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-Bloggged 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 Just Call 408-252-8900 Luxury Homes in Top Silicon Valley Schools-San Jose, Cupertino, Saratoga & Palo Alto 12/07/2009 03:47 AM
  9. Debra 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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Rainmaker
693,508
Debra Walsh
Hudson Valley NY Real Estate 845.928.8000
Keller Williams Realty

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. 

 

December 09, 2009 12:07 PM
Rainer
134,387
Jon Rudolph
ACI
I.D. Property Inspections, Inc.

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.

December 09, 2009 12:51 PM
Rainer
56,728
Rick Schwartz
William Raveis Real Estate

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.

 

 

December 09, 2009 01:39 PM
Rainmaker
351,418
Damon Gettier
Broker/Owner ABRM, GRI, CDPE
Damon Gettier & Associates, REALTORS- Roanoke Va Short Sale Expert

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.

December 09, 2009 08:17 PM
Rainmaker
894,756
Tony Marriott
Associate Broker, REALTOR
Haven Express @ Keller Williams Arizona Realty

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.....

August 17, 2010 09:47 AM
Anonymous
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Rainer
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Rick Schwartz

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