How do you successfully negotiate through home inspection challenges? How do you still make it to the closing table?
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Agents fall into two categories on this issue. Which are you?
1. Experienced agents who have a Swiss army knife of solutions they can deploy to keep buyers and sellers 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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Whether you are in the first or second category, these points will help you navigate your toughest inspections.
Fact: Buyers are getting more control of the transaction and home inspections are happening again. So are home inspection negotiations! 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.
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What to do when you get that big grocery list of what the buyer wants 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.
Homework: If you’re not already utilizing a great home warranty company, ask your broker who they recommend, or check them out here:
(Our favorite is AHS.com which is American Home Shield Warranty, but you can compare using this link). https://www.forbes.com/advisor/home-improvement/best-home-warranty- companies/
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.
Remember: Don’t give up! There’s always a way to keep the deal together.
a– Buyer gets nothing. Take it or leave it. They walk or they don’t.
b– Seller says yes to everything, they figured they’d have to deal with inspection items. Sometimes repairs are even underway.
c– Seller gives the buyer money to do the repairs themselves, based on estimates.
d- Some combination of the above possibilities. Repairs plus some money.
3. Buyer’s Agents: When presenting the home inspection to your buyers, simply ask them what they think. It’s not your job to have an opinion, to be an expert, or to play home inspector. Often times what YOU are freaking out about might not be of concern to the buyer.
4. Listing 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? How your seller reacts should take the price into consideration.
For example, if the buyer is in contract at or over the list price, has a super strong lender letter, or is all cash, the seller should be more willing to give in a bit on inspections.
If the buyer came in really low and the seller ended up coming down in price, usually the seller is less likely to also give in on inspection items.
–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?
–If the buyer is FHA or VA, the seller may be required to fix certain things not by the home inspector, but by the APPRAISER. This is pretty hard to get out of and almost always centers on safety or security items. Favorite things for the FHA/VA appraiser to ask for are handrails along stair steps, locks on windows to work properly and access to crawl spaces, etc.
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. (Ask the coaches what this is about if you need help).
–Buy a home warranty for the buyer if it’s not included. This works well if systems are old but functional. At least the major appliances will be covered for the first year of ownership.
–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. This is a question for
your broker, or call your real estate commission to find out, as this is different in every state.
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 responsibility, right? However, 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. It’s a place to start and it shows good faith to get the deal done.
–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 title. The seller knows it’s going to repairs and the buyer has some money to work with.
–You can also try splitting the repair 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!)
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!
If you’re losing a deal and you are unclear on how to save it, always, always ask for help from our coaching staff!
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