Purchasing a home is a long and arduous process, especially for first-time buyers. It can feel like a roller coaster from the moment you hire a real estate agent to the moment you get the keys. Some of the major twists that these transactions can take come after the home inspection. You can submit a home inspection repair addendum if you want the seller to fix something. However, that is rarely the end of the negotiation process.
If a home inspection reveals major or structural problems, sellers should make repairs rather than risk losing the sale. However, many sellers refuse to make small or cosmetic changes to the home.
What Is an Inspection?
Many real estate agents recommend that you submit buying contracts with an inspection contingency. This clause says that if the seller chooses your bid, you will have the right to hire an inspector and see the report. The inspector should be qualified to tell you the condition of every part of the home. Many states require these professionals to have certifications.
Your inspector's job is to look for every single potential problem in the home. She will look at the rooms, attic, basement, roof, foundation, garage and any other structure on the property. She checks out the electrical, plumbing, heating and cooling systems as well. The inspector then writes a report on everything in the house that she believes needs attention.
While the inspection is thorough, it does not cover everything. Your inspector likely will not check for mold, asbestos or termites. However, you can request more specialized inspections if you fear that the home may have any of these issues.
You have the right to attend the inspection and should do so if you can. If not, your agent may go for you. If nobody from your family or your agent can be there, you should set up a meeting with your inspector to go over the details.
Pore Over the Inspection Report
Expect to see several pages in the report. The length of the notes can scare some buyers immediately, but it shouldn't. The average inspection turns up 50 to 100 problems. Most of these issues are minor things that the new homeowners can fix with relative ease.
The report will include everything from a bad foundation to places where windows need new caulking. However, these problems clearly do not carry the same weight. Some inspectors may make special notes about things that are major safety concerns or that the sellers need to fix before you buy.
Look over the report with your agent and decide which fixes are the most pressing and which you can do yourself when you move in. You can then begin the negotiation process with the sellers.
Ask for Repairs
Depending on the results of your inspection, you may want to ask the sellers to make repairs before you close the deal. This is common, and experienced sellers may even expect it. If you use an agent, you only communicate what you want to the agent. Your agent then goes to the sellers or their agent if they have one.
Before submitting your requests, it's important to be sure you're not asking for too much. Certain requests can turn off sellers, particularly in a competitive market. For example, asking that the sellers fix a small window jam or paint a room before you move in may just irritate them.
You should also avoid asking for repairs on major issues like foundation problems or termites. These things can jeopardize your mortgage. It's often better to just walk away from the home altogether.
Negotiate for Your Market
If you buy a home in a solid sellers' market, you probably can't request too much from your sellers. Focus on asking for repairs that any reasonable buyer would request. You have more negotiation power with these fixes because you're close to closing and they would run into these issues with anyone else too.
In buyers' markets, you have much more power in the negotiation. You can ask for any repairs that you feel you need. However, you should still have some caution. Even motivated sellers have breaking points.
Ask for Seller Credit to Buyer for Repairs
Many sellers are too busy to make the repairs themselves. After all, they are often in the buying process as well. With that in mind, you may want to request a credit to pay for the repair job rather than asking for completed projects before closing.
The credits give you cash back on the sale of the home. This allows you to pay a contractor to fix the problems after closing. Many sellers are more receptive to these requests because it does not require them to do too much.
If the Seller Refuses
Even if your requests are reasonable, the sellers may still reject your addendum. In most cases, the sellers have no obligation to fix anything. If they do not like your request, they can either submit a counteroffer or reject it outright. If they send a counteroffer, you can decide whether it meets your needs. For example, you may ask for repairs and they may counter with an offer for credit.
It's possible that the seller won't make repairs after the inspection and refuse to offer credit. If this is the case, you may be able to walk away from the home. Depending on the contingencies in your contract, the sellers may have to reimburse the earnest money.
Putting the Mortgage in Danger
If the seller will not make significant repairs and go forward with the sale, beware of the appraisal. If the appraiser notices the same problems that the inspector noticed, he could conclude that the home is worth less than the selling price. In that case, the lender could deny the mortgage.
However, the sellers could then understand that their home is worth less and lower the price. After all, chances are that any other buyer's appraiser would find the same problem. They may then accept a request for a lower price that matches the appraisal. You could end up getting a better deal, but it is a gamble.
Lenders often require structural problems to get fixed before approving the loan, even if the price is not an issue. For example, if the appraisal or inspection finds any code or safety violations, you need the seller to repair the problem or risk your mortgage getting denied. Because all financed buyers will have the same issue, you can use it as leverage.
Tips for Smart Negotiation
While you can't control how your sellers feel about making repairs, you can do a few things to move things in your favor. First, be sure to keep any plans for renovations to yourself. While it's fun to think about gutting the master bath or painting the living room, letting the sellers know about your plans can impact your negotiating power.
Start with asking for credit for smaller repairs. Sellers often appreciate the gesture and you can fix the home on your own terms. If it means getting to the closing day without issue, it may be worth it. Furthermore, you and your seller may have vastly different ideas of what a repair should entail. If you ask for a fix, you may get a barely-done job. However, taking a credit gives you the power and money to make your new home your own.
Finally, be sure to approach the issue with an open mind. The chances are that if the kitchen has scratches on the floor and outdated countertops, you will want to renovate it soon anyway. Refrain from asking for cosmetic fixes in that room, which can turn off the sellers.