Almost every home buyer includes a Home Inspection Contingency as part of their offer.
These can help them (you) understand what you are buying using a competent professional who will be looking at the house over a three hour window. A home inspector will probably find easily fixed items such as leaky valves or improper electrical outlets, but will often find an item that will cost $1,500 or more to fix.
Over the summer when a client’s small house in Vienna was inspected, the home inspector recommended a “Level 2 Inspection of the fireplace and chimney” which the buyer asked the seller to complete and then repair as recommended.
Fireplace inspections are often included since fire, smoke and potential health and safety issues can be costly. All in all, the inspection and cleaning cost about $300 but the video camera showed a lot of missing and cracked mortar and deterioration that needed to be repaired to meet today’s fireplace safety recommendations.
So, how is something like this negotiated?
Home buyers will want a repair like the chimney to be done to their expectations. That means having a professional reline the chimney so it is safe for years to come.
A home seller may look at this differently since they may have used it daily without issues ~ especially during the great arctic blast of 2014.
And how will the loan underwriter approve the repair? (More on that below)
This situation requires some negotiating because the buyer may consider this a defect and want to void the contract. The seller may feel that it hasn’t been a problem, so, take it or leave it.
If the buyer voids the contract then she will need to look for a new home to buy.
In that case, the seller is back to square one looking for another buyer.
The chimney will remain an issue that they need to address by getting it repaired, or the seller could offer a credit to the buyer so the buyer can hire a contractor after closing to repair the issue to their satisfaction.
A home buyer should be taking that route since you won’t want the seller to hire a substandard contractor to “repair” the mortar issue. The buyer should negotiate a credit and then hire someone after closing.
Loan Underwriters may require a re-inspection
Times have changed when home inspection items get in front of mortgage underwriters. They see the contract and before they approve the loan they will want documentation that agreed upon repairs have been properly completed. And… they can demand that any such repair be verified (often by an appraiser).
Lenders need to comply with the Dodd Frank Act consumer protection guidelines and the Consumer Financial Protection Bureau (CFPB). The underwriters need to cross all “T’s” and make sure all “i’s” are dotted… and the seller’s word that repairs were done simply won’t cut it anymore!
The best solution that will satisfy the buyer, seller and underwriter is to cross out any big repair item and settle on a closing cost credit. Any good inspection should include an estimate to complete the repair which gives the buyer and seller a reasonable starting point for a negotiation.