Inspections and Repair Negotiations
Real Estate Home Inspection Negotiations
A home is never truly bought or sold until the money has exchanged hands. You may have received an offer on your house and be fairly certain that you have a buyer, but there are several other steps you must go through before the sale is final – one of which is the home inspection. Unless your home is flawless – which few ever are – you are probably in for some negotiations with the buyer before you see the end of your sale. The last thing you as a seller want to go through is protracted home inspection negotiations! I know as a Realtor® one of my least favorite parts of a real estate transaction is negotiating any necessary home inspection problems that have surfaced. Unfortunately however it is an inevitable part of our job.
So what is the best way of going about negotiating home inspection issues?
First of all, you should be clear on the realities of selling a home. No home is perfect, and an honest inspector is very likely to find some existing issues with your home. This is normal. How you handle the negotiations that follow, though, can make a big difference on how much you give on your end and the level of stress you experience from the process.
This is in fact one of the reasons I like to council all of my clients on how to prepare for a home inspection. Taking care of the issues you know about will go a long way in making sure your transaction stays on track. When you do this you don’t need to know how to negotiate home inspection issues!
Working as a Realtor® for the past two decades one of my biggest pet peeves is dealing with those buyers who intentionally use a home inspection as an opportunity to re-negotiate the transaction. Don’t get me wrong there are plenty of times when a buyer is justified in asking a seller to make repairs for unsatisfactory conditions to major systems like the electrical, plumbing, roof and foundation.
A buyer however that expects a home to be delivered like it is new construction is not getting good guidance from their buyer’s agent. You would not believe how often I get a punch list after a home inspection for some of the most benign things. The purpose of a home inspection is to find major defects that would cause a buyer not to want to move forward with the transaction or at the very least have these items repaired.
A Buyer who is under the false pretense that a home inspection is for the purpose of creating a long punch list that will be remedied by the seller is setting themselves up for a contentious sale. Most sellers are smart enough to realize if they have been through this before that a home inspection is not the buyers opportunity to change the agreed upon contract terms.
If major problems are discovered that should be fixed then that is a different story. That is the real purpose of a home inspection.
When buyers start to over step their bounds is often times when real estate transactions go sour. Buying and selling a home is all about being reasonable. Sometimes buyers will ask for repairs of items that were clearly visible before an offer has even been made.
When I am representing a buyer I will always advise them not to ask for repairs of items they knew about before writing a contract. If they feel there is something that needs to be addressed monetarily they should do it in the offer and be upfront about it. A perfect example would be seeing a crack in a tile or even a seller pointing it out in a disclosure statement and then asking the seller to fix it after a home inspection.
If you want to get someones back up this is the perfect way of doing it.
Push For Inspection Credits Instead of Repairs
When selling your home and subsequently negotiating home inspection items, you should always push for a closing cost credit or a price reduction whenever possible. Negotiating home inspection issues is sometimes not that easy but this is what you should be shooting for as a seller.
There is simply too much stress and uncertainty in putting yourself on the line for repair work if you can avoid it. The buyer is likely to be extremely picky about the quality of the work and you could wind up being asked for even more work if he or she is unhappy.
This is why most Realtors® will recommend you offer the cash value of the repairs – negotiated down as much as possible – instead of offering to do the repairs yourself.
It is easy to see how you can get into trouble here. Say the roof over your garage has hail damage that the buyer demands be fixed. You agree that repairs need to be made and offer to have them done before the closing takes place. Two things happen: First, the repairs take longer than you thought and potentially end up delaying the closing if the buyer or their attorney will not agree to an escrow hold back. Second, the roof shingles are newer, so they do not look the same as the old shingles.
The buyer should understand this, but chooses not to, and demands you do something about it. Again in the second example the buyer could attempt to delay the closing creating stress for you especially if you have bought another home and you need to close on your home in order to purchase.
You probably would not be liable for any further costs in this particular situation, but you also just put yourself through weeks of anxiety and ended up with an angry buyer, all of which could have been avoided by just handing over the estimated cost of repair in cash or credit on the sale. The buyer picks his contractor and deals with the consequences while you move on.
Negotiating Home Inspection Problems
In most states you are not obligated to repair your home before you sell it, as long as you are upfront and honest through the course of the sale. However, you also want to sell the house to a buyer that is willing to pay what you want.
You must be willing to negotiate in most any type of market and repairs are one area where this is a must. The buyer can back out in all sorts of ways, leaving you searching for another to take the home off of your hands. Depending on the market, this can be a real serious headache.
One of the difficulties with going through the home inspection process and then not coming to terms with a buyer is the fact you and your Realtor® may have to disclose everything that was discovered at the inspection. In many states this a disclosure requirement moving forward. This of course can make your home more difficult to sell.
This being said, just because you must negotiate and maybe spend a little money to ultimately sell, you do not need to give in to every demand. Haggling is an art anyone can learn, and you should have a Realtor® with you to help in the process as well. Know the value of what you are trading and look out for your bottom line. This is another one of those times where having an exceptional real estate agent in your corner really comes in handy.
In practical terms, this means focusing on what is best for you. There may be 20 things that could possibly need repairing, some big, some small. You do not have to take care of all of them, but you may need to take care of some. For instance, the buyer may come to you with a list like this:
- Cracked tiles in bathroom
- Sod replacement in corner of yard
- Fence repair in backyard
- Leaking pipe in basement
- HVAC system replacement
- Old above ground swimming pool removal
Most of these problems could be accomplished by a contractor or two for small amounts of money, except for the HVAC replacement. This is where you have to decide your strategy. Which will cost you less? Which things are you willing to do? In this particular situation, you may really want to avoid replacing the HVAC system. It will be expensive, the old one still has a few more years left in it, and you do not really feel like you should be responsible for it.
If this is the case, offer to do all the other smaller repairs on the list. You can even explain that the old HVAC is a result of buying the older home you are selling and that the price reflects this. Make it understood that you are willing to do a lot, but there is only so much they can reasonably ask. Appearing reasonable and acting in good faith can ease your way through these negotiations.
The same is true for the actual repair costs. Make relatively low offers based on your estimates. You can always give a little to come nearer the middle, but you cannot go back down after you make an offer. This is just like haggling for a car or even a piece of fruit at the farmer’s market.
One of the best ways to avoid your home sale going sour is to know what the most common home inspection issues are and deal with them before you even put the home up for sale. Over the years I have come to realize that many home owners get so comfortable with their environment they never stop to take a hard look around to see if they have any problems that are sure to crop up. Doing a once over of your property before putting it on the market can really make a difference!
Do Your Best And Trust Your Realtor®
Depending on the state of your home, you may not be able to get every last penny you hoped. However, selling for a good price is worth spending a little money. Trust your Realtor® to guide your choices and do your best to negotiate the home inspection issues with skill, and you should be able to sell without spending more than is reasonable.
Remember that navigating your way through the home inspection process is important. Don’t become stubborn and refuse to take care of issues that are sure to come up again with a different set of buyers. It is important to recognize problems that will be issues with anyone and deal with them. Unless it is an incredibly strong sellers market where you can get away with telling a buyer they need to take the home “as is” then make sure you are reasonable. Doing so will lead to a smile on your face when you are shaking hands with a buyer at the closing table.