Buyers and sellers often think the negotiations are complete as soon as both parties sign the purchase agreement. The fact is that another round of negotiations is frequently needed after the house is professionally inspected. The inspector’s job is never to decide if the agreed price is correct or what it should be. Nor should the inspector be involved in a second round of negotiations after the inspection. The inspector’s role is to make the buyer aware of any problems that may not have been known previously so the buyer can make an informed purchase decision.
Risks of Waiving a Home Inspection
In this strong sellers’ market, it can be tempting for the buyer to waive the home inspection. This can make your offer look stronger if the seller has multiple offers to consider. But it is a huge risk for the buyer. In a seller’s market, the buyer has probably submitted a top-dollar offer. Do you want to pay top dollar and then have to make expensive repairs that weren’t known about? Do you even have the money to make those repairs? Besides the additional expense, the buyer also risks that the lender will not approve the mortgage without an inspection or that an insurance company will not issue a homeowner policy. Even a strong sellers’ market is not a good reason to waive a home inspection.
Your Options After the Inspection
Following the inspection is a time that real estate agents typically play an important role. Emotions run high when the seller and buyer believe a deal has been struck but both learn there are more issues to be resolved. A good place to start is for both agents to go over the report separately with their clients. They should make it clear that generally five options could result from the report:
- Do nothing by completing the sales as already agreed to.
- Cancel the sale based on major problems revealed by the report.
- Negotiate a new price.
- Negotiate repairs.
- Negotiate a combination of repairs and a price revision.
What Probably Can’t Be Negotiated
Although there will be professional opinions involved, the report can be prioritized into issues that must be corrected and issues that the buyer would like to have corrected. There are no hard and fast rules about what has to be corrected. The deal might fall apart but both parties are free to refuse the demands of the other. For instance, the seller should not be expected to make repairs or improvements to items that were visible to the buyer when he or she viewed the house.
Items that are generally not negotiable after the inspection include anything that was accurately described in the Seller’s Property Disclosure Statement. Also non-negotiable are cosmetic issues like worn carpets and peeling paint that was visible. Anything visible that the buyer wanted to be corrected should have been part of the already signed purchase agreement.
Older homes can present unique challenges in this area. An inspection could report that an old but functioning furnace should be replaced within a year. If the furnace is functioning correctly, this is more opinion than fact. Either way, the condition of an older home and the probability that future repairs will be needed should already be built into the sales agreement. It’s the surprises that are more negotiable.
What Might Be Negotiated
It doesn’t happen often but there can be issues that the seller’s lender will make the loan contingent upon. This could be a damaged roof that was not detected by the buyer. The seller can’t be forced to make the repair but chances are they won’t be able to sell contingent on a loan until the repair is made.
There can be other major problems that only come to the buyer’s attention via the inspection report. This could be a roof nearing the end of its useful life, a damaged electrical system, foundation damage, crumbling chimney masonry, a poorly constructed deck, etc. These surprises can warrant a price reduction. In many cases, the seller will have to include this information in the Seller’s Property Disclosure Statement for a future sale.
Just because a problem needs repairing doesn’t mean the seller has to make the repair. Often it’s in the best interest of the buyer to get a price concession and arrange for the repairs themselves. The seller is still looking at the bottom line that he or she will walk away with. The seller is likely to have a minimum repair made rather than consider the long term consequences.
Local code violations such as missing handrails almost always have to be repaired. However, upgrades to revised codes that were grandfathered are negotiable. The home inspection is not a code compliance inspection. While the inspector might make recommendations based on code changes, the buyer needs to look at the big picture. Rarely are houses that met code when built required to be upgraded at a later date. If the buyer wants a house complying with the new codes, he or she should probably be looking for a newer house.
The buyer obviously wants to purchase the house if a purchase agreement has been signed. They should approach the house inspection as a relationship with the seller rather than a need to be right about everything. This is what makes a “must fix” and “nice to have” priority list good from the beginning. Final negotiations aren’t complete until the house inspection has been accepted.
Please leave a comment on your thoughts about negotiating after house inspections.
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Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for 12 years. He also draws upon 30 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, near a national and the Pacific Ocean.