Negotiating After the Home Inspection
IMPORTANT ACKNOWLEDGEMENT: Daylight Inspections Ltd., or any of its staff are not real estate agents or attorneys. This is not legal advice or real estate advice, it is just our opinion. We do not share opinions about negotiations during home inspections, nor do we share these opinions in our inspection reports. Opinions are based on our personal experience outside the realm of a home inspection and outside the realm of our expertise. The choice of what should or should not be negotiated is ultimately yours! Since we’re asked our opinion frequently, we think it is only fair that we share our opinion.
What is a Home Inspection?
A home inspection is a limited, non-invasive examination of the condition of a home, often in connection with the sale of that home. Home inspections are usually conducted by a home inspector who has the training and certifications to perform such inspections. The inspector prepares and delivers to the client a written report of findings. The client then uses the knowledge gained to make informed decisions about their pending real estate purchase. The home inspector describes the condition of the home at the time of inspection but does not guarantee future condition, efficiency, or life expectancy of systems or components.
A home inspector is sometimes confused with a real estate appraiser. A home inspector determines the condition of a structure, whereas an appraiser determines the value of a property. In Illinois, the IDFPR regulates home inspectors. A professional home inspection is an examination of the current condition of a house. It is not an inspection to verify compliance with appropriate codes; building inspection is a term often used for building code compliance inspections in the United States. Issues that come up during a home inspection may be negotiable, but there are no hard and fast rules about repairs that sellers need to complete as a result of a home inspection.
Here in the Okanagan, the real estate sales contract would typically indicate what would, or would not be allowed to be negotiated. But no matter what the law says, you will always have the freedom of choice. And your choices after the inspection are quite simple.
1. Proceed with the purchase with the house as is.
2. Cancel the purchase agreement.
3. Negotiate to have repairs performed or compensation so you can have repairs performed.'
Negotiating After the Home Inspection
Proceed with the purchase with the house as is.
No home is perfect. As will be repeated in this eBook multiple times, the choice is ultimately yours if you wish to purchase the home as is. When buying a used home, buyers shouldn’t expect everything to be perfect, because they never are. Home inspectors will have a list on every inspection performed. Putting the issues in a proper perspective is an important part of the process. If you choose to accept the home “as is”, then do it.
Cancel the purchase agreement
This typically happens when the buyer decides there are too many issues, or some issues are too expensive to mitigate. It also happens when buyers and sellers cannot come to an agreement. If the issues are too much for you, then don’t proceed. Negotiate to have repairs performed or compensation so you can have repairs performed This option is what happens after just about every inspection. In the negotiation process there are two basic request.
Your Two Choices
In the negotiation process there are two basic requests.
Ask the seller to perform repairs
Renegotiate the price
Ask the seller to perform repairs
When asking a seller to perform repairs, it is important to be specific. Say exactly what should be done, by whom, permits pulled, inspected and approved, when the work should be completed by, and documentation provided to the buyer by a certain date. I personally am not a big fan of this option because the sellers don’t always get good quality work performed. And when a repair is done poorly, it doesn’t sit well with the buyer.
Renegotiate the price
With this option, the buyer can hire their own professionals to do the work, and they can oversee the whole project after they own the house. This is a common approach, but it isn’t always a practical approach because it doesn’t leave the new home buyers with any cash for repairs.
It’s Your Choice
Every action has a reaction. There’s a chance that you will accept conditions that are different than what you expected. There is also a chance that you will “kill the deal” and have to start over. Decide carefully and thoughtfully and make sure everyone involved is professional and accurate. We strive to be thorough, accurate, and professional with every home inspection we perform.
DONE
Issues That Shouldn’t Be Negotiated
Known Conditions
If a condition is readily visible or apparent and you knew about it prior to the inspection, you should take that into consideration during your first negotiation for price. It is the job of the home inspector to inform you of items that you weren’t aware existed. A short list of known conditions include:
Peeling paint
Damaged walls
Damaged ceilings
Damaged floor coverings
Damaged driveways
Damaged walkways
Any condition listed in the Seller’s Property Disclosure Statement
Old items
We often hear discussions of older components and systems. Items that are near or at the end of their expected life span. The expected life span is just an average, a rough guide, and an opinion of the home inspector. Any item can fail prior to that expected life span and they can also last well beyond the expected life span. This is a list of items that have expected life spans. Life spans vary from the quality of the appliance:
• Windows – 30 to 50 years
• Furnace – 20 years
• Air conditioner – 20 years
• Water Heater – 10 to 12 years
• Tankless Water Heater – 20 years
• Appliances – 15 years
• Garage door opener – 15 to 20 years
• Roof – 20 years
We’ve been on inspections where the listing stated the furnace was replaced last year and the unit was 15 years old. This is completely a different story. If the buyer is expecting an appliance to be new and we tell you something different, then you should ask for compensation. You originally negotiated based on thinking the furnace is new. If the buyer discovers numerous items are at the end of their life-expectancy and they know they won’t be able to afford replacement soon, they might decide that this home isn’t the right one for them unless the seller would like to help out. It is not unreasonable to renegotiate at this point. Note: A price negotiation typically won’t help a buyer in this case. The buyer won’t have any more cash to deal with the repairs or replacements.
Minor Defects
As stated earlier, houses aren’t perfect. Part of being a homeowner means spending time and money on the house. Home buyers must accept and plan for this realty. Here are some things we feel home buyers shouldn’t ask sellers to address:
• Missing cover plates at outlets, switches, and junction boxes.
• Missing caulk
• Dirty furnace filter
• Dirty AC condenser
• Damaged insect screens.
Safety Upgrades / Code Changes / Energy Upgrades
While a home inspection is NOT a code compliance inspection, home inspectors often recommend safety upgrades due to changes in building codes. We also may use the codes to base our opinions are what is safe and unsafe. Homes, however, are not required to be upgraded every time a new codebook is printed. This does not mean that these safety and energy upgrades are not important, but we believe they make for somewhat petty negotiation items. The short list includes:
• Lack of AFCI devices
• Lack of GFCI devices
• Lack of safety glazing in hazardous locations
• Anything related to stairway safety, including wide spacing on stairway balusters
• Protection of the municipal water supply against backflow
• Minimal attic insulation
Of course there are always exceptions. If recent work was performed, it should be installed to today’s standards. The items above would only relate to home built 50 or more years ago with no upgrades completed. If you are going to do it, do it right. In closing, if a home seller is already upset because they are selling their house for less than they wanted, they won’t be happy to receive a list of small chores from a home buyer in the form of a purchase agreement amendments. This has been known to be the straw that breaks the camel’s back leading to the deal falling apart. We hate to see this happen, because items that cost hundreds of dollars to fix should never hold up the sale of the property that costs hundreds of thousands of dollars.
Our advice to home buyers is to not put yourself in that position. Treat the home purchase like a relationship; do you want to be right, or do you want to be happy? Let the little stuff go.
Reasonable Negotiation Items
We’ve discussed the options that a home buyer has after getting a home inspection in first section, and gave a list of what we consider to be unreasonable negotiation items. For this section, we are making a list of some common home inspection findings that are frequently negotiated. We are not saying these items should be negotiated, but that these are common items which are negotiated, and we don’t feel that any of these things are unreasonable.
What all of these items have in common is that they’re usually expensive, not obvious, or take special knowledge and equipment to recognize.
Big Roof Problems
• Leaking roof
• Defective shingles that could allow for leaks
• Improper roof installations that could allow for shingles to come loose.
• Roof coverings at the end of their life span
• Why do we mention roof coverings at the end of their life as a reasonable negotiation item, but excluded old appliances? Because appliances can be replaced after they fail. Roof coverings should be replaced before they fail.
Big Electrical Items
• FPE Stab-Lok Panels
• Overloaded electrical panels
• Outdated wiring such as aluminum branch circuit wiring and knob & tube wiring
• Widespread electrical hazards
– Open air splices
– Unprotected wires
– Improperly wired outlets
– Exposed live wires protruding from walls
– New, improper electrical wiring where the extent of the defects are unknown
Big Exterior Problems
• Masonry chimneys in need of more than just minor repairs
• Windows in need of replacement
• Rotting / Water intrusion at the walls
• Siding in need of major repair / replacement
• Unsafe decks, porches, balconies, and stairs
Big Plumbing Items
• Galvanized water distribution pipes that do not supply adequate water flow
• A water supply pipe from the street to the house that may need replacement
• Galvanized steel drains in need of replacement
• Active leaks – water piping, gas piping, drains, vents, etc.
• Clogged drains
Big HVAC Items
• Equipment that is not functional
– Furnace
– Boiler
– Air Conditioner / Heat Pump
– HRV
• Unsafe fuel burning appliances due to combustion or venting problems
• A cracked heat exchanger in the furnace
• A boiler that leaks exhaust gas
• A back drafting water heater
Other Notable Concerns
• Wet basement issues
• Moisture, or frost in the attic, and / or major ice dam issues – The fix for both of these is to address attic air leaks, insulation, and sometimes attic ventilation. While adding insulation is generally considered an upgrade, if insufficient insulation and attic air leaks are leading to water problems, this would be considered a repair, not an upgrade.
• Foundation problems
• Major structural deficiencies
• Damaged sewer lines (this can only be found by scoping the sewer)
• Environmental items, such as:
– Buried oil tanks
– High levels of Radon
– Asbestos that is loose or friable
– Mold
– Termites or other wood boring insects
– Lead dust, paint, and water
The above sewer and environmental issues are not included with our standard home inspection. They can be arranged for an additional cost. There are many other possible items, but this list makes up most of the “big” items that get identified during the home inspection. As stated, the choice is ultimately yours! If you are going to negotiate, your real estate agent or your attorney will usually do the negotiating on your behalf.
RESUMED STARTED
Important Information
99% of realtors and lawyers (and home inspectors) are upstanding and honest people. They will work on your behalf on all parts of the real estate transaction. If you feel that your real estate agent or attorney is not working in your best interests, please be careful what you share with them. Always write honest reviews at the end of the process. Nobody can control reviews on sites such as Google and Yelp. It will keep the honest ones motivated and discourage the dishonest ones from continuing in this business.
Prepare for the Negotiations – *Key Step*
Organize your list of deficiencies that you want to present. Divide the issues into three columns.
Column A – Deal Killers
These items are important enough that you’d be willing to walk away from this house if they aren’t corrected or if you are not compensated for them.
Column B – I Got This
These are smaller items in the inspection report that are inexpensive, easy to correct or that you may just accept in their current condition. They could be maintenance-type things like changing light bulbs or fixtures or painting the windowsills. The strategy here is to signal to the sellers that you’re not being unreasonable; that you understand homes are not perfect and you are going to accept some of the problems. The longer this list is, the more reasonable you become in the seller’s eyes, and the more ammunition you give to your realtor/attorney to negotiate on your behalf.
Column C – Everything Else
These are moderate items that are important to you. You are going to ask your attorney or real estate agent to be your advocate, do their difficult job as a negotiator, be your hero, and get you compensated for these items, as much as possible. You can let them know that you’re still willing to buy this home even if none of these items are compensated or repaired. Discuss each item on this list with your agent. Each home is unique, so there are going to be factors (some outside of your control) that change each transaction. These unique factors can increase, or reduce, your negotiating power. Your real estate agent will be tuned-in to the current market and can help you with your list.
Factors that increase, or decrease your leveraging power include:
• How hot the market is. Supply and demand.
DONE
If there are buyers behind you ready to purchase the home should the deal fall through, then the seller may not care if you purchase it or not. It sounds harsh, but this is a business transaction. On the other hand, if the market is slow and you are the only offer in three months, that will give you more negotiating power.
• The price you paid
Your real estate agent will have access to comparable properties. He or she will be able to see how much similar houses sold for recently. If you are above those prices, it will increase your leveraging power. If you are under those prices, your leveraging power will be decreased.
• How much you love this home
Emotions do get involved. Try to keep them out of it. There are plenty of homes out there and there is an old saying: desperate people do desperate things.
• How badly do the sellers want to sell This one will be difficult to know. If you are able to get some inside information that the sellers are a bit desperate, that increases your power.
Our goal is to consistently exceed our customers expectations by being the most thorough, accurate, and professional home inspection company in the Okanagan area.