Contract Closeup: When the Lender Requires Repairs
Even if the parties are happy with the condition of a property, the lender may want repairs before it commits to a mortgage loan. In that case, Paragraph 7E of the One to Four Family Residential Contract (Resale) (TAR 1601, TREC 20-14) comes into play.
Just because the lender asks for repairs doesn’t mean the repairs will be made. According to Paragraph 7E, absent another written agreement, neither party is obligated to pay for lender-required repairs. Instead, if the parties don’t reach an agreement on the lender-required repairs, the contract will terminate, and the buyer will be refunded his earnest money. Also, if the cost of the lender-required repairs exceeds 5% of the sales price, the buyer can terminate the contract and receive his earnest money back.