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How Home Inspection Negotiations Create Friction

July 14, 2013 By Doug Francis

Wolf Trap VirginiaAs 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.

 

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Filed Under: Blog, Home Buyer Tips, Home Seller Tips

About Doug Francis

A Realtor specializing in unique and new homes around Vienna, Virginia, Doug started writing a first-hand blog about his everyday real estate experiences a decade ago. In depth, helpful and fun has always been the objective. Outside real estate, he was profiled in a commercial for Verisign's "Where the World Clicks" campaign, and was quoted in Money Magazine's Best Places to Live article on Vienna. He's a Boston University graduate who feels morning coffee is non-negotiable.

Being able to guide my clients through many real estate sales, either moving out, moving in, or just across town, has been a rewarding experience that helps when discussing a plan with a future client.

Being able to help them focus and understand our proven sales plan always eases their anxiety of this looming personal task. And, putting it into bite-sized steps always helps them get where they really want to be.

My background… I’ve been an active licensed agent in Virginia for 25 years, work at TTR Sotheby’s International Realty in McLean, and sell homes in all price ranges. I donate to the town tree replacement fund, participate in a neighborhood citizens association, and try my best to stay in shape.

Questions? Email doug@dougfrancis.com or call me at (703) 304-6827 to discuss your plans. Cheers!

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About Doug Francis

I am a Realtor with TTR Sotheby's International Realty® just outside Washington D.C. in Northern Virginia. I have been a full-time Realtor licensed in Virginia since 1991, and cover a big territory specializing in the Vienna real estate market and custom homes for sale.

I have unique knowledge of digital real estate marketing, and my marketing starts here. My elite clientele has been attracted to my results-oriented strategy for years, and I am accepting new clients now.

Thanks for reading, and feel free to contact me at 703-304-6827 or email me at doug@dougfrancis.com anytime!

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