Rona Fischman reporting
The home inspection contingency is in the Offer to Purchase contract to protect buyers from purchasing a house with major unknown defects. The phrasing on the contract allows the buyer to cancel the contract (walk away) if there is more than $X in structural, mechanical or other defects. I put $1000 in that space; with the properties that I work with, that’s a pretty easy number to exceed.
In some areas of the State, buyers sign a Purchase and Sales Agreement before the home inspection. I think this is not to the buyer’s advantage because they are much more invested in the property after paying for both the attorney (for the P & S) and the inspector before getting a shot at renegotiation.
Today, the A-B of negotiation. Tomorrow is C = Consideration. (That’s a word that means both courtesy and monetary negotiation.)
A = Anticipate
How much you are able to negotiate after inspection will depend on several factors:
1. What is the supply:demand ratio on this house? Is there a line of buyers waiting with back-up Offers or has the house been sitting there, lonely, waiting for you?
2. What is the condition of the house? What do the sellers think the condition of the house is? How many updates have been mentioned on the MLS sheet? Does it seem as though the seller is house-proud for a good reason, or is the seller merely house-proud?
3. What have you already been told? What is obvious to anyone walking in about the property?
4. How hard did you negotiate the Offer price? If you pushed the seller to the ropes, you are more likely to get a “no” at this point.
B = Be prepared
1. Get a good look at the house before you make your initial Offer. Make your Offer based on the problems that anyone can see; make sure the seller or seller’s agent knows that you know this house needs updating (sometimes I remark to the seller’s agent that you are aware of obvious problems and that those things are not going to come up again later.)
It is not realistic to make an Offer on a house with a 1920’s kitchen, then after inspection say “the inspector says there are no GFCIs in the kitchen and that’s a hazard. We want $1500 to upgrade that.” Judge the house by its type; what you’d legitimately expect from a 2002 construction you’ll almost never get from a 1907 house, unless it has a very high end renovation.
When you are going through the house with an agent from 4 Buyers Real Estate, we will point out the problems we see. Since we have seen thousands of houses, we can spot problems you won’t notice. We add those to our list of known problems, but not necessarily to the things we let the seller’s agent know we know.
2. If there is high demand on the property, you are likely to lose it if you negotiate after inspection. Therefore, you need to make your best offer when you submit an Offer to Purchase, with communication that shows you are not planning to be clueless about the condition of the property. If there is a true surprise, there could be another round of negotiation; the problem has to be something that any reasonable buyer would object to. We have successfully negotiated the price down after inspection in cases like that. No two negotiations are exactly the same, so there is no single “how to.”
C = Consideration
“Consideration” on a contract means “money.” When doing negotiation over a house, in order to get money (consideration) it is important to remember that the sellers own this house and will have feelings about your inspector’s critique of their maintenance of it. So human consideration of their position will get you the most monetary consideration.
The home inspector will be a wealth of information about things that are wrong with the house that a typical buyer, who is not a house-geek, would not know.
If you are a house geek, don’t tell the seller! It is important not to walk around a house telling the listing agent what you know. It could bite you later, during the negotiation. If a bathroom is old, that’s one thing; if the bathroom is not usable, that’s another. If you have already said — in front of the listing agent — that you plan to gut the bathroom, negotiation is over before you start, on the topic of that bathroom. Get it?
Sellers have to pay attention to certain defects because most buyers will object to them. A smart listing agent will disclose any of these that they know about. If they don’t disclose, these problems make great negotiation fodder.
1. Termite or carpenter ant infestation. If there have been termites there and no treatment, most buyers require compensation. If there is structural termite damage, it is important to examine the extent of the damage (and the cost.)
2. Electrical: Rusted main service panels or knob and tube wiring found by the inspector.
3. Very old pipe fittings: Brass piping is beyond its life expectancy and is a leak waiting to happen. Lead main water lines are a no-no and steel water lines are often corroded or beginning to leak. Leaking cast-iron waste pipes (sometimes called a “sewer line.”) Your inspector knows what these looks like.
4. Active water leaks: A moisture meter can tell the inspector that there is an active roof leak, or a currently damp area in a finished basement. Drips from pipe fittings under sinks or under dishwashers, around the toilet base, shower or tub base also should be compensated. (Big leaks from broken pipes spray all over and can’t be ignored. You won’t see those on inspection. They are emergencies.)
5. Problems with ventilation of the heating system: voids in the liner of the chimney, lack of liner with deteriorated bricks, loose or badly fitted flues between the appliance and the chimney, chimney blockages from debris, bird’s nests or dead animals.
6. Radon readings over 4.0 pc/l.
8. Asbestos found in places where you couldn’t have seen it.