What is a PICRA?
PICRA stands for Property Inspection Contingency Removal Addendum and it is something that comes up in a lot of Residential Real Estate deals. This is the document that contains Buyer requested repairs as a result of the home inspection.
How a PICRA Works
Essentially, the Buyer lists items (s)he would like the Seller to repair as part of the contract for the purchase of the property. The Seller needs to agree to do the repairs and does have a window to negotiate the requested repairs with the Buyer. The Seller may be willing to repair some items but not all items, or may modify the scope and /or depth of a requested repair. If Buyer and Seller come to an agreement on the repairs, each party signs the PICRA reflecting the agreed upon terms for the repairs. There are times where the Seller may offer a payment in an amount certain in exchange for the Buyer waiving said requested repairs.
Generally speaking, all agreed upon repairs should have a receipt showing that the work was completed and paid for prior to closing or at least showing that the work was completed and that payment will be included within the closing cost/proceeds from the real estate transaction. There are certain instances where proceeds can be escrowed.
It is always suggested that PICRA repairs be as detailed and specifically written as possible. This is to guard against ambiguity and a broad interpretation which some Sellers may do to try and get out of the repairs as cheaply as possible. For example- some suggestions to include in the PICRA, but by no means limited to, is the following:
- Licensed contractor
- Be specific with repair OR replace
- Include quantity of something
- Include location of something
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