Negotiating with the buyer after inspection

Hank Bailey
Hank Bailey
Published on March 11, 2019

All too many times in my career have I had another agent congratulate me for getting a contract on a listing.  What they forget is that at the point of contract, that’s where the work begins! Negotiating to a successful closing of a home sale may begin with an agreeable sales price and contract terms, yet it doesn’t end until the deal closes.

The most frequently negotiated items, after price and seller concessions, have to do with any concerns raised from the home inspection. Whereas in the past appraisals were a worry to be a potential deal killer, today I see the haggling over home inspection items or concerns among the most contentious part of negotiations.

Very few home inspections are “clean,” meaning there’s not a thing wrong with the home. And, many of the items mentioned in the reports are minor.

Your real estate agent will counsel you on how to deal with your buyer’s “list of demands,” regarding any requests for repairs, but it helps to know why he or she is making certain suggestions.

Learning how to choose your battles, and you’ll understand the negotiating process.

The 3 most common types of requests

When homebuyers find items from the home inspection that they want fixed, their agents typically counsel them to submit one of the following requests:

Ask the seller to make the repairs

I see this most common.  There may be six to ‘sixteen’ items of concern that the buyer will ask you to do prior to closing, along the lines of making repairs. One thing you as the seller should know is that the buyer’s lender may require certain repairs to be done before final approval of the loan. These include issues regarding the home’s safety, structural soundness, and to remedy building code violations. Expect to make all of these types of repairs.

Ask the seller for a credit of the funds required to make the fixes

Many times this is done by increasing or adding some seller paid closing costs to lower the buyer’s out of pocket at closing. That way they can do the repairs themselves.  There is no ‘credit back’ at closing from seller to buyer for an amount to equal repairs. If you interject money is there for repairs, then the buyer’s lender will require the work be done prior to closing. Be careful as they could throw a wrench into your closing and delay things unnecessarily.

Again, as the seller, be careful to know that beyond what you and the buyer agree to regarding their inspection concerns, there are certain red flags on repairs that are required by VA and FHA, before the close of escrow. If you are not sure if your house would contain any of these potential additional issues from the lender’s point of view, ask your agent.  Yet due diligence or inspection for the buyer and potential lender required returns from their own inspection at point of appraisal are two different things.

Asking the seller to lower the contract price

Buyers’ agents will suggest to their clients that they may want to request a price reduction to compensate for the cost of needed repairs.  This is effective if your buyer is making a cash purchase.  It lowers the amount of money they bring to closing.  In a lender financed sale this way is probably a less desirable way to the buyer because while the purchase price would be lowered, if you agreed to a price decrease in lieu of repairs, it does not lower their cash to close by much.  This is why on a financed sales we see more times than not a seller agreeing to increase or add seller paid closing costs of that amount. Once again, it lowers their out of pocket at closing that they must bring to close the transaction and thus creates funds that could be used for repairs after the fact.

What should a seller never agree to repair

Repairs to rectify cosmetic issues can be ignored. Lender-required fixes, on the other hand, should always be performed. The key within your contract, when you are negotiating the sale and prior to going binding and into due diligence, you need to make sure you limit any seller paid ‘lender required repairs’ with a dollar figure you are comfortable with if any of these are found.

During a sellers’ market, you are in the driver’s seat and can safely ignore most of the more trivial requests. In a buyers’ market, however, you may have to take a deep breath and carefully consider agreeing to more of the buyer’s wishes.

Don’t follow the buyer’s agent’s script

If the items on the buyer’s “list of demands” aren’t of a safety, structural soundness or building code violation nature, you are under no obligation to respond to them. If they are effectively asking for “improvements,” which add value to the home, they can do those themselves after they close.

In other words, you don’t have to offer a credit, make the repairs or lower the price of the home. You have options, too. Some of these include:

Hold back personal property

Even if you won’t be taking your appliances when you move, don’t automatically include them in the sale. These are great to hold back to use as negotiating leverage during contingency periods, such as over price and repairs.

Instead of lowering the price of the home or making non-essential repairs, offer to throw in the appliances.

Offering a home warranty or termite bond

Offering a home warranty or including a termite bond is a way to address those requests for replacement of an item that, although it may be nearing the end of its functional life, still works efficiently.

An aging water heater or furnace, for example, may concern the buyer. A home warranty might ease their worries and save you money in the process.

As always, discuss with your real estate agent about all possible responses to a buyer’s request for repairs. Find out from them what they see buyers and sellers agreeing to and make reasonable repairs or offer reasonable solutions.

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