This is a question that concerns both
home buyers and sellers. There is no firm answer, other than that it
may require some creativity and flexibility from both parties. The
severity of the problem, at times, is a matter of perception and the
degree of desire to complete the sale.
What's the Problem?
Each buyer brings with him or her there
own experiences and background. So what is a deal killer for one may
not even raise an eyebrow for another. For instance, I recently sold
an older home where the inspector, without comment, noted that there
were galvanized pipes running out to the street. The buyer had just
spent several thousand dollars replacing the galvanized pipes in the
home they had just sold. For them, this was too much for them to
handle so they backed out of the deal.
I got some estimates for the
replacement, however, I did not intend to do the job unless it became
necessary to complete the sale. However, the numbers would have been
useful if it came down to a negotiating point. Even this proved to
be unnecessary as just a few days later we found a buyer that didn't
care one way or another and was content with the pipes as they were.
Nitpicky Details
Often times inspectors will come up
will all sorts of minor points that don't make a whole lot of
difference one way or another. That is what they are trained to do.
Although, it seems that some take kind of perverse delight in finding
the “how did you ever see that” type of detail.
I was buying a house a few years back
and the report came back with about 12 to 14 items that needed
attention. Among them were cracked outlet covers and a loose fence
post. I already was aware of most of the things and it was a little
annoying, but the guy was just doing a thorough job. The one thing I
asked the seller to fix was a mis-sized circuit breaker. I hadn't
noticed that and it was fixed without me having to do it.
Often the inspector will have a list of
things you can ask the seller to take care of. If they are not
major, they usually agree to most of them and it saves you a little
work.
What if it Isn't Little Stuff?
Sometimes the inspection will turn up
issues that many home buyers will not pick up on. This is why you
hire these guys. Sometimes they can keep you out of a money pit.
Suppose he finds that the HVAC is held together with chewing gum and baling wire, or the roof isn't as good as it looks and will need
replacing in a year or two? Are these deal killers?
It all depends on how badly you want to
buy the house, how badly the seller wants to sell the house, and how
good a negotiator you or your agent is. Let's say the major repair
costs around $15,000 and you really don't have the extra money to
handle it. There are various options – assuming the seller is
flexible and willing to talk about a solution. If he is not, it's
often best to walk away and keep looking.
You could ask them to drop the price by
that amount or at least a portion of it. That sounds good but
probably won't help as it won't lower your down payment that much and
you still won't have the money. If it is a cash deal, that can be a
workable alternative, You could ask the seller to replace the roof
before the sale is complete. This takes the problem out of your
hands – sort of. This way you have no control over the process and
you may get a good job or you may get a cheap job. You could offer
to pay the full price that you agreed to with the amount for the
repair held in escrow to pay for the job, That is the title company
or the attorney that handles the closing will keep the money in their
account until the buyer is satisfied the job is complete – then
pay the bill.
These are three ways of working and
there can be combinations depending on what works for each of the
parties. The point is that a big bill does not necessarily kill the
the deal, but it probably does require some sort of give and take to make
the deal work... if you still want to,
If it is a Deal Killer
What do you do if the problem is more
than you want to deal with? Any reputable agent will include an
inspection contingency clause in your agreement. In my part of
Florida it is usually ten days from the time the seller accepts the
contract, but even that is negotiable. This gives you that much time
to have the inspector evaluate the property and it is usually a no
questions asked satisfaction contingency. This should be scheduled
as soon as possible to give you the maximum amount of time to make your
decision.
When working with investors, usually on fixer-uppers, some will want to have larger deposits and no
contingencies. I understand they don't want to tie up the property
and have someone back out, but personally, I tend not to deal with
them.
I had one deal where we gave the place
a once over and made an offer. After it was accepted but before the
inspection appointment, I was giving it a much closer look since
actual money was involved. The house was a brick bi-level on a lot
that sloped to the back. As I was examining it closely I found a
crack in the foundation at one of the back corners. As I followed it
up, it ran halfway up the house – through the bricks, not just the
joints. It could have been fixed, but I really didn't want to deal
with it.
I talked to the agent and canceled the
contract as that is the purpose of the inspection contingency – no
matter who finds the problem.
Seller Surprise Protection
While it is not usually done, I have
come to be of the opinion that the seller could benefit from an
inspection when putting it on the market. This way you have a pretty
good idea what the buyer will find, It is possible then, to fix many
of the smaller issues and be prepared for the major ones if any. If
it is a good report, you can show it to potential buyers. If it is
not good, you can mitigate the problems so as not to scare your
buyers away.
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