For most people involved in a real estate transaction, it’s a toss-up whether the home inspection or the appraisal induces more nail-biting due to anxiety of what could go wrong. Homebuyers, sellers and at times even the agents involved await the results of both with a mixture of anticipation and even pure trepidation. Statistics over the years however show that these feelings are a bit unfounded.
“Nationally, [only] 3.9 percent of sales failed in 2018,” according to Forbes staff writer Samantha Sharf.
Forbes doesn’t mention the reason for the failures, although it’s a safe bet that not all of them were due to a bad home inspection report. So, the chances are in your favor that your deal, regardless of buyer concerns generated from findings of the home inspector, will sail through to closing.
But, it may need your help.
When faced with problems that the home inspector turns up, you as the buyer, have several options.
Always Choose Your Battles
Understand that there are some repairs, such as electrical, roof, the HVAC system and plumbing, that you can reasonably expect the seller to make. After all, if there are major issues impacting these components of a home, the seller will have to repair any of the above for “the next buyer,” so they might as well make you happy to keep you in the deal and moving forward to closing!
This includes anything that presents a health and safety concern or that negatively impacts your use of the home. That would include mitigating elevated levels of radon gas or mold, just for example.
It’s the little things though that can bog down a home sale, sometimes bringing them to a halt. If you really want the home, ignore the small stuff you can do yourself or items that are really more “preventative” suggestions made by the home inspector and fight for what actually matters.
Recently I had a buyer I was working for who didn’t quite follow this advice. After the inspection, we received an 86 page inspection report and from that they asked for 28 items to be repaired by the seller prior to closing! My fear was that the seller would get a “deer in the headlights” look when reading through this six (6) page repair addendum. That was as it turned out about the size of it! The seller suggested fixing things that were easy on the list and missed items that were truly of importance to these buyers because what was important to the buyer got lost in the mix!
Great advice on items to ignore would include anything of a cosmetic nature and problems that are inexpensive to remedy. Leverage your negotiating prowess for the major repairs.
Don’t ask for light bulbs to be replaced and for the seller to put a new air filter in the furnace! Those things you can do once you move in! Focus on addressing with the seller the big stuff that would be costly for you to make sure the house you purchase is in good working condition the day you close!
Demand repairs to anything that presents a danger to health and safety, such as faulty wiring or mold.
You Have Options When Faced With An Ugly Home Inspection Report
Ask the seller to make the repairs
When faced with major repair or replacement costs, many homebuyers ask the seller to make the repairs before the close of escrow. Sometimes sellers may balk at large requests, but once they’re reminded that the “next potential buyer” will most likely make the same request, they’ll relent. That could include once again, radon, mold, septic issues, roofing problems, HVAC issues, and appliances that don’t work just to name a few!
Ask the seller for a credit towards closing costs
Rather than ask the seller to make the repairs, ask that he or she credit you with the cost of the repairs as additional seller paid closing costs. This way, the seller avoids the hassle of having to hire a contractor and the inconvenience of home repair work happening while he or she is trying to pack up for the move. You get the benefit of being able to have the work done yourself after closing to make sure it’s done as you would prefer!
However, if the problem has to do with the roof and the required repairs are extensive, if you are obtaining an FHA, VA, or some other type of government backed loan, they may require that the work be done before the close of escrow. Keep that in mind!
Renegotiate the price
A third option is to ask your agent to amend the purchase agreement with a reduced price, reflecting the deduction for the cost of the repairs. You’ll need to get bids from contractors to determine the cost of fixing or replacing whatever is at issue.
This option depends on your current cash flow. While it lowers the cost of the home, it does nothing to put money in your pocket. So, before exercising this option, determine if you have the funds to do the work.
Switch your financing
If you’re using a FHA-backed loan, contact your lender to find out if you can switch to their 203k program. Because this loan rolls the cost of the repairs into the mortgage, you’ll, in essence, be financing the repairs but only make one payment every month.
The 203k program is a bit complicated and the loan takes time. It will significantly slow down the purchase process so you’ll also need to ask the seller for a later closing date.
Please remember that it’s important to work closely with your real estate agent on inspection problems, requests, and remedies. As always, reach out to me if you have any real estate related questions. I’m happy to offer advice to try and help calm any fears you may have about the process of buying a home.