Real Estate Home Inspection Negotiations
Are you wondering how to negotiate after a home inspection?
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 reasonably sure 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 when the buyer has a home inspection contingency in their offer.
So what is the best way of going about negotiating home inspection repairs?
No House is Perfect
First of all, you should be clear on the realities of selling a home. No home is perfect, and an honest home 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 in how much you give on your end and the level of stress you experience from the process.
In fact, this is one of the reasons I like to counsel 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 after a home inspection, as the issues will be minimal.
The Home Inspection’s Purpose Isn’t to Intentionally Renegotiate
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 renegotiate 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 significant systems like the electrical, plumbing, roof, and foundation.
However, a buyer that expects a home to be delivered like it is new construction is not getting proper 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.
Understanding what is a reasonable home inspection request and what is not is essential as a buyer’s agent.
The purpose of a home inspection is to find significant defects that would cause a buyer not to want to move forward with the transaction or, at the very least, have these items repaired.
Trying to Negotiate Problems Your Already Know About is Dumb
A Buyer who is under the pretense that a home inspection is to create a long punch list that the seller will remedy sets themselves up for a contentious sale.
Most sellers are smart enough to realize that a home inspection is not the buyer’s opportunity to change the agreed-upon contract term if they have been through this before.
If significant 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 overstep their bounds is often when real estate transactions go sour. Buying and selling a home is all about being reasonable. Sometimes buyers will ask for repairs of clearly visible items before an offer has even been made.
When I represent a buyer, I will always advise them not to ask for repairs of items they knew about before writing a contract. If they feel something 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 someone’s back up, this is the perfect way of doing it. Negotiating repairs after a home inspection should be kept to what is vital.
Steps For Negotiating After a Home Inspection
After the home inspection takes place it is not unusual to have to negotiate if there are significant problems discovered. These are the steps that should be taken whether you are a buyer or a seller.
Review The Home Inspection Report With Your Real Estate Agent
Typically within 24-48 hours after the inspection takes place, home buyers should receive the inspection report from the inspector they hired. The home inspection will review the major issues which are typically highlighted. There will be special emphasis on safety issues and structural issues. Quite often an inspector will mark these in red as major repairs needed.
The report will also contain a list of minor issues as well. A good inspector will provide a copy of the inspection report that contains photos of major problems and necessary repairs.
If you are a home seller, it will be a good idea to discuss the next steps with your listing agent. An experienced Realtor should be able to give you sound advice based on common negotiation practices taking into account the current real estate environment.
Negotiating a home inspection is a significant part of a real estate agent’s job description.
Take The Current Real Estate Market Into Consideration
The type of real estate market can have a significant impact on negotiating after a home inspection. Is it a seller’s market or a buyer’s market? If it is a buyer’s market it will certainly be in your best interest to negotiate important repairs. The focus should be on big-ticket items, safety hazards, and any structural or mechanical problems.
If the next buyers would also insist on having these problems remedied. it makes little sense not to address them.
In a strong seller’s market, you may not have to do anything even when larger problems are discovered. The negotiation process could be minimal.
Focus on Repairs By The Size of The Issue and Cost to Remedy
Older homes will typically be ripe for having more significant issues than a new home. If you are a buyer you should focus on repair requests that are absolutely necessary and don’t sweat the small stuff.
First-time homebuyers often get caught up in the minutia found in a home inspection report rather than focusing on what’s really critical.
If there is a safety concern push for the seller to fix it or provide a repair credit. When there is a significant unplanned expense like a leaky roof, water damage, or electrical system problems that’s where your focus should be.
Get Quotes From Local Contractors
For the large ticket items, it will be prudent to get some estimates to remedy whether you are the buyer or the seller. Due diligence is essential in this situation to get at least a rough idea of the cost of repairs.
It is more challenging to negotiate potential problems into the purchase agreement when you don’t have a handle on pricing.
Sellers Should 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 just 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 they are 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.
Understanding how to negotiate the house price after inspection will become crucial in the transaction.
There Are Reasons a Buyer Should Want a Cash Credit For Home Repairs Too
It is easy to see how you can get into trouble here as a home seller. Say the roof over your garage has hail damage that the buyer demands to 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 delay the closing creating stress for you especially if you have bought another home and you need to close on your home to purchase.
You probably would not be liable for any further costs in this particular situation. Still, 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 in the form of a seller’s concession.
The buyer picks his contractor and deals with the consequences while you move on. As a buyer, you get to choose the contractor and control the quality of the work. A win-win for you.
Negotiating Home Inspection Repairs
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 sale. Some sellers may even choose to market their home as selling as-is. However, you also want to sell the house to a buyer that is willing to pay what you want. Most of the time marketing your property as an “as-is sale” is a mistake. Read the article to find out why.
You must be willing to negotiate in almost 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 severe headache.
Knowing When to Move on From The Transaction
One of the difficulties with going through the home inspection process and then not coming to terms with a buyer is that you and your Realtor may have to make real estate disclosures of everything discovered at the inspection.
In many states, there is a disclosure requirement moving forward. Disclosure of problems, of course, can make your home more difficult to sell.
Additionally, every prospective buyer’s agent is going to ask why the sale fell through.
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. Giving the buyer back their earnest money deposit sitting in escrow and starting from scratch is never fun.
Look Over The List of Repairs Carefully
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 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 the bathroom
- Replace the leaky water heater
- Sod replacement in the corner of the yard
- Fence repair in the backyard
- Fix some faulty wiring
- Leaking pipe in the basement
- HVAC system replacement
- Old above ground swimming pool removal
Having a Strategy When Negotiating After a Home Inspection
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.
You might also consider paying for a home warranty that will address some of the issues.
Being Reasonable Usually Wins in Negotiations
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 making 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 the most common home inspection issues and deal with them before you even put the home up for sale.
Over the years, I have realized that many homeowners 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 for. However, selling for a reasonable price is worth spending a little money on. 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 essential. 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 seller’s 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 shake hands with a buyer at the closing table.
Part of knowing how to negotiate after a home inspection is putting your trust in the agent you hired.
Final Thoughts on Home Inspection Negotiations
Understanding how to negotiate after a home inspection is a critical piece of moving from this phase of your transaction to the next. Whether you are a buyer or seller, it is important to be reasonable. The best negotiations occur where there is a little give and take.
Don’t lose your cool when discussing the inspection results. Remain level-headed and think about whether it makes sense to have a concession or not.
Hopefully, you have found this guide to negotiating home inspections to be useful.
About the author: The above Real Estate information on negotiating after a home inspection was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at firstname.lastname@example.org or by phone at 508-625-0191. Bill has helped people move in and out of many Metrowest towns for the last 35+ Years.
Are you thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!
I service Real Estate Sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Natick, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge MA.