Are Home Inspections for Renegotiation or Buyer Protection

By
Real Estate Agent with William Raveis Real Estate

It's fairly ubiquitous today to hire a licensed home inspector when purchasing a home.  This is a good thing. For most folks a home purchase represents the largest amount of money to be spent in their lifetime. The home inspection contingency is typically one of the "big three" contingencies in an offer to purchase.  

While specific language and format will vary, the basis of a home purchase agreement has, in essence, three components from the buyer's point of view.

 

We will purchase your home if...

  1. You agree to our price
  2. We can acquire appropriate financing
  3. Upon inspection(s) the home has no defects which we deem unacceptable

If any of those contingencies are not met, the buyer has an out and will likely be able to recoup any money paid into an escrow or trust as a deposit.

I guess this is where I should put my disclaimers. 

I am neither an attorney nor a home inspector - this post is to be construed neither as legal advice nor specific recommendations on any construction, structural, etc issues regarding a home you wish to purchase.  Any similarities to actual persons living or dead is purely coincidental. One offer per household and finally - employees of Rick Schwartz Homes, any affiliates, wholly or partially owned subsidiaries or related companies are not eligible.

The question I'm posing, as a Realtor is this: Should it be assumed, by the buyer, that the seller should bear the cost of repairing any and all defects uncovered during a home inspection?

My purpose in this discussion is to raise the issue for thought as to why we do home inspections and should the buyer plan to use this moment to renegotiate the purchase price of the home.

We do home inspections in order to uncover defects in the home that might not be noticed during the shopping process.  Things that might not be visible during a routine walk-through. Most defects are fixable.  There is obviously, a cost involved in any remedy.  The key point, in my opinion is one of expectations.  The purpose of the inspection is to uncover things that were not likely to be apparent when you are in "shopping" mode.  Examples:

  • If you see water dripping into a large puddle in the center of the basement directly under the kitchen, you should not be surprised when a home inspector reports a plumbing issue.
  • If you see scores of rodent traps on the floor in several rooms, you should not be surprise if the inspector hints that there might mice present.
  • If there is black tape across the front of several electrical outlets, you should not be surprised if the inspector recommends that an electrician check the place out.
  • If the front view of the house looks more like the one on the left in the image below, rather then the one on the right, you shouldn't be surprised at anything the inspector finds.  

nice vs ugly

Serious point here is that your own walkthrough which happens long before you negotiate price should give you a general idea of the condition of the house. If you have a feeling that there are issues yet to be discovered, say so early on. Have your Realtor let the listing Realtor know that you are making a lower offer because you saw, this or that or the other.  Take the condition of the house into account before you decide what you want to pay.

Your home inspection is, without a doubt, going to reveal some items that need to be corrected. If they are minor, put them on your list of things to work on when you move in.  If they are major safety, health or structural issues, then either ask the seller to pay for repairs, split it with them or use your contingency to pull out. 

close

Re-Blogged 11 times:

Re-Blogged By Re-Blogged At
  1. Mark VanBuskirk 12/01/2009 03:47 AM
  2. Bill Ladewig 12/01/2009 12:42 PM
  3. Jon Sigler 12/01/2009 10:11 PM
  4. Patty Mortara REALTOR, ABR, CRS | Hunterdon County (NJ) 12/02/2009 04:50 PM
  5. Lyn Sims 12/03/2009 04:45 PM
  6. Sybil Campbell 12/04/2009 12:17 AM
  7. Marzena Melby 12/07/2009 03:32 AM
  8. Michelle Carr-Crowe-Selling Silicon Valley Homes in Top Schools San Jose, Cupertino, Saratoga, Palo Alto-Just Call 408-252-8900 12/07/2009 03:47 AM
  9. Debbie Walsh 12/09/2009 12:09 PM
  10. Dan Edward Phillips 04/26/2010 11:04 AM
  11. Dan Edward Phillips 06/10/2010 10:52 PM
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Show All Comments
Rainer
241,202
Douglas Fischer
East Oahu Realty - Selling Honolulu, Hawaii Condos - Honolulu, HI

From my perspective, unfortanately too many buyers and their agents use the home inspection as fodder for round 2 of price negotiation.

Dec 02, 2009 02:40 PM #85
Rainer
241,202
Douglas Fischer
East Oahu Realty - Selling Honolulu, Hawaii Condos - Honolulu, HI

From my perspective, unfortanately too many buyers and their agents use the home inspection as fodder for round 2 of price negotiation.

Dec 02, 2009 02:40 PM #86
Rainmaker
203,711
Patty Mortara REALTOR, ABR, CRS | Hunterdon County (NJ)
Hunterdon Realty Group - Flemington, NJ

It seems lately that a primary purpose of the home inspection is to re-negoitate the sales price and not to simply find the mechanical, structural and environmental defect as the inspections were intended to!

Dec 02, 2009 04:50 PM #87
Rainer
67,262
David Helm
Helm Home Inspections - Bellingham, WA
Bellingham, Wa. Licensed Home Insp

Rick, excellent topic, and there are a lot of well thought out comments.  As a home inspector, it is not up to me to even consider whether items should be renegotiated.  That is completely up to, and between, the buyer and their realtor.  It is my job to do as thorough an inspection as possible and to report conditions as found.  Many things fall under the heading of deferred maintenance, but others are actually defects, or safety issues.  I am often asked by clients if they should ask for something to be fixed.  I refer them to their agent for answer (even though I probably do have opinions).  There are certainly some things found in inspection that it is a good idea to get estimates on prior to closing.  The cost of repair may be staggering.

Dec 02, 2009 05:31 PM #88
Rainer
138,299
Tony Hager
United Realty Texas - Denton, TX
Broker

I don't think you can answer the question about opening the door to renegotiation without a specific deal in mind. It all depends on where the seller has his price situated and how much you do find in the inspection.  Therefore all those that answered in general terms trouble me.  If a seller knows he has failed to properly maintain his home yet he prices it on the low side to indicate that then the buyer should not expect them to pay for repairs as the seller has already allowed for that in the price.  On the other hand if the seller has not maintained the home but has it priced on the high side of the market then yes the buyer should renegotiate the price once repair items are found.

Dec 02, 2009 05:36 PM #89
Rainmaker
237,724
Roger Johnson
CENTURY 21 American Homes - Hickory, NC
Realtor - Hickory NC Real Estate

I didn't take the time to read all the comments, so forgive if it's been said, but in short, it can be both. What defects are found, and how serious they are, and if the buyer/seller wanted to continue, would determine if a home inspection becomes a renegotiation tool.

The REAL issue with the home inspection is that the majority of the agents, and therefore, the buyers, don't know what repairs are part of the purchase and sale contract.  State laws, and contracts vary, but most have some form of inspection and repair contingency.  ONLY repairs that fall into the guidelines set in the contract affect the contract.  Most agents and buyers see ANY issues as needed repairs and demand satisfaction.

If the home is not new construction, then the buyer should NOT be expecting a NEW home.  Some examples of...well...stupid repair requests by buyers: light switch plate cover is cracked, needs fixed.  light bulb is burned out, needs replaced.  ice maker not installed on refrigerator.  light fixture is not centered in room.  And my personal favorite...attic insultation is only 2 3/4 inches thick, needs to be 3 inches.

Until the agents learn what a home inspection is for..and not for...the buyers will continue to view them as a way out of the contract or a renegotiation tool for every dripping faucet that they find

Dec 02, 2009 06:25 PM #90
Rainer
122,675
Marian Pierre-Louis
Fieldstone Historic Research - Medway, MA
Metrowest Boston

Buyers have varying degrees of understanding what they see when they walk through a house.  As a result a home inspection can mean different things to different buyers.  For some, it is a lesson in understanding how to take care of their future home.  For others it is uncovering a termite problem in a structural beam that they weren't able to recognize themselves.  No matter what way you look at it home inspections are important.  The most important thing is to make sure you have a good inspector.

Dec 02, 2009 08:24 PM #92
Anonymous
Anonymous
susan thompson

I feel that the home inspection provides an opportunity for the buyer to learn about their new home. In my opinion it should be to identify safety, mechanical and structural issues and those are the issues that potentially should be negotiable and the agent should take this position in educating the buyer on the purpose of the report. Unfortunately, many buyers interpret the purpose of the inspection differently, many times doing their own resourch and developing their own mentality on this, or very often listen to the opinions of others which can be totally off track and without foundation. And, as it was mentioned in some of the comments, many buyers have little or no tolerance for anything that needs to be repaired. When buyers go beyond consequential safety, mechanical and structural issues, keeping those types of buyers on track is extremely difficult and almost always jeopardizes the contract .

Dec 02, 2009 09:23 PM #93
Rainmaker
185,646
Alan Grizzle
Chestatee Real Estate - Dahlonega, GA
Full Time Realtor, Lifelong Resident of Dahlonega

I advise my buyers to look at the house and offer what they would pay as is for it. If they see a problem plan on fixing it after they close. The inspection is to find something they did not see when we looked out at it. If we find a unexpected problem such as a bad HVAC unit then ask the seller to fix that.

Dec 02, 2009 09:41 PM #94
Rainmaker
1,262,937
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

Nothing is guaranteed.  It is all negotiable.  I tell my clients in this market to only look at major issues.  Any good home inspector will find something.  You should not nickle and dime.  Safety issues and price make something major; as well as lender issues.

Dec 02, 2009 11:01 PM #95
Rainmaker
333,351
Ty Lacroix
Envelope Real Estate Brokerage Inc - London, ON

Rick, with all the above comments, all I can say is know your client

Ty

Dec 03, 2009 10:38 AM #96
Rainer
3,868
Lawrence Transue
Integrity Inspection Service - Easton, PA

" Should it be assumed, by the buyer, that the seller should bear the cost of repairing any and all defects uncovered during a home inspection?"

That depends on what the meaning of the word "repair" is?   Is it a "repair" to install a GFCI outlet near the kitchen sink of a fifty year old home?  Or is this a safety upgrade? 

Is it a "repair" to replace a 15 year old water heater that works fine and does not leak?

Many buyers expect the seller to "correct" these things.  In my opinion this is unrealistic. 

A seller can (at their option) correct or compensate a buyer for any non-disclosed items in need of "repair"

Such as a leaky roof, inoperative Central AC unit, structural damage, etc. 

Unfortunately, many buyers are asking for much more especially in this market.   This can be addressed in the sales agreement.

Dec 03, 2009 02:08 PM #97
Rainmaker
818,493
Lyn Sims
RE/MAX Suburban - Schaumburg IL Real Estate - Northwest Suburbs of Chicago - Schaumburg, IL
Schaumburg Homes

Excellent post.  The agent should discuss what is expected from the home inspection.  It seems when that is done & clear in the buyers mind, most problems don't arise. 

Dec 03, 2009 04:35 PM #98
Rainer
153,778
Matthew Bartlett
Century 21 Masters/Lic. #01353034 - Glendora, CA

Hi Rick,

I personally always recommend to my clients that they complete a property inspection. Not for the purpose of renegotiating the price. But for the simple purpose of insuring that my buyer is well informed about the home they are considering. My buyer will make the ultimate decison on whether to request for repairs, accept the needed repairs and agree to fix them themselves, or walk away from the deal . However it must be noted that in California the Seller does not have to agree to make any repairs. This includes code violations. The seller does not have to repair code violations, nor do they need to know the various housing codes. The only acception to the above mentioned is the Seller MUST strap the water heater and the Seller MUST install all required smoke detectors prior to close of escrow.

All buyers must be aware that when purchasing a home you must expect that there will be things wrong with the home. They must also be informed that expecting the seller to make all repairs or cover all the cost of the repairs depending on the market is not always realistic. Very good post!

Matt 

Dec 05, 2009 04:26 PM #99
Rainmaker
201,298
Marzena Melby
Coldwell Banker Burnet Realty - Richfield, MN
Realtor, Twin Cities Minnesota Real Estate

Well, Rick, what a great discussion.  Great article.

Dec 07, 2009 03:33 AM #100
Rainmaker
728,494
Debbie Walsh
Keller Williams Realty - Middletown, NY
Hudson Valley NY Real Estate 845.928.8000

This is a terrific post and too often now-a-days buyers feel the inspection is just their tool for price negotiation.  It IS their tool but to make sure they are buying a safe and well built home.  More and more they seem to be forgetting this. 

 

Dec 09, 2009 12:07 PM #101
Rainer
135,615
Jon Rudolph
I.D. Property Inspections, Inc. - Loveland, CO
ACI

This is a very interesting and enlightening post.  Most the comments here say that the buyer's inspection is limited to what a buyer can or can't negotiate with the seller.  What a Realtor will "tell" their client they should or shouldn't ask the seller to do.  A few posted statments on inspection negotiations are based on state contract language but, most seem to be Realtor opinion.   

I'm curious, as a prospective home buyer, why wouldn't I be allowed to negotiate whatever I want?  Isn't that my prerogative as a buyer?   Is there a law, other than in a few apparent states with specific contract language, which dictates what a buyer can or cannot negotiate? 

Again, with a few state exceptions, I haven't seen what the basis is for limiting a buyer's negotiation position.  Can anyone provide some justification?

Thanks.

Dec 09, 2009 12:51 PM #102
Rainer
56,728
Rick Schwartz
William Raveis Real Estate - Danbury, CT

Hi Jon, thanks for reading and commenting. I'll try to give you my answer to your question.

It is totally the buyer's prerogative to attempt to negotiate anything they want.

Purchasing a home is about as close to a textbook definition of a free-market as you can find. Either side can make any requests or demands that they choose - and either side can pull out of a deal at any point provided if they are keeping with a contingency that is spelled out ahead of time.

A Realtor should not ever "tell" a buyer what they can ask for anymore than a Realtor should never "tell" a seller what they should or should not agree to.

When working with a buyer my goal is to help them find and purchase a home at the best possible price with the least amount of inconvenience in the shortest amount of time. 

When I discuss this topic of inspections and negotiation with my clients, I do so at the beginning of our relationship not after the inspection was done.   I offer them the benefit of my experience and I advise them that should make a decision early on about how they fell about inspections. 

It's a matter of philosophy

  • Philosophy #1.   Negotiate for the best price you can get and order a home inspection to find out if there are unexpected defects in the house.  Ask for major repairs but absorb the minor ones as part of being a new homeowner.
  • Philosophy #2.   Negotiate for the best price you can and then plan on using the inspection to uncover as many minor issues you can and push the seller to fix them all or you will pull out of the deal.

When representing a buyer, it is important for me, as their advocate to know how they think on this subject.  The more I know, the better I can help guide and advise them.

If a client is a firm believer in #2, I usually go on to make sure that they understand that negotiation is a two way street.   Although they have the right to walk from a deal if the seller will not do as they are asked, the seller also has the right to refuse. 

The second thing I advise them about negotiations in general is this.  Pushing really hard at the front of a deal can have repercussions.  The fact is, that even in a buyer's market, the buyer needs the seller's goodwill and cooperation.

If you as a buyer, pressure a seller into agreeing to a laundry list of small items you may feel that you've "won".

If you fast forward a few weeks and your loan commitment is delayed or the closing is delayed or the closing on the house your selling is delayed and you need to ask the seller to have some flexibility with you - they have the option of being cooperative or holding you to the letter of your agreement.

I think it's obvious that my recommendation is go with philosophy #1.  I will work with buyers who believe in the latter but I always make them aware that there are risks with rewards.  

If you manage to push a seller into $2500 worth of cracked switched plates, running toilets, stuck windows, sidewalk cracks, leaves in gutters and other small repairs - the seller will remember. 

As long as you as a buyer are not surprised when they remember, then move ahead and negotiate twice.

It's all about what your goal is.

 

 

Dec 09, 2009 01:39 PM #103
Rainmaker
351,538
Damon Gettier
Damon Gettier & Associates, REALTORS- Roanoke Va Short Sale Expert - Roanoke, VA
Broker/Owner ABRM, GRI, CDPE

I personaly practice the principal of negotiating the price and then have a home inspection to make sure that the home is in good shape.

If a buyer wants to use a home inspection to negotiate the sales price than they should do the inspection before they put an offer on the house.

Dec 09, 2009 08:17 PM #104
Rainmaker
912,860
Tony Marriott
Haven Express @ Keller Williams Arizona Realty - Scottsdale, AZ
Associate Broker, REALTOR

Contrary to popular opinion, Buyer Inspection Period is not an opportunity for a "free look".  The Buyer must act in "Good Faith" when making a decision to cancel during the inspection period.  Deciding they no longer like the floor plan doesn't count.....

Aug 17, 2010 09:47 AM #105
Anonymous
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Rainer
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