Most of the home sales contracts I work with these days have a home inspection contingency. This means that buyers can have a home inspector inspect the home they want to buy and ask the seller to fix any defects the home inspector finds. The contract provision applies to defects in structural elements, plumbing, heating, electrical, appliances, as well as environmental problems, such as mold, asbestos and radon gas. If the seller does not want to remedy the defects, the buyers can cancel the contract and recover their deposits.
The home inspection contingency is the most frequent point at which the home purchases I work on break down. Either the seller doesn’t want to spend more money to fix the flaws, or buyers expect their sellers to make the home “perfect” for them as part of the buying process. Because the expectations of the two parties are sometimes so different, it is necessary for lawyers and real estate agents to remind their clients why they are in a contract. However, it is also important that lawyers and real estate agents protect the interests of their clients; It shouldn’t matter that the deal closes if the interests of your clients won’t be served by a closing.
From the sellers perspective, the home inspection report is usually a bad surprise. They believe they have kept their home in good condition or believe they have dropped the price enough to make up for a home that has not been properly maintained or updated with the newest kitchens and baths. When a home inspection reveals problems buyers want fixed, many sellers are reluctant to spend extra money or give buyers credit so they can fix the problems themselves. As a salesperson, you need to be pragmatic, not emotional. In your case, if you’re too tight-fisted to fix home inspection problems, your buyers will walk away from the deal. You don’t want to put the house back on the market and try to work with a new group of buyers. For one thing, you’ve lost time, sometimes the best time to market your home.
It costs money to hold your home until the sale closes: money in mortgage costs, real estate taxes, and possible repairs that may be routinely needed. Your goal is to negotiate enough so that your buyers do not cancel the contract. How much is enough? It depends on whether homes in your town are still losing value, whether there are many other homes on the market in your price range, and what your buyers’ expectations are. Certain repairs are so common that every buyer expects them. Any findings of asbestos, mold, underground oil tanks, termite and termite damage, leaky roofs, non-functioning appliances, wet foundations, or electrical box issues are expected to be repaired or cured by each buyer.
This means that you must correct these types of items. In many cases, buyers will want to hire their own contractors and apply for a credit against the purchase price. If a defect is disclosed on the home inspection report, it is now a known issue that must be disclosed in seller disclosures. You want to give a little (don’t be the toughest bargainer) to get a lot (your house will be sold and you can move on with your life).
From the buyers perspective, you want to make sure that the seller makes the major repairs or that you receive some compensation for walking away with the defective house. However, you may also want to give a little. It is expensive to start the home buying process and not get one at the end. You are paying home inspection fees, mortgage application fees, and attorney fees. Although this market gives you many homes to choose from, you may have already seen what’s on the market and this is the home that comes closest to your wish list. Or you may have to move from your current home due to a change in circumstances and can’t wait for the perfect home to come on the market. Your lawyer and your real estate agent will advise you what are the usual repairs and what problems are of such a risk that you do want to cancel the contract.
You should also expect your home inspectors to point out problems that aren’t current defects but will become a necessary repair in a year or two. Very few sellers will compensate buyers for potential problems. You should expect the seller not to fix this kind of problem. Many home inspectors will make the house sound like it’s falling down so you feel like they’ve done a good job. If the home inspection reveals a structural defect (the foundation) and the repair is very expensive, you may want to cancel the deal. It may be too risky, even if the seller is willing to repair. But, especially if the house has been on the market for months, or if another deal hasn’t gone through, press the seller for concessions. This is your best chance to fix many of your home repair problems or to get the money to pay for it so you can hire your own contractors.
The home inspection is one of the most important parts of the home buying/selling process. Do not let your emotions make you take a position that you will later regret.