When you’re in escrow on a home, it’s an exciting yet nerve-wracking time. You’ve found the property that seems perfect, but now comes the home inspection—a crucial step that can uncover issues with the property that may not have been evident during your initial walkthrough. While discovering problems might be disheartening, it’s important to remember that inspection findings are a normal part of the home-buying process, and they offer you the opportunity to negotiate with the seller. Here’s how to navigate those negotiations effectively.
1. Understand the Inspection Report
Before you start negotiating, take the time to thoroughly understand the inspection report. The inspector’s job is to find everything that might be wrong with the property, big or small. The report will likely include a range of issues, from minor cosmetic imperfections to more serious structural or safety concerns. It’s essential to differentiate between these to determine what’s worth negotiating over.
- Minor Issues: These are usually cosmetic or maintenance-related, such as chipped paint or a loose door handle. These items are generally not worth negotiating over.
- Major Issues: These include problems like a failing roof, foundation cracks, plumbing or electrical issues, or a failing HVAC system. These are the issues that should be the focus of your negotiations.
2. Prioritize Your Concerns
Once you’ve reviewed the report, prioritize the issues that are most important to you. Consider the cost of repairs, the potential for future problems, and how these issues might impact your enjoyment or use of the property.
- Health and Safety Concerns: Issues like mold, asbestos, or faulty wiring should be at the top of your list. These problems can be hazardous and should be addressed before you move in.
- Structural or Mechanical Issues: Major repairs like roof replacement or foundation repairs are costly and could affect the home’s value. These are also key items to negotiate.
- Code Violations: If the home has any features that are not up to code, these should be rectified, either by the seller or through a price adjustment that allows you to handle the repairs.
3. Request Repairs, Credits, or Price Reductions
When you’re ready to negotiate, you generally have three options: ask the seller to make repairs, request a credit toward closing costs, or ask for a price reduction. Each has its pros and cons:
- Repairs: If you request that the seller make the repairs, ensure that they are completed by a licensed professional before closing. However, be aware that the seller might opt for the cheapest fix, which may not meet your standards.
- Credits: A credit at closing allows you to handle the repairs yourself, ensuring they are done to your satisfaction. This option gives you more control but requires you to manage the repairs after you’ve taken ownership.
- Price Reduction: Asking for a price reduction based on the estimated cost of repairs can help you lower your mortgage, but like credits, you’ll need to manage the repairs on your own after closing.
4. Get Multiple Estimates
If you’re considering asking for a credit or price reduction, it’s a good idea to get multiple estimates from contractors for the cost of repairs. This gives you a solid basis for your negotiations and shows the seller that you’ve done your homework. Providing these estimates can make your case stronger when requesting a specific amount.
5. Be Reasonable and Realistic
When negotiating, it’s essential to be reasonable. Sellers are not obligated to fix every issue or agree to all of your requests. Focus on the most critical issues and be prepared to compromise. For instance, if the seller agrees to fix the roof but not the cosmetic issues, that might be a fair trade-off.
6. Consider the Market Conditions
Your negotiating power can be influenced by the current real estate market. In a buyer’s market, where homes are sitting on the market longer, you might have more leverage to ask for repairs or credits. In a seller’s market, where properties move quickly, you might need to be more flexible and focus only on the most critical repairs.
7. Leverage Your Agent’s Expertise
Your real estate agent is a valuable resource during these negotiations. They’ve handled numerous transactions and can provide insight into what is reasonable to ask for and how to approach the negotiations. They can also communicate with the seller’s agent on your behalf, ensuring that your requests are presented professionally and persuasively.
8. Prepare for Possible Outcomes
Negotiations can result in several outcomes. The seller might agree to all your requests, they might counter with a compromise, or they might refuse to make any concessions. Be prepared for any of these scenarios:
- Agreement: If the seller agrees to your terms, make sure everything is documented in writing as an addendum to the contract.
- Compromise: Be ready to prioritize what’s most important to you and negotiate accordingly.
- Refusal: If the seller refuses to negotiate, you’ll need to decide whether to proceed with the purchase as-is or walk away. This decision should be based on how much the unresolved issues will impact your enjoyment or investment in the property.
Conclusion
Negotiating inspection findings during escrow can be a delicate process, but it’s also an opportunity to ensure that you’re making a sound investment. By understanding the inspection report, prioritizing critical issues, and approaching negotiations with reasonable and well-supported requests, you can often reach an agreement that satisfies both parties. Remember, the goal is to ensure that your new home is safe, sound, and worth every penny you’re paying for it.
