So I'm about 6 weeks out from closing on the sale of my metal fabrication shop. Buyer's due diligence turned up that two of our press brakes and the powder coat line need upgrades to meet current EPA regs. Buyer wants me to cover the cost before handover. We're talking maybe $60-80k. Has anyone dealt with this? Do I eat it, split it, or tell them to pound sand? The purchase price already reflected the aging equipment, IMO.
Equipment
How to handle required equipment upgrades before handing over the keys
Tell them it's baked into the price. If they wanted new equipment they should have offered more. That's what due diligence is for – fiding problems and adjusting the offer. Not your job to remodel the shop on your way out.
Depends on how bad you need the deal to close. If you've got other buyers lined up, stand firm. If this is your only offer and you're already packing boxes, maybe negotiate a split. But don't just roll over over.
What does your purchase agreement say? Usually there's language about equipment being sold as-is unless specifically warranted. If the buyer didn't carve out an upgrade contingency, that's on them. But I've seen deals die over less. Get your lawyer involved before you agree to anything.
Yeah, the agreement is silent on environmental upgrades. My lawyer says we're technically in the clear but it could spook the buyer. I just don't want to sink 80k into a shop I'm leaving in a month.
Can you get a quote for the upgrades and offer a credit at closing instead of doing the work yourself? Buyer might prefer to handle it their way. And you avoid the hassle of managing contractors while you're trying to pack up.
This. A credit is cleaner., But make sure it's a fixed number, not 'we'll split the actual cost.' Otherwise you're writing a blank check.
Also, are these upgrades actually required for the buyer to operate, or are they just something they'd like to have? Big difference. If the shop can legally run as-is for another five years, you've got leverage.
One more thing – check if any of those costs cann be passed to the buyer through a higher purchase price and seller financing. If you're carrying a note, you might structure it so they pay for the upgrades over time. Just a thought. But honestly, if I were you I'd offer a modest credit and hold firm on the rest. They'll likely take it.