Content of the material
- What Is a Home Inspection?
- Things To Know About Your Home Inspection
- Negotiate After Home Inspection
- Who Pays for the Repairs When You Negotiate After a Home Inspection
- The Home Inspection Negotiation
- Generic Tips To Negotiations After The Home Inspection
- Go Through The Home Inspection Report With Your Realtor
- Discuss with your agent what you can and cannot live without.
- Get A Quote For Repairs
- Would You Prefer Money or Repairs?
- Understand The Seller Is Not Obligated To Make Repairs
- Understand Sometimes You Cannot Reach a Deal
- Ready to Learn the Ins and Outs of the American Housing Market?
- Do sellers have to fix everything on home inspections?
- How Much Are Home Inspections?
- Provide Supporting Documents
- What is a Counter Offer?
- #2 Your Home Inspector Is Everything
- You are basically digging yourself a grave when paying for a cheap inspection.
- The Report
- When to Call a Professional
- Additional Tips
- What To Expect
- How to a Counteroffer After a Home Inspection
- The bottom line
- The Home Inspections Purpose Isnt to Intentionally Renegotiate
- Trying to Negotiate Problems Your Already Know About is Dumb
- Get a read on the current state of the market
What Is a Home Inspection?
Whether you decide to buy a condo, a single-family home or a multi-family home, a home inspection is an assessment of the condition of that property. It covers the general structure such as foundation, roof and framing, as well as systems like plumbing, electrical, HVAC, etc.
Your home inspector will comment not only about the soundness and condition of the home, but also any health or safety concerns. In their report, they will point out repairs that are a priority which should be performed in the very short term and repairs that should be considered over the course of their homeownership.
Things To Know About Your Home Inspection
- A home inspector is not allowed to give pricing on recommended repairs.
- Your inspector can only comment on what they can see; they can’t see through walls and can’t get comment on inaccessible areas.
- An inspector will not tell you whether you should or should not ask the sellers for a repair.
- Inspectors will not tell you whether you should buy the house or not.
- An inspection is not a pass or fail, it is an overview of the home’s condition.
Negotiate After Home Inspection
First, talk to your realtor. He/she will know what is best for the situation, given the current market. When it is time to negotiate after the inspection, make sure it is with kindness and don’t attack and focus on the bigger items. It is highly suggested that you look at roofing, HVAC, mold, electrical, plumbing and the foundation of the home, as your main pieces of negotiation.
The majority of the time, a seller will consider giving you a repair credit on the purchase price of the home, rather than actually agreeing to conduct all of the repairs that have been negotiated. The seller may also counteroffer.
Who Pays for the Repairs When You Negotiate After a Home Inspection
When there are repairs to be made, the seller is expected to pay for them. Typically, a home inspection repair is given in a repair credit/price reduction of the negotiated price of the home. This is great for both parties involved, because the seller is paying you in the form of a credit and you are getting to select the contractor to complete the work.
The Home Inspection Negotiation
After a thorough review of the inspection report, the Buyers should meet with their REALTOR® in order to formulate a plan of action for the home inspection negotiation. It is important to establish 2 different things:
- Overall Home and Property Condition – There are times when there are just too many issues and unsatisfactory items. Sometimes it makes sense to terminate the contract without any further negotiations or attempts at finding a resolution. While rare, it happens.
- Unsatisfactory Inspection Items – It is best to start to prioritizing this list in order to present to the Seller’s agent.
- Health and safety issues – things like radon, mold or asbestos. Since mitigation on things like this can be costly, we address them first.
- Building code violations, construction defects, and materials that may have been part of any class action suits. This protects the buyer from getting stuck with any serious financial burdens down the road.
- Deferred maintenance – things like furnaces, exterior grading, and roofs. These are items that can become issues due to replacement costs or uninsurability.
Once the buyer decides on which items need to be addressed, the REALTOR® will put together a document called Notice of Unsatisfactory Conditions. This document outlines any concerns the Buyer voiced as well as proposed remedies. Many times the REALTOR® will include a copy of the actual inspection report to help the Seller’s agent clarify what the request is addressing. This needs to be delivered to the seller’s REALTOR® prior to the inspection objection deadline.
Generic Tips To Negotiations After The Home Inspection
Now that we got that out of the way, using the above information, use these tips below on your negotiations!
Go Through The Home Inspection Report With Your Realtor
Doing this step will help you decide what you can ask for, what’s in good faith, and what your needs are.
Decide what items are minor, maintenance, or major items.
Typically, home inspectors will have general summary at the end of their report.
Here’s also a list of items generally found in a home inspection
Discuss with your agent what you can and cannot live without
Of course you will need a working A/C, but if this is something you can afford yourself and you are already a great deal on the home, then maybe pass on this.
Get A Quote For Repairs
Having quotes for the necessary repairs will help you determine what the value of those items are.
This will help you and your agent determine how much those items can affect the value of your purchase.
Would You Prefer Money or Repairs?
Sometimes, completing the repairs yourself will be cheaper. Also, you could hire your own contractor rather than using a seller’s contractor to complete the repairs.
In my personal opinion, I like asking for money off of the purchase price of the home (unless an immediate fix is needed), so I can ensure the repair is done properly.
If a seller makes any repairs, you may want to consider a re-inspection.
Understand The Seller Is Not Obligated To Make Repairs
Understanding this is very critical to keep your emotions in check.
Although, as buyers, we are led to believe sellers will fix items, it is not always the case.
Understand Sometimes You Cannot Reach a Deal
A great closing comes with two happy sides and sometimes this cannot be reached.
However, do not fret. There are homes out there for everyone and maybe you can reach a good compromise with the next seller.
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Do sellers have to fix everything on home inspections?
If a buyer presents the seller with a list of items they would like to fix, the seller does not need to accept the repairs. This is where both parties negotiate after a home inspection. The seller can agree to part of the list and see if the buyer accepts it or they can offer other incentives to keep the deal going.
For example, a seller might offer a price reduction (or a buyer might request one) based on the inspection report. If the roof needs to be replaced and the seller won’t fix it, they can drop the price of the home. This gives the buyer the funds to cover the repair costs.
Buyers can approach sellers with repair requests or new pricing agreements as part of the negotiation. It’s up to the seller to decide which option they prefer — or if they want to walk away from the sale.
If the buyer and seller can’t agree, the buyer can also walk away from the sale. However, they risk losing the money they put in escrow — or the good faith deposit to show they are serious about the purchase. The seller would then have to turn to back-up offers or re-list the property — which could be seen as a sign that something is wrong with the home.
At the end of the day, both parties want to agree on a fair home price and reasonable conditions for the sale. This is why both buyers and sellers negotiate after a home inspection. Buyers want the property and they want it in the best condition possible. Sellers want to sell quickly and for a fair price. Both parties can find the middle ground through clear negotiations.
How Much Are Home Inspections?
Home inspections typically range from $279 to $399, according to HomeAdvisor. The actual cost of your home inspection depends on where you live and the size of your home.
Provide Supporting Documents
Provide any supporting documents you may have. The pages of the home inspection report or other reports from another professional you had further investigate a situation, will validate the repair that is being asked for.
A leaking roof the issue and its ramifications are obvious. But take an FPE Stablock Electric Panel, it is known to have a high failure rate. If you are asking for the seller to replace the faulty panel than provide supporting documents showing that the panel has a high rate of failure and replacement is recommended. Google is a wonderful thing!
What is a Counter Offer?
After a home inspection, a buyer may “counter offer.” This is a process in which the buyer asks the seller in writing to re-open negotiations and to repair major areas on the inspection report. When purchasing a home, a buyer should be able to make the purchase and not have major issues. The buyer has the right to ask for the issues to be taken care of and the seller has the right to say no.
#2 Your Home Inspector Is Everything
Having a skilled home inspector is incredibly vital when negotiating after the home inspection.
The home inspection is like the Bible of everything about the home. So, are you willing to pay for a cheap home inspection? Probably not.
You are basically digging yourself a grave when paying for a cheap inspection
Don’t believe me? Here are a few reasons why you are hurting yourself by not doing you research into a good home inspector.
- Cheap home inspectors are less experienced = They miss items. Fact.
- A less detailed report = Less negotiating power afterward.
- If they miss things, they may not care about their reputation enough to fix those items.
- I could go on.
I digress… you get the point.
Doing you research into a highly qualified home inspector is key in getting a thorough home inspection report.
A detailed report with many pictures can help convey messages about the home as a whole.
Believe it or not, but issues in the home are connected.
If there is a mold issue in the home, there is a water intrusion issue. If there is a water intrusion issue, there is another issue in the home that has to be addressed. It all comes down to a lack of maintenance on the home.
So, how does this help you?
Showing pictures and conveying the items wrong about the home properly exhibits the issues for the seller and why they may or may not be a big deal.
A bad home inspector simply cannot do this for you.
When to Call a Professional
It highly recommended to use a professional realtor when buying or selling a home. He/she has your best interest at heart, has the negotiating skills, and can help make it a smooth process for you. Some people may not like paying the realtor when the contract is signed, but remember, this professional works hard for you and for many hours.
Additionally, as stated above, the home inspector needs to be a licensed and knowledgeable inspector with good reviews.
The post-home inspection negotiation process can be a fraught time for both buyers and sellers. Nobody wants the sale to fall through though, so it’s important to approach the negotiation process with an open mind and a willingness to compromise. You should never back down from something that’s really major—particularly if it’s something the seller must have known about before listing the home and was thus required to disclose—but you also don’t want to be unreasonable.
Here is a bit of additional advice that you can use as you negotiate:
- Don’t make assumptions
As a general rule of thumb, don’t go into negotiations assuming that you’re going to get everything you want. While you certainly might, it’s always possible the seller won’t be willing to comply with requests. Know exactly what your dealbreakers are so that if you don’t get what you’re asking for you know when to walk away.
- Think long term
If you’re planning to do a kitchen renovation in the next five years, then it probably isn’t worth it to go back and forth about an outdated dishwasher or wonky cabinetry. While all buyers would like their home to feel like new construction when they move in, some issues are to be expected. If it’s something you intend to take care of in the near future anyway, just plan to live with it for a little bit until you do.
Most of the time, a home inspection and the negotiations that follow go quite smoothly. Rely on the expertise of your realtor to guide you through the process, and keep your eye on the prize: finally getting to move in to your new home.
What To Expect
Generally, sellers may be willing to negotiate on major issues, such as a leaky roof, a cracked foundation, electrical problems, or other items that pose a safety hazard or come with a high repair bill. That’s in their interest, since your lender may not approve your loan if the home has structural defects, serious safety hazards, or building code violations.
Sellers will be less likely to budge on aesthetic or superficial items that don’t impact the overall fortitude of the house. However, they might be more flexible if the home has been on the market for some time or if the local housing market is soft.
Sellers typically won’t consider negotiating on issues that were visible or known before you made your offer on the home.
Before negotiating, you may want to consider:
- The state of your local housing market
- Your desire for the home
- The size and cost of the repairs
- The severity of the problem
- Your future renovation and remodeling plans
- Your budget
- The time the home has been on the market
- The home’s history and age
How to a Counteroffer After a Home Inspection
Most home inspections will reveal some issues with a home, which may be major or minor. If there is a major structural or infrastructural issue with a home, like a plumbing or HVAC problem, the buyers may ask for the seller to fix it. However, this can prolong the closing process especially if the buyer isn’t happy with the job. It’s standard practice for a homeowner to adjust the price of the home to account for the approximate price of the repairs, rather than negotiating repairs for the seller to make. Here is how a homeowner can make a counteroffer after a home inspection reveals potential issues.
- 1. Closely assess the home inspector’s report. Carefully examine any issues outlined in the home inspection report, and assess the fairness of the buyer’s most recent offer. If the problems are minor, the seller may not need to significantly adjust the price. If the issues are more serious, it may be appropriate to make a significant counteroffer to your buyer.
- 2. Consider the associated costs of repair. If the home inspection has revealed problems with the home that require significant work, consider the costs of those necessary repairs and factor that into your counter offer valuation. You're more likely to reach a compromise with your buyer if you've reached a fair counteroffer that doesn't drop below your minimum asking price.
- 3. Determine the state of the real estate market. If it is a seller’s market, the seller will have more negotiating power and may be able to offer a small price reduction in their counter offer. In a buyer's market, it is easier for the home buyer to look at properties and you may need to offer a greater price reduction to make the offer competitive.
- 4. Look at comparable properties. Take the prices of comparable properties into account when you’re making your counteroffer. Show your thought process to the buyer. This way, they’ll understand how you’re coming to your valuation.
- 5. Communicate and collaborate with the buyer and their agent. Whether you’re in a buyer’s or seller’s market, the sooner both parties can compromise on a fair purchase price, the sooner the sale can move forward. If the seller isn’t prepared to reduce the price, they can offer to cover the closing costs or give repair credits to compensate for the home inspection repairs. If the buyer and the buyer’s agents have established a good relationship, there is a greater chance that they will take the counteroffer seriously. Keep in touch with your buyer and ensure that you've heard whatever issues they've raised.
The bottom line
Negotiating after home inspection for repairs can be a fraught process, however, both parties have an interest in coming to an agreement. Make reasonable requests and be flexible around how concessions are made. If all else fails, you can back out of the deal.
The Home Inspections Purpose Isnt 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.
Get a read on the current state of the market
The state of the market could be a deciding factor on whether you move on to the closing table or walk away from the house.
In a seller’s market, where buyer demand is high, but there aren’t many homes for sale, sellers hold all the cards. It could be that the sellers of a home know that they could line up another buyer easily (maybe your offer was one of many in a bidding war) and you’ll have to accept that you don’t have any leverage.
That doesn’t mean you shouldn’t weigh the decision carefully. Water encourages buyers to get an estimate for the work the property requires, regardless of whether the sellers agreed to negotiate:
“Let’s say the total for repairs comes to $500,” Waters explains. “Before you walk away, ask yourself ‘Is it worth it to walk away from something you love for $500?’” On the flip side, an estimate for tens of thousands of dollars in repairs may be the reality check you need to move on.
Now, if you’re negotiating in a buyer’s market, the tables are turned. If you threaten to walk away, the seller might recognize that they’d rather work with you than start from square one to attract another buyer when the market is slow.
But such a “call your bluff” move could always backfire: the seller may choose to let you walk away. Work with your agent to understand your options, and decide on a strategy that’ll give you the best outcome.