What is the best way to negotiate repairs after the home inspection?
Tuesday, September 25, 2018
There’s a simple answer to this question: ask your Realtor. You may be represented by your own “buyer’s agent” and not working directly with the seller’s realtor; but also many realtors act as a “transaction agent,” meaning that they do not represent either side of the deal and their job is only to facilitate the transaction while following a set of ethical guidelines for fairness to both parties.
While some Realtors recommend that you have your own agent when trying to resolve the repair issues that come up after a home inspection, others feel strongly that a transaction agent is a better way to go. “More transactions fall apart with buyer’s agents than with transaction brokers,” according to one local Realtor. “It causes a lot of confrontation and, in the end, may be more difficult to negotiate repairs.”
Whether you use a buyer’s or transaction agent, a good Realtor has a feel for the current state of the real estate market, how much leverage you have to get what you need, and can recommend a workable strategy.
Home inspectors like us are not good advisors about negotiation after the inspection, so don’t ask us. Our specialty is finding and listing defects. However, we can offer several sensible guidelines from our years of experience watching from the sidelines as buyers and sellers come to terms over the findings in a home inspection report.
•• Request a credit for the repairs, instead of having the seller do them. “This an especially good solution when the house is vacant or the seller’s physical health circumstances makes repairs cumbersome,” according to Betsy Pepine, of Betsy Pepine Realty.
When we are asked to return to a home to verify that the seller’s repairs are satisfactory, about half the time some of them are not and further wrangling ensues. However the seller does have an incentive to do the repairs correctly. “If it is not done right, money is placed in escrow at closing to fix it,” says Betsy. “And licensed contractors have to do the work, with receipts provided at closing, unless otherwise agreed prior.”
Except when the repair is clearly defined, such as replacement of a leaking, older roof, consider asking for a dollar amount and not the actual repair. “Requesting a credit allows you to choose who you want to do the repairs,” recommends Betsy, “or even gives you the option of doing it yourself.”
•• If it’s just a few minor problems, ask yourself if it’s worth losing the house over fixing them. How does the cost of the repairs compare to the cost of the house? Is it worth fighting for $700 worth of repairs when you think you are getting a pretty good deal on a $200,000 house? That’s less than half of one percent of the price of the home.
We are not proposing that you be a wimpy negotiator, just practical. It’s sad when we see a deal fall apart after buyer and seller lock horns over a couple of hundred dollars of repairs.
•• Don’t send signals as to what you will accept. Everyone at a home inspection wants to get along for the duration and, if the seller and/or seller’s realtor is present and listening to our verbal report at the end of the inspection, it’s tempting to be gracious and say “Oh, that’s really not worth bothering with” or “I love this house so much I’m not going to worry about that.” Don’t do it. We suggest just listening and nodding. Also, mentioning that you plan to gut and remodel the master bathroom as soon as you move in makes it tough to get any dollars off for bathroom defects.
•• It’s not about right and wrong. It’s a negotiation, and trying to figure out whether the seller should have known about the problem we uncovered or arguing that it is their moral obligation to fix certain things are both a waste of time—and aggravates everybody involved. Prioritize you repairs, then go for what is most important to you.
Do you have an “as is” contract? If you signed a sales contract with no dollar amounts for repairing the defects found during the home inspection, theoretically your only option is to “take it or leave it.” In actuality, you can always ask for what you want and maybe the seller will accommodate you, but it makes things much more difficult, and the seller is more likely to stand their ground—unless something big and unexpected is found.
•• Repairs that are necessary for financing are easier to get. Fortunately, for buyers who are financing their purchase, lenders are very cautious about the condition of the property, especially if it is an FHA or VA loan. In those cases, unless the seller wants to lose the buyer and potentially wait months for the next qualified buyer to come along, they will need to make a concession for big-ticket items, such as the roof, HVAC, plumbing, water heater, or an outdated electrical system. If the buyers cannot obtain their financing, “no loan, no sale.”
•• You won’t get much from a bank. “If you are buying a foreclosure or short sale, you shouldn’t expect any assistance from the bank,” according to Chris Handy, of Bosshardt Realty. “The only exception would be minor repairs needed for the buyer’s financing approval. Also, don’t enter into a transaction with a bank on a property that clearly needs major repairs—like a new roof, for example—if you are planning on doing VA or FHA financing, which requires the home to be move-in ready. The odds of getting the bank to give you a new roof or other big repair are slim, at least in today’s market.”
•• Expect more of the same from the seller. “Often, the style of negotiation at the beginning of the transaction dictates any future negotiations,” adds Chris. “If the seller uses strong tactics up front, you should expect the same later on for the repairs.” So plan you strategy accordingly.
Ask your Realtor for advice. Often you will get more than one plan of action to choose from.
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To learn more strategies for getting the best possible home inspection, here’s a few of our other blog posts:
To read about issues related to homes of particular type or one built in a specific decade, visit one of these blog posts:
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