As my client signed the closing documents, he innocently asked the settlement attorney about problems she sees at closing.
“These days, probably home inspection items not getting done right,” she said.
If you plan to buy a home, you will likely include a Home Inspection Contingency in your offer. Home Inspection Contingency periods typically last seven days and require you to hire a professional home inspector (not your Uncle Fred) to take a look at the major systems, roof and more and then provide you with a written report. At that point, you will have the option to request that the seller repair items through a another negotiation. But, if the inspector looks at you and says something like “this home is sinking into a hole” or “it will probably roll off that cliff” then you can void the contract and walk away.
Home Inspections will give you valuable insight
That Settlement Attorney actually hit on something that I have seen in the especially hot real estate markets we have seen in 2013 from Vienna to Ashburn .
Many home buyers have had to escalate the price above the list price, waive the appraisal, financing contingency, or add some other quirky gimmick to beat-out multiple offers. But in this age of transparency, everyone feels home inspections are still smart — so they get completed.
The problems arise when the agreed to repairs in the addendum aren’t completed to the buyer’s satisfaction – even if they are done properly by a professional!
Recently, when a client went to conduct a pre-settlement final walk through inspection, an agreed upon repair item wasn’t done at all.
The end result is that the Settlement Attorney winds up seeing these things get hashed out at the closing table… which doesn’t always go well especially if the buyer is paying $23,000 over the original asking price. Get it?
A Smart Home Inspection Negotiating Strategy
Mortgage lenders have also gotten much more involved in documenting home inspection repairs, and underwriters have been demanding to see receipts that these things have been repaired. That’s right, big momma (who is lending you 80%) wants to know that the homework is done.
I have seen agents and sellers, who have dragged their feet, freak out because their procrastination may delay closing!
The smart strategy is to negotiate a dollar amount that will cover the repair after settlement. If you are a future home buyer just starting to learn about real estate negotiations, this type of a credit will be written on an addendum as a “credit toward your closing costs as allowed by the lender”.
For example, during a recent home inspection in Vienna with Jiri Danihel of House Inspection Associates, LLC, he pointed out that a dishwasher was old and needed repair. Instead of asking the seller to repair it, my clients asked for a closing cost credit of $600 which was accepted by the seller. Of course each scenario is unique, but factoring in the potential cost of the dishwasher repair, hassle of meeting the repair guy, this credit was a smart way to resolve a typical home inspection issue. In the end, my clients were able to buy a really nice dishwasher and have it installed a few days after the settlement.
Home Inspection Negotiations gone haywire
The worst possible scenario happens when a real estate agent writes a vague home inspection addendum, or submits the home inspectors list to fix everything. That tactic is a sure fire way to get a sellr to say NO.
Recently, an agent submitted a vague addendum that seemed to reference a repair far from what his client really wanted (pissing off his client and me).
And the laundry list addendum from the home inspector report is typically filled with inspector CYA jargon or tasks requiring unreasonable further investigations. And I have also seen buyers request repairs be made based on an assumption that the home inspector made – yes, to fix something that is “unknown”.
See how these things can go haywire?
If there is one thing… being specific is smart
You (yes, you the buyer) and your agent need to understand the inspection and ask for dollar credits rather than having the seller hire the cheapest guy to make repairs. If an item needs an evaluation from another professional, then include that request in your addendum and negotiate that item.
The best bet is to understand the issue and then negotiate a specific credit that can be used toward your lender-allowed closing costs.