Don't fix house before you own it

Recently, a couple buying a home in the desirable Upper Rockridge neighborhood in Oakland, Calif., asked the seller if they could have some work done to the property before closing. Ordinarily, this is something that real estate agents discourage for a number of reasons.

However, in this case, the buyers wanted to have a chemical treatment done that was recommended in the wood pest inspection report. They have a baby and didn’t want to risk exposing their young child to chemicals by having the work done while they were living there. The sellers were already out of the house, so they agreed to let the buyers have the work done early.

An amendment to the contract was drawn up stipulating that the buyers could have the work done before closing, at their expense. The buyers had purchased the property in its “as is” condition; the sellers weren’t required to have this work done. The buyers’ loan was formally approved; all contract contingencies had been removed. The work was scheduled for one week before closing.

The risk factor in the above scenario was minimal. The work was being done by the sellers’ pest company. The sellers knew the contractor and trusted that the work would be done properly. The cost of the work was $1,100 — not an insignificant amount, but not a huge amount either. The deal was firm and the buyers had made a considerable good faith deposit that would be at risk if they backed out at the last minute.

In a worst-case scenario, if the buyers defaulted and the sellers had to remarket the property, it would be in better condition that it was the first time around.

HOUSE HUNTING TIP: In most cases, it’s risky for buyers to have work done on a property they don’t own. If the deal falls apart, the buyers have paid to improve someone else’s property. The sellers could be left with a job that’s half completed, or one that’s done badly, which will need to be corrected before the house can go back on the market.

It might seem like a good idea to have work done before closing, particularly if the house is vacant and no one will be disturbed by work in progress. Refinishing hardwood floors and interior painting in particular are jobs best done when no one’s around.

From the buyer’s standpoint, you could be out a sizable amount of money if for some reason the transaction never closes. Usually, neither buyer nor seller is happy when a deal collapses. Chances are slim that the seller will be inclined to reimburse you for your costs.

Then there are concerns about such issues as to who’s responsible if someone is hurt on the property during the course of the job. And, who pays for damage inadvertently caused by one of the contractors?

Some contractors won’t do work on a property for someone who isn’t an owner. In the above example, the contractor required that the work be authorized and scheduled by the property owner — not the buyer — even though the buyer was paying for the job.

The sellers have potentially more to lose by letting a buyer do work before close. If the buyer doesn’t close, they could be left with a mess to clean up before they can resell the property. This could cost a lot of time and money, not to mention inconvenience.

THE CLOSING: A better solution to buyers doing work before they own a home is for the buyers to delay their move-in date and schedule fix-up work to start the day the transaction closes.

Dian Hymer is author of “House Hunting, The Take-Along Workbook for Home Buyers” and “Starting Out, The Complete Home Buyer’s Guide,” Chronicle Books.