How To Negotiate Repair Items from a Home Inspection

home inspection guideAs with so many other things in real estate, the home inspection is all about context. There are a handful of core concepts that can make or break how the home inspection impacts a potential sale.

Preparation

Foremost, is preparation prior to your home inspection.

Start with reading up on what an inspection is and what it is not and where a home inspection fits in the home buying timeline. But mainly, when I say preparation I mean:

Prepare yourself for imperfection.

The vast majority of the housing stock for sale in Boston is 80-120 years old on average. No property is perfect and every home or condo, even new construction, will have issues. The more you can be prepared for this, the less shocked you will be at the actual inspection when things come up. There are a handful of very common items the show up all the time, like double tapped circuit breakers, subjective suggestions of the necessity of exterior masonry work, non-grounded outlets, kitchen and laundry venting issues, etc.

Remember: a good home inspector is someone who will help you understand what is going on with the physical condition of the property. They should not be giving you estimates for repairs (use a contractor for this), they should not be saying who should take care of what (buyer versus seller) since they have no clue as to the context of the transaction – let your broker make suggestions on this – and besides the fact that they may be inherently worried about liability, it is also their job to thoroughly inspect a home for imperfections (typical or not) so they will be (and should be) pointing out every minor defect.

Context

The next step is understanding how your transaction and the current real estate market conditions correlates to your home inspection results. If there were multiple offers and/or very low days on market, then the potential to leverage the seller for repairs or credits after inspection is decreased.

The key is here is framing the issues in a way that the sellers understand any subsequent disclosure ramifications. Let the selling side know that these issues will come up with any buyer, and that dependent on what they are, that they may have to disclose them to the marketplace if you back out of the deal. Have your broker stress that the initial multiple offer feeding frenzy time period has elapsed and that they may not be in as strong a position, as they were when you were competing to buy the unit.

On the flip side, if a home has been on the market for a long period of time and/or has seen multiple deals fall apart at prior inspections, than you can be more aggressive as far as seeking concessions.

Negotiating Post Home Inspection

As part of negotiating post inspection, it is always useful to be transparent with the selling side. Forward them the inspection report summary, if not the entire report. That way they can see that even though some requests are being made, that there are a multitude of other issues in the report that are being left alone, thus showing that the requests are reasonable. This builds trust, as well as context for the seller.

It is always advisable to ask for a whole bunch of items, with a true agenda of important issues. That way you can play give and take, and still accomplish your goals on what you want the seller to address. This is true both as far as the number of items: ask for 10, and be happy with 3-5, or the equivalent credit to cover the price of repair.

Credits vs. Repairs

Credits off the purchase price are generally preferable to actual repairs. This is because it eliminates subjectivity to the quality of repair work performed, removes what can be tricky pre-closing logistics to coordinate the work, and prevents repair related verbiage in a purchase contract from over-complicating loan underwriting. Not to mention, as a buyer, you can pick and choose what you actually want to address/how you want to spend that money once you own the property.

Always shoot for +-2-3 times the amount that you will be happy with. If there is a big ticket common building expense in there, realize that the seller may be thinking a split is fair, versus a current material defect, where they may be more amenable to covering the full cost.

Example:

After a home inspection, the inspector reports some major and minor items that need repair:

Small Items

Miscellaneous small items like improperly wired outlets, leaky toilet, etc. that may cost a few hundred dollars in handyman labor.

Major Items

Then there is the inspector’s opinion that there is some spot pointing needed, and a mason estimates $10K of cost for the condo association (and a share of that, say$2000, for the specific unit in question). Shoot for $3000, over estimating the cost of the miscellaneous stuff to $1000, and posturing that you want the seller to pay for their portion of the needed outside work.

A good result will be $1000, and anything over that would be excellent. The fact is that there is no guaranty that the masonry is even going to get done (condo would need to approve, and again that expense can be highly subjective as to when it is actually needed).

Remember, it is all context. Understand the severity, or insignificance, of the issues; remember the context of the deal, and prepare yourself for what to expect both before and after an inspection. A good place to start is with our Home Inspection Guide.






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How To Negotiate Repair Items from a Home Inspection

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