belong.

The framework is the value here.

Latest YouTube Video:
Your Home Inspection Found Problems. Here's What to Do Next.