New Pennsylvania law helping home sales close more quickly
Posted: September 07, 2017 at 12:00 AM by Leah D'Angelo
Home buyers and sellers in Pennsylvania communities that require inspections of existing homes now have more wiggle room to negotiate who fixes what and when before a sale goes to settlement.
A new state law called Act 133, which went into effect earlier this year, no longer makes sellers responsible for repairs needed for a buyer to obtain a municipal use and occupancy permit to live in the house.
For sellers who already are benefiting from historically low housing inventories that have driven up home prices, the new law has helped turn a good market into a great one.
"It's definitely helping," said Jamie Ridge, president, and CEO of the Suburban Realtors Alliance, which lobbies for Realtors in the Philadelphia metropolitan area in their dealings with municipalities.
The new law amends the Municipal Code and Ordinance Compliance Act "to make it easier for real estate transactions to occur," the Pennsylvania Association of Realtors stated in announcing the new regulations.
In Bucks County, 30 of the 54 municipalities require some level of inspection before a use and occupancy certificate can be issued to the new homeowner, said, Ridge. In Montgomery County, 31 of the 62 municipalities do so.
Previously, municipalities that required home inspections often put the onus on the seller to get the repairs done, "inappropriately withholding or impending certificates, leading to some real estate transactions being postponed or canceled," the state Realtors association stated.
For example, if the municipality decided the sidewalks or a roof needed to be fixed, the seller was responsible, whether or not they could pay for it.
"That takes away the seller's ability to negotiate repairs with the buyer," Ridge said.
"There are all these hoops you jump through. ... It would have a huge domino effect," he said, if a settlement couldn't take place and in turn, forced the postponement of more than one house sale, because the sellers might have wanted to move to another house and the buyers had to get out of the house they were selling.
Eric Rehling, president of the Montgomery County Association of Realtors, remembers a sale that almost didn't happen. A repair to a sloping sidewalk — ordered by the municipality — ended up costing a Conshohocken home seller $12,000 in engineering and concrete work. It had to be done before the house, valued at approximately $175,000, could be sold, and it wasn't easy for the seller to pay for that repair along with the costs of moving to a different home.
"They can get expensive," Rehling said of inspections.
Under the new law, when a municipality inspects a property or orders the buyer or seller to have an inspection done, the parties involved know what repairs need to be done and can negotiate the process.
Then, one of three types of use and occupancy permits can be issued: a regular permit if all repairs are completed by settlement; a temporary permit if the house can be lived in, allowing the buyers up to a year to complete needed repairs; or a "temporary access certificate," which allows a purchase to go through even if a property needs so many repairs that the buyer cannot live there, but can work to have the repairs completed in a year. The law allows for the time frame for repairs to be extended if needed.
Doylestown Borough recently adopted an ordinance requiring an inspection before a use and occupancy certificate can be issued to the buyer of an existing home. Karyn Hyland, borough director of building and zoning, said the borough aligned its new law with Act 133 so that the certificates would match the state requirements.
Langhorne Borough Manager Scott Mitchell said that even before the new law was enacted, his borough had a system of issuing temporary use and occupancy certificates, especially if someone purchased an older home that needed repairs, such as to the electrical or heating equipment.
Bob Williams, broker and manager with Coldwell Banker Hearthside Regional Sales Center in Newtown Borough, said that most of the municipalities with inspection requirements are older communities since the law applies to existing homes only, not new construction. He said sometimes the seller will assist the buyer with the cost of the repairs so that the settlement can proceed.
Inspection reports can differ depending on who is doing the report, Rehling said. In municipalities that require a private inspector, material defects in a property — such as old flooring that would need to be replaced — as well as safety issues and code violations will be the focus. But in municipalities where a government official completes the inspection, the focus is on public safety, such as uneven sidewalks, as well as other code violations.
Whenever an existing home is sold, the Realtors advise getting the inspections done promptly in the buying process, so the negotiations over repairs are done early in the settlement process before mortgage applications are finalized. And be prepared for last minute issues to come up, though they usually aren't over big-ticket items that should have been ironed out early — like who's paying for a new roof.
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"It's generally not big things that are the surprise," McPheeters said.