Even if you already have an accepted offer, a home can’t be considered bought until the money has changed hands. But before you can get to that you’ll need to navigate a few things, one of which is the home inspection. This is a vital step in the buying process in which a third-party will inspect a home for any major defects. Most times problems are found. If they’re bad enough, they could be a great opportunity to renegotiate the contract for a better deal. But they can also present you with a tough choice of buying despite the need for repairs or walking away. Here’s a look at what you need to know about home inspections and how to get the best deal possible.
What is a Home Inspection?
Before we get started, let’s just clarify what a home inspection is, and what it’s not. When you first signed a purchase contract you probably included a few contingencies. One of these will have been the home inspection contingency. This will be an inspection of the property by a certified home inspector to determine if the property has any construction defects. Most of the time small issues will be found but sometimes major ones pop up. When major issues are found this can dramatically affect the value of the property and raise the question of repairs. As the buyer, you now have the option of negotiating for a change in the deal or walking away.
It’s important to understand that unless you’re buying a new construction there will probably be small issues found in the inspection. Most buyer agents will advise their clients to not be nitpicky about small things as it can needlessly hold up the sale. Major issues though such as water damage, foundation issues, and problems with the roof are well worth negotiating on.
Opening Negotiations
In every negotiation, perception, and framing are of vital importance. How you approach the seller and frame your demands will play a big part in whether you’re successful. When you go to the seller with your list of demands be smart about how you respond to their objections. One way would be to frame any demands for repairs as an investment in the deal. They want to get the place sold too and by making a few repairs they can help make that happen. As mentioned, you should also avoid being nitpicky with what demands you make. If you have a long list of demands for minor repairs, then this can make the seller feel like their conceding more than they are. Try to stick to the most important issues, those being the most expensive repairs.
You also need to approach negotiations from a win-win perspective. The aim in negotiating isn’t to use all the leverage you have to beat the other side into submission. Instead, it’s to find some common ground and create a sense of partnership. You’ll have a far higher chance of success if you remain reasonable in your demands and find a compromise solution. It’s also good to know when to stop negotiating. Once you’ve got all the main things you wanted then it’s usually better to let the rest go. Your goal, after all, is to get the house you want, not to win on every line item. Stretching out negotiations over minor things only risks putting the deal in jeopardy.
Push for Repair Money Rather than Actual Repairs
Forcing the seller to make the repairs themselves before closing can cause a few problems. First off, they may hire a contractor whose quality of work isn’t up to your standard. Second, the repairs might take longer than expected and delay the closing. A delayed closing could mean missing out on your locked-in interest rate for your mortgage. The seller may also not have the money to make repairs. Even the best negotiators in the world can’t squeeze out a dry rag.
A better alternative and one that’s a win-win for everyone is to make the sale contingent on the seller setting aside some repair money from the proceeds of the sale. This can be done either with cash that’s kept in an escrow account or closing credits. This way you can get the repairs done to the standard you want and still without paying for it. Meanwhile, the seller gets their money without having to organize repairs or find up-front money. It’s the best compromise for everyone and only requires an extra clause in the contract.
Know When to Walk Away
Sometimes negotiations don’t work out and it’s better to walk away. Negotiating after an inspection can be especially hard in a seller’s market. In a tough situation where you don’t have the money for a down payment and repairs, you may be forced to let it go. The worst thing you can do is buy a home that sucks every last dime out of you. In such a situation it’s better to walk and start your search again. This is why it’s important to not get emotionally attached to the home during negotiations. You’ll end up boxing yourself in and ending up with something you really shouldn’t have bought. Above all, trust your exclusive buyer’s agent. They’re there to look out for your best interests and will advise you on whether it’s worth proceeding with the deal.