Congratulations! Your home is under contract to a buyer who loves it. Next up? He’s going to hand you a list of criticisms about it.
In one of the quirks of the real estate world, buyers first state their intention to buy, and then inspect the merchandise. Seller beware: It’s a scenario that’s likely to stoke your anger or bruise your ego.
In any case, the first step for sellers is to “take your emotions out of it,” advises Blake Taylor, a top-selling agent in Austin, Texas, who’s sold 83% more properties than his peers. “A lot of the time, sellers get defensive. They might feel [repair requests] are a knock against them, how they’ve maintained the home.”
In fact, negotiations over the home inspection before closing can be more delicate than the first go-round leading to the purchase contract. But we’ve pulled together advice on how to rein in troublesome requests, negotiate wisely, and make the fixes that work in your favor to keep the closing on track.
Tip #1: Do an informal inspection with your agent before the for-sale sign goes up.
The very word “inspection” has ominous connotations, but you probably already have an idea about some of your home’s blemishes, like a small tear in a window screen, or larger flaws like a spot in the basement where water leaks in during a big storm.
Still, sometimes inspections findings can come as a surprise. “Termites might not be readily apparent,” for instance, notes Taylor. That’s why buyers in certain states who are getting a government-backed loan must also obtain a separate termite inspection.
When he lists a home for sale, Taylor and his sellers “perform a walkthrough to make a list of recommendations for repairs to make ahead of time, and to have a good idea of what may appear on inspection.”
For some flaws that you and your agent spot, the best strategy could be to make a fix before that first showing. Your agent may point out that it’s not worth leaving that snag in the window screen for potential buyers to notice, for instance. The cost of a repair can pay for itself—and more—in more interest from buyers, says Taylor.
Although a small number of sellers pay a few hundred dollars for an inspection before they put their home on the market, it’s not usually necessary to spot the issues that will arise, says Taylor. Besides, if you order your own inspection, you’ll be obliged to report issues on the seller disclosure that aren’t bothersome enough to come to mind otherwise.
Tip #2: Set a deadline for the buyer’s inspection to be scheduled after the purchase offer.
The last thing you want is for the home inspection to occur at the 11th hour before closing and throw everyone for a loop. This is especially true if your buyer has a special type of loan or you suspect the inspection findings could drudge up necessary repairs.
That’s why it’s a smart idea to set an aggressive deadline for the buyer’s inspection appointment and write that date into the purchase contract. The sooner the inspection happens after both parties sign the contract, the better. This will allow wiggle room in the closing process for any negotiations and fixes.
Tip #3: Know when to offer a credit, arrange for a repair, or stand your ground.
When you negotiate the home inspection results before closing, the good news is you’ve got options as the seller. With every request the buyer makes you can choose to:
- Give them the money to complete the repair
- Hire a contractor to fix the problem
- Reject the repair request and negotiate from there
The trick is knowing the best response for different types of requests and when to walk away if there’s an impasse. This is something your agent can help you navigate (they’ll have seen it all!) but let’s dig a little deeper into each one of your choices.
Offer a credit for repairs that would delay closing
Typically, if a repair doesn’t need to be completed before the closing, and especially if it’s a significant or big-ticket item, the seller shouldn’t volunteer to arrange and oversee the work. In these scenarios, it’s better to offer the buyer a credit for the cost of the job. Another advantage to this strategy: you won’t field later complaints that the job wasn’t performed properly.
To provide an accurate credit, you’d secure an estimate from a licensed, reliable contractor and then negotiate the amount offered to the buyer at closing. Then, you’d follow through with the credit either with a check to the buyer at closing or by reducing the sale price by the credit dollar amount.
Repair issues that would prevent the buyer from inheriting a safe, comfortable house
Sometimes there’s no getting around the fact that you’ll need to make a repair yourself before buyers will agree to close. The buyers may insist, for example, that they won’t move in during a hot summer unless the AC is refurbished to good working order.
In a buyer’s market where you have less leverage, you could be on the hook for fixing a dated roof or replacing the furnace just because it’s old—it all depends on what you’re able to negotiate and at what point you’d walk away rather than concede to repairs.
If your buyer is getting a government-backed mortgage like an FHA loan, a home must also meet certain “minimum standards for health and safety,” says Daryle Messina, regional manager of Homebridge Financial Services, Inc.
A major issue like a foundation crack could take longer to fix and with any repair you risk extending the closing timeline and delaying settlement if you can’t get the job hired out and completed in time.
However, one benefit to making the repair yourself is you won’t spend a dime more than what the actual job costs. In some cases with a credit, the estimation for the job could be higher than what appears on the final bill.
For any repair you oversee, “Make sure you document with before and after photos, keep paid receipts, and have the work done at least a week in advance of closing,” says Taylor.
Say “no” to excessive or cosmetic repair requests when possible
Still, sellers don’t need to yield to every buyer request. Hardly. Cosmetic imperfections, loose door knobs and handrails—these items aren’t urgent or a threat to the integrity or function of the house, so don’t agree to them (so long as your agent concurs).
Then you have the leverage to stand firm and reject repair requests, especially when the requests aren’t serious in nature, Taylor notes.
No matter which way the market tilts, favoring buyers or sellers, “some owners just don’t want to deal with [repairing inspection issues] so they make it clear from the start that the buyer has
to purchase ‘as is.’”
Also, a word of caution: It’s relatively rare, but unscrupulous buyers who get cold feet may try to wriggle out by presenting an outrageous list of demands. “Let them go,” counsels Taylor, adding that insisting on an early inspection allows you to quickly move on to another, more serious buyer.
Tip #4: Play out different scenarios: How would you respond to this hypothetical list of repair requests?
Every home sale is unique, and a seller’s response to inspection issues fit his circumstance.
The National Association of Realtors has studied the most typical concerns to give you an idea of what’s common, but let’s explore a hypothetical.
Say a buyer hands you the following list of problems that came up in an inspection report, requesting that you respond to them in some fashion:
- Ungrounded outlets in the kitchen and bathroom
- Spongy soil around the foundation
- Damaged gutters
- Missing roof shingles
- Inadequate water pressure
- Pipe leak in the basement
- Dated but functional light fixture in the living room
Here’s how your negotiations with the buyer could land:
An ungrounded outlet doesn’t contain a ground wire, an important protection against electricity sparking a fire—so it’s a serious safety issue. Your buyer or his mortgage lender may insist that it is repaired before closing. If not, it’s best to offer a credit. You can expect to spend an average $202 per outlet including materials and labor.
If after a rain, water isn’t flowing down and away from the foundation, the remedy is typically relatively inexpensive—about $500—and can be completed by a landscaper in half a day, says Pauma Valley, Ca, certified home inspector Michael Casey. Since this fix is pretty clear cut, and the buyer insists it be completed quickly, a seller could arrange the work, but “it’s nearly always better to give a credit,” says Taylor.
At the more benign end, maybe all that’s needed is a good cleaning or new gutter pipes and splash pans so that water runs off and away from the foundation. Got gutters that are bent, rusted, or the wrong size? You’ll need new ones, costing an average of $4 to $9 per linear foot. Negotiate the cost and give the buyer a credit.
Missing roof shingles:
Missing shingles can be pretty common on roofs that are several years old. It’s relatively inexpensive to replace a “square,” the 10×10 inch piece that’s used for replacements. Depending on how many shingles are missing, it might not be more than a couple of hundred dollars. But why worry that the buyer won’t like the look of the repair? Give a credit.
Inadequate water pressure:
A picky buyer may insist he wants a credit of a couple of hundred dollars for low water pressure. It’s negotiable. You’ll prevail with a firm “no” if in your market and situation, the buyer knows he doesn’t have leverage.
Pipe leak in the basement:
Aahh! That’s why the floor is always damp near the basement laundry sink, the piping underneath has a leak. The rusted pipe needs replacement, but it’s not an emergency. It could be a relatively inexpensive fix, and a buyer might agree to take it on himself later. You won’t know until you negotiate, and an experienced agent can judge how strong you hand is.
Dated but function light fixture:
OK, this one shouldn’t even be on the inspection report. It’s clearly cosmetic. No, no, a thousand times no!
Tip #5: Put the cost of repairs in perspective for the buyer.
Post-inspection, if a buyer makes excessive or unrealistic demands, step back and consider how the cost of repairs fit in the total equation.
Here’s an example to illustrate why: Taylor recalls a recent transaction where his seller had already closed on their purchase of their new home late in the year. Their own buyer made a ridiculous request for 35 repairs, “all picky, cosmetic things, and this was a home that was well maintained,” he explains.
The objective of the buyer wasn’t really to have all those changes made, but to secure more cash from the seller for their closing costs. And that was something the seller had no intention of caving on.
So Taylor made some calculations. “In Texas, if you own a home and occupy by Jan. 1, you are eligible for a homestead exemption on property taxes.”
If the 35 repairs were made, the closing would never happen by the end of the year, and the buyer wouldn’t get the tax break, worth $5,000. When Taylor pointed that out to the buyer, they quickly rescinded their over-the top repair requests.
Keep it rational, not emotional, and you’ll get through the inspection pomp and circumstance
The inspection process is routine—virtually all buyers and sellers go through it. But when you’re in the thick of it, it can feel like an uphill climb. In challenging moments, try to see things from a buyer’s perspective before reacting emotionally. Never forget your end goal: to get the house sold and never look back!
Article Image Source: (Startup Stock Photos)