Welcome back to America’s #1 Daily Podcast, featuring America’s #1 Real Estate Coaches and Top EXP Realty Sponsors in the World, Tim and Julie Harris. Ready to become an EXP Realty Agent and join Tim and Julie Harris? https://whylibertas.com/harris or text Tim directly 512-758-0206
Today, we’ll discuss how to handle the deal-killing home inspection. How to avoid this problem ethically, what to expect, and how to still get the deal done.
Our listeners fall into two camps on this issue:
1. Experienced agents who have a Swiss army knife of solutions they can deploy to keep buyer and seller happy and make it to closing. They don’t panic, they just solve problems.
2. Agents who may be experienced in working with buyers and sellers but who have little experience negotiating home inspections because they haven’t had to in the hot seller’s market of the past decade, where sellers could just say ‘Nope! Take it or leave it, I have 3 other offers!’, or worse: no inspection at all for you if you want to buy it.
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Today’s podcast will help that second category the most but also help fine-tune the skills of our more experienced listeners who may not have dealt with this for a while.
Fact: Buyers are getting more control of the transaction and home inspections are happening again. So are home inspection negotiations! In the worst-case scenario, this becomes a secondary point of negotiation. Everything could be on the table, including the purchase price, concessions from either or both sides and even the deal itself. This is a critical skill to improve upon so you’ll virtually never lose a deal due to failing inspection items.
What to do when you get that big grocery list of what the buyer wants to be fixed?
1. Listing agents: Consider having Seller’s Coverage from a trusted home warranty company at the time you take the listing. Many items will be covered including HVAC, plumbing, and electric, and the cost isn’t paid until closing. This will help with minor but common issues.
2. Buyers agents: Council your buyer about what is appropriate versus inappropriate to request. Safety and security items and health risks are typically appropriate. Cosmetic items are not.
Note: With all home inspections, the results will be one of these 4 outcomes.
-Buyer gets nothing. Take it or leave it. They walk or they don’t.
-Seller says yes to everything, they figured they’d have to deal with inspection items.
-Seller gives the buyer money to do the repairs themselves, based on estimates.
-Combination of the above. Repairs plus some money.
3. Buyer or seller’s agent: Present the list and simply ask them what they think. It’s not your job to have an opinion, to be an expert, or to play home inspector. Oftentimes what YOU are freaking out about might not be of concern to the buyer.
4. Buyer or seller’s agent: Know what’s a deal killer and what is just a request. Again, focusing on safety items is the rule of thumb here. If the HVAC just doesn’t work, that’s a reasonable request. If the buyer wants new window coverings, that’s pretty unrealistic, cosmetic, and not the point of a home inspection.
5. Listing agents: respond in a timely way with a reasonable response. Factors for you and the seller to consider when deciding how to respond:
-Is the buyer paying the list price or over the list price, or did the seller take significantly less than the list price?
-Does the buyer have other options they can buy if they simply walk away or is this the only home on the market or close to it?
-Was the seller going to fix some of these items anyway before closing?
-Are there warranties on any of the items? New construction has builder warranties that last several years. Newer appliances may have warranties. HVAC systems as well.
-What is the total value of the items requested? Put a dollar figure on it.
-Would the seller offer the buyer money/concessions to fix the items versus hassling with the repairs? If it’s a big ticket, estimates may be needed. Average several to know a realistic cost.
-Can the seller fix the big items and deny the rest without jeopardizing the deal?
6. Buyer’s agents: accept or counter with a reasonable response in a reasonable time. Keep the deal alive no matter what. There is a resolution.
7. Worst-case scenario when the deal gets stuck:
-Use some of your processing fee ‘kitty’ to help pay for repairs.
-Buy a home warranty for the buyer if it’s not included. This works well if systems are old but functional.
-The seller may have to disclose the problems on a new property disclosure form. This is leverage for the buyer/buyer’s agent. Know what’s legally required after a home inspection when the problems have been identified.
8. The worst, WORST case scenario… You guessed it, your buyer or seller expects YOU to pony up and pay for the repairs. Not your furnace, not your repair, but it IS your deal. This is where you invoke the dreaded ‘some money is better than no money’ scenario. If you don’t have a backup offer and you’re about to lose the deal, consider the following:
-Chip in versus pay for. If it’s a $5000 repair, maybe you offer $500 to help out versus losing a big chunk of your commission that you’ve worked so hard for.
-If it’s possible, get the seller and buyer to meet in the middle. In our $5000 scenario, the seller escrows $2500 towards repairs, to be released to the service provider when the receipt is submitted to the title. The seller knows it’s going to be repairs and the buyer has some money to work with.
-You can also try splitting the repair in 4 ways: Buyer / Seller / Agent / Agent to split up the costs and keep the playing field level.
-If the seller wants to do the repair but doesn’t have the cash to pay for it on hand, find a repair person who can be paid in full at closing out of the seller’s proceeds.
9. The Hail Mary solution. Yes, you pay for it but it’s a LOAN not a gift from you. Have your title company create a promissory note, charge a little interest, and have a date by which it must be paid. File it at closing. You may or may not be paid but it’s better than just giving your money away. (We did this a few times, and didn’t expect to be paid back but every one of them paid us back within a year of closing!)
10. Be willing to lose the deal, but make sure you and the seller have a plan to get it back on the market. Extend your listing agreement, figure out if they have fixed or not fixed but disclose. Maybe the repairs get done and it goes back on the market with or without a higher price. Depends on the solution.
Caution Listing Agents::: Be sure you’re doing what your SELLER or BUYER wishes to do, versus inserting your opinion! Many times when you submit the list and just keep your mouth shut, the seller will say ‘Yes, I knew about all of this. How about I fix a, b, and c and offer them $1500?). Don’t create objections where there aren’t any. Consider the Seller’s Home Warranty.
Caution Buyers Agents::: Don’t overreact on behalf of your buyers. Don’t use home inspectors who like drama. Good bedside manner is beneficial. Prepare your buyers that this is a negotiation, not a bloodbath.
Bottom line? Don’t give up! If the buyer still wants the house and the seller still has to sell it, your job is to find the solution to get them both to the closing table!
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