Understanding the California Request for Repair (RR) Form: A Guide for Buyers and Sellers
When buying a home in California, there’s a lot to consider before finalizing the sale—one key component being seller disclosures. Seller disclosures provide essential information about the property’s condition, helping buyers understand any known issues upfront. In California, sellers are required by law to disclose known material defects, past repairs, or any factors that could affect the property's value. This transparency sets the stage for the Request for Repair (RR) form, which buyers use to formally request repairs or negotiate financial adjustments.
The Role of Seller Disclosures
Seller disclosures are foundational to a real estate transaction. Once received, buyers should review these disclosures closely. They include details about structural, mechanical, or environmental issues, which help buyers gauge the property’s condition. After reviewing disclosures and completing their own inspections, buyers may discover additional concerns or repairs they feel should be addressed before closing. This is where the Request for Repair (RR) form comes into play.
Purpose of the Request for Repair Form
The RR form allows buyers to formally request that the seller address issues identified during inspections. It covers:
Repairs that the buyer would like the seller to complete.
Financial Credits or Concessions that would offset repair costs.
Price Reduction if the buyer prefers to negotiate down the sale price rather than ask for repairs or credits.
Types of Requests on the RR Form
Repairs: Buyers can list specific repairs needed based on inspection findings. For example, if the home inspection reveals a leaking roof or a faulty electrical system, the buyer can request the seller repair these issues before the sale closes. If the seller agrees, they must provide proof of completed repairs, typically within a few days before the closing date.
Credits and Concessions: Instead of requesting repairs, buyers may ask for a credit or concession at closing. Here’s how these work:
Credits: A credit is a financial amount that the seller agrees to provide the buyer to help cover the costs of repairs or other expenses. This credit is applied at closing, which means it goes directly toward the buyer’s closing costs. It’s not a cash payment to the buyer; rather, it reduces the buyer's out-of-pocket expenses at closing.
Concessions: Concessions are similar to credits but often cover specific costs, like loan fees or title insurance, rather than repairs. Both credits and concessions are negotiated amounts that the buyer and seller agree on.
Price Reduction: In some cases, the buyer may ask for a price reduction on the property instead of requesting specific repairs or credits. A price reduction lowers the purchase price, meaning the buyer’s loan amount and potentially their monthly payment will be smaller. For buyers who prefer a straightforward approach, a price reduction can simplify the transaction without requiring the seller to make repairs.
Understanding Lender Limitations on Credits and Concessions
Credits and concessions must be carefully managed to avoid conflicts with lending rules. Here are some key points:
Lender Approval: All credits and concessions must be disclosed to the lender, as they impact the buyer’s total loan amount.
Limits on Credits: Many lenders set a cap on credits that can be applied to closing costs, typically ranging from 3% to 6% of the loan amount, depending on the type of mortgage and the buyer’s down payment. For example, if a lender allows a 3% credit and the buyer’s loan is $400,000, the maximum allowable credit would be $12,000.
Excess Credits: If the agreed credit exceeds the lender's limit, the buyer might lose the excess amount since it can’t be paid out in cash. Therefore, buyers and sellers should work closely with their agents and lender to ensure credits stay within acceptable limits.
How Sellers Can Respond
Sellers can respond to the RR form in several ways:
Agree to All Requests: If the seller agrees to all repairs, credits, or price adjustments, they will sign the form, and the buyer will typically need to remove their inspection contingency. This step helps finalize the terms and move the sale closer to completion.
Decline the Requests: Sellers can refuse some or all of the buyer’s requests. If this happens, buyers can decide whether to proceed with the sale, renegotiate, or withdraw their offer.
Partial Agreement: Sellers can negotiate by agreeing to some requests but not all. They might propose alternatives or suggest a modified repair or credit arrangement. Any partial agreement should be documented and signed by both parties.
Additional Tips for Buyers and Sellers
Example Scenarios: Imagine a buyer prefers a price reduction over repairs for a cosmetic issue, like minor paint touch-ups. Or, perhaps they request a credit for roof repairs to complete after closing. Different scenarios can fit various buyer and seller needs, offering flexibility in negotiations.
Consider the Timeline: Real estate negotiations often have short deadlines. Repair requests, credit decisions, and final agreements must be finalized promptly to keep the transaction on track.
Inspection Contingency Role: To finalize a deal, buyers may need to remove the inspection contingency. This means the buyer agrees to proceed with the purchase without holding the seller responsible for future repairs. Understanding this step is essential, as removing this contingency is often a condition for getting repair requests or credits approved.
The RR form is a powerful tool in California real estate transactions, helping buyers request repairs, financial credits, or a price reduction based on the findings from inspections and seller disclosures. By understanding how repairs, credits, concessions, and price reductions work—and how lenders view these terms—both buyers and sellers can proceed with confidence and clarity in their real estate negotiations.
If you have any questions or need additional assistance, please get in touch.
Best regards,
Lindsay Woolf | CA DRE #02236711
DOMO Real Estate | CA DRE #01290500
Disclaimer: The information provided in this blog post is for general informational purposes only and does not constitute legal advice. Real estate transactions can be complex and subject to local regulations.
