Unfinished Business: The Final Walkthrough

You are just hours away from closing, conducting the final walkthrough with your buyer, and discover an unfinished repair or unforeseen issue changed from the date of offer. Now what?  Now that mortgage lenders no longer permit “repair escrows,” how is a buyer’s agent expected to handle the situation. 

First, as you walk through the property, you should be looking for anything that is not of the same physical condition per the contract under the agreed terms of “physical condition.” 

What does “substantially the same physical condition” mean? 

First, it depends on what you wrote in the contract for “Property Maintenance and Condition” par. 7 of the GCAAR contract. The buyer chooses either “Date of offer” or Date of Home inspection or “Other”. In Virginia: Paragraph 9 of the regional contract states the same as GCAAR.  

Second, all utilities should be in service during the final walkthrough inspection.  If they are not, you should call the listing agent immediately who should call the sellers to inform them.  If the utilities are not on, a delay for closing is allowed per the contract.  Smoke detectors are considered a utility. 

For any issues involving health and safety, you should immediately contact the listing agent and perhaps the lender and disclose the issue.   

On the other hand, if it’s a matter of a stained carpet/floor or other relatively minor issue outside of a threat to health or safety, you should contact the settlement attorney for further guidance.  In most cases, the settlement attorney can draft a closing cost credit addendum to be submitted to the lender and approved prior to the scheduled closing. 

Per the contract, the Buyer accepts the property in “as-is” condition. “As-is” simply means that the property is being sold in its current condition and the seller makes no warranties or guarantees whether defects are apparent or not. The difference between condition as required in the contract and as is condition is the timing. If something is changed from the date of the offer, the seller is likely responsible.  

What is the property is subject to a post-settlement occupancy agreement?

In this case, the property condition paragraph (3) essentially carries over the paragraph from the contract to this period, with the same condition that it be delivered “in the condition required by the contract” with the utilities paid through the period of the occupancy. The final walkthrough inspection takes place the day after move-out. Any list of claims must be delivered by the third business day after the final inspection (per the GCAAR contract). 

Finally, for all the above property condition claims, the most efficient way to resolve this situation is for the buyer to prepare a list of repairs required and the cost that each item incurs (this may require a written estimate). Submit this to the listing agent and negotiate a credit for the repairs. The advantage for the buyer is that they can choose the vendor and pay the vendor directly which allows for them to hold the vendor accountable and receive warranties or guarantees if any. There is also an advantage for the seller avoiding the delays and hassles of trying to find a vendor to perform the repairs. It is a Win-Win solution. All that is needed is an addendum with all parties signing in agreement.