It’s the day (or night) after the inspection. Anxiety levels are running high on both sides the transaction. As the buyer, you’re waiting on the report and are bout to be shocked by the sheer length of the report regardless…., and the sellers and their agent are hoping they don’t hear more than a 👍🏼
A typical inspection will last a couple hours, the inspector will take a lot of notes as well as pictures to ensure the report is thorough.
Inevitably, (good or bad) the report hits your email like a ton of bricks. After sorting through the disclosures you remember signing, disclaimers and all the print/pics of 50-plus pages of descriptions, photos, subsections and educational primers of each part of the house, you (the buyer) is left to try to make sense of this document and determine what in the hell you’re supposed to do from here. Now is the stage most people have these questions:
Do you ask for repairs, a reduction in price, ask for closing costs, a home warranty or some combination thereof?
How do you know what repairs a seller should address and whats ok to leave be? What was disclosed and should have been factored into your price? Is it going to piss the sellers off if you over ask and make the rest of the transaction contentious?
Welcome to one of the most confusing parts of the real estate transaction for most people. There is no handbook for post-inspection negotiation or coaching on what to do ahead of time because, quite frankly, it depends on the specifics of the deal (the house, the people selling you the house and their agent are all variables we can’t account for until we’re under contract!).
So much of what happens next is predicated by several variables including what has already been built into the transaction with regard to price, terms and concessions (if any), the your expectations (realistic or unrealistic), experience buying a home (first time, investment, eighteenth purchase, etc.), the type of agreement in use, what is customary in the particular area the property is located as far as handling repairs as well as the negotiating savvy and inspection knowledge of the buying and selling agents involved.
So without further ado, here are 7 post inspection tips for negotiating:
1. Look at the big stuff
Review the report to determine what is major vs whats minor. If you can’t determine, you damn well better have an agent that can.
What items are structural or mechanical and could have the biggest impact for the buyer as the next homeowner?
It’s the lowcountry, so wood rot and termite scarring on homes built pre-1992 are regular, but is it a minor amount that can be quickly fixed or something that may impact structural integrity?
Is there anything that is not functioning properly that needs to be fixed, assessed or cleared by another licensed pro? Does the roof or chimney have issues? What about the home ventilation and air conditioning (HVAC) system, water heater, plumbing and electrical systems?
Big picture items: Structure, roof, plumbing, electrical, mechanical are where my eyes go to on the report first.
Are any of the items needing attention critical to the sale going through and/or the your loan getting approved? Is the roof near the end of its life? This could potentially be called out by an appraiser (in another week) or make it difficult for the buyer to obtain insurance that isnt jacked up over their pre-contract estimate.
If certain areas of the home are deemed in ‘poor condition’ or worse, this is likely something that we would have seen during our first visual inspection (initial showing of the home) and factored into the price. However, depending on the type of loan that the you are taking on, such as FHA loansor VA loans, some of these items will have to be repaired ahead of close. Which is why certain homes in need of a lot of improvement, deferred maintenance are difficult to obtain FHA/VA financing
3. Obtain estimates
When it’s time to renegotiate post inspection, you better be negotiating with facts and figures in hand from licensed pros. (if you bring me repair requests/credits on one of my listings with out, i laugh you out of the room… errr over the phone…. probably when we hang up, but you get it). Too many agents and buyers throw out arbitrary costs without any idea as to what is reasonable.
Arbitrarily inflating numbers is a surefire way to lose credibility and break down post-inspection negotiations. Even if youre able to navigate through, you can bet any other hurdle to close will now become a mountain to climb.
No seller will likely agree to any sort of concession or repairs without obtaining estimates themselves or verifying with what you present.
I can usually give a decent ball park on most items because, while this is a unique experience to you, I’ve likely seen before (and grew up the son of a builder), but remember I’m not the licensed contractor and won’t be doing the work. So, NEVER, just take your agents word for what a repair item might cost.
A good agent will also have a roster of contractors on speed dial so that they can quickly round up some estimates.
It’s not uncommon for the buyer and seller to obtain a couple estimates and then determine a course of action from there.
4. Determine the next move
Decide whether you should ask for a fix, concession or price reduction.
If there is something that must be done to close the transaction, then asking a seller to have the repair done prior to closing is the only way to go (see above).
A concession on price/closing costs might not be enough to cover the cost entirely, and you could be left having to cover the additional expenses that were unforeseen
For example, something like a major roof repair, HVAC, extensive crawl space leaks and major electrical issues such as repairs to the electrical panel, faulty wiring, etc., are often better addressed prior to closing with the buyer’s inspector going back to reinspect the repair to ensure all was done properly. That gives you several licensed pros who have given their proverbial blessing to the discovered issue
If the repairs are relatively minor or are something you may be willing to tackle (and the sellers may be on a tight timeline to close) it might be better for the buyer to deal with them after closing with vendors of their choosing. In this case, a price reduction or closing cost concession based on the estimated cost of the repairs is an easier and welcome option for all involved.
Sometimes, a combination of the seller handling some repairs and a closing cost credit can be a way to appease the buyers. The sellers will often be pleased too, as they won’t have to take on the burden of all requested items.
5. When Possible - Avoid liability
You need to weigh the risks of having a repair or correction done before closing versus accepting a concession or price reduction.
For example, an air handler nearing the end of its life located in the attic might be better off replaced and relocated to the garage before closing. Although this might be viewed as an improvement rather than an actual repair (especially if they disclosed the age ahead of time) consider the ramifications of what can happen between contract and close.
The handler ends up with a slow leak that no one notices until the time of the walk through at which point a glaring moisture stain is on the ceiling or worse yet, the leak ends up accelerating to where it comes through the ceiling and now we have a 2nd repair needed.
The stress of this situation, not to mention the scramble to have all repair and replaced will cost more in the long run than had the seller just complied with the buyer’s request to replace the air handler in the first place.
6. Be realistic
An inspection report can be a helpful tool in renegotiating the terms of a purchase with sellers. However, the report should not be used to go for a “beat down” of the entire transaction with the seller.
You need to be reasonable and should not expect every item in the report to be addressed, regardless of whether it is an actual repair or not. I find first time buyers often forget that we filled out a sellers disclosure as part of the contract. If one is filled out thoroughly the sellers will have made good faith effort to make us aware of problems they have had, fixed and the age of major systems (think roof, hvac) that should be factored into the original price and terms.
Inspection reports often contain recommendations for improvement and maintenance, but that does not mean it is something that needs correction or repair
Just because an inspector recommends that gutters be added does not mean it falls on the seller to take care of that. Ditto for adding drainage, repairing or replacing a fence, etc. It’s the difference between an actual repair vs an improvement.
Some items are best left to a buyer to take care of with vendors and materials of their choice. Every resale will have “things” as a result of what was found from the inspection.
7. Work it out
Although repair negotiations can often put sellers on the defensive, it is usually in the best interest for both sides to work out an acceptable compromise. Obviously if there are big hidden surprises or an adjustment that should be made, the seller is unwilling to do, your agent should have placed language in the contract to help protect you (and your Earnest money).
The key being compromise. As with most negotiations there is bound to be some give and take. While there are always variables in each transaction (even the difference of you using the repair procedure vs the due diligence addendum), it’s important to remember everyone has the common goal of getting to closing. There’s a reason you’re already under contract on this property (probably checked several boxes of location, size, neighborhood, value, etc..) and as long as there is nothing significant discovered, best practice optimism and know it can and will get worked out!