The main reason to perform a buyer's inspection is so that you know what you are purchasing. You can read more about Why Inspect at this blog post. If the inspection turns up a $6,000 problem, it would a good time to renegotiate the purchase, since you discovered a problem that wasn't apparent when you made the offer. If you made an offer on a home that has APPARENT problems, or problems that you can visibly see, those items usually would not be negotiated during the inspection timeframe, since your initial offer would have already accounted for that issue.
Results are in
Once you have the final inspection report, it is time to figure out what should be of concern, and what can be saved for later. Most of the time, the inspection report will be a laundry list of what is wrong with a home. Believe me when I say that EVERY home has its problems, even new construction. The main reason for the inspection is to figure out which flaws you can live with, and which we should renegotiate on. Usually small items are not negotiated, and we only try to renegotiate if we have larger more expensive items to repair, or sometimes, if we have a lump sum of many smaller items that add up to a significant value. Some examples of items that should be renegotiated are: a failing roof ($8,000), a failing foundation wall ($20,000), a failing furnace ($2,000), a failing sewer line ($6,000), or other similarly expensive items. When we see items like failed GFCI ($10), or inappropiate S trap ($100) or lacks downspout extensions ($20), these small cost items are usually not negotiated on. They are inexpensive enough to correct once you close on the home, and if we open up negotiations, there's always a chance the seller may not agree and want to cancel the deal.
Also taking on the repairs yourself gives you control of the outcome. If we ask the seller to recaulk a bathtub, they may find the cheapest $3 tube of caulk and do a sloppy job of it. It's better for you to take control of these types of issues so that the quality can be assured.
Negotiating Inspection Issues
Once you determine that you should negotiate an inspection issue, there are several ways to solve the problem. The most common methods that we use in the Minneapolis housing market are outlined below.
- Ask the seller to repair the defect. We can ask the seller to fix the broken item at their cost using a licensed contractor. The advantage to this is that you can move in after closing without having to do a major repair on the house. Also, the price of the home probably would not change, since your offer price was based on the fact that all the major items were in good condition, and the seller would be putting the particular issue into good condition.
- Negotiate the price of the house down. With this option, we would lower the price of the home, and you would then have to take on the repair once you move in. This option is especially good if you want to choose the contractor and quality of the work being performed. I have seen many a bad roofing job just because the seller chose a cheap roofer. But lowering the price does not put money in your pocket for the expense of the repairs. It just lowers your overall mortgage.
- Set up an escrow fund for repairs. Perhaps the seller isn't willing to do the work, but is willing to pay for the cost of the repair. We can have the seller put money into an escrow fund to cover the cost of the repair and that way, you, the buyer, have the funds for the repair, and the control of the quality of the job. But setting up an escrow fund is tricky. This type of fund needs to have the blessing from both the title company and the mortgage company so that they can make sure it is within the rules and guidelines. Under most circumstances, escrows are not a good option because of the difficulties involved.
- Walk away, cancel the contract. Usually this is one of the last options because it means that you didn't get the house that you wanted, and you have already spent money on the inspection. But in some instances, this may be the best option. This is especially true if you get a seller that doesn't want to address an issue, or perhaps the seller's agent is coaching them in the wrong way. Either way, this option can be a good one.
These are just a few of the ways that we use to normally resolve inspection issues here in the Minneapolis housing market. Hope that your inspection goes as planned.