In last week’s blog post, Negotiations after the inspection, part 1: options for the buyer, I discussed four options that a home buyer has after receiving a written inspection report.
- Cancel the purchase agreement
- Do nothing
- Renegotiate price
- Ask the seller to perform repairs.
The first two options are pretty straightforward, but the last two items involve negotiations. Today, I’ll discuss common home inspection negotiation items that I believe should not be negotiation items.
I’m not a real estate agent or attorney, so this is not real estate advice or legal advice. These are my opinions. I don’t share my opinions on negotiations during home inspections, and I do not share them in my inspection reports. This is completely outside the realm of a home inspection, and honestly, it’s outside of my area of expertise. However, I (like most people) certainly have an opinion about this stuff. If you don’t agree with my opinions, comments are always welcome.
Here’s how the Inspection Contingency works in the State of Minnesota: first, negotiations may take place between the buyer and seller before a purchase agreement is ever signed. Once all terms of the Purchase Agreement have been accepted by both parties, including the Inspection Contingency Addendum, the home buyer will have a specified number of business days to have a home inspection performed. The number of days will vary, but we typically see a three to five day period. The number of days can vary further based on the volume of home sales in the market, and can be dependent on the availability of an inspector. Once the inspection period has expired, the buyer will typically have one to two business days to respond. It’s during this period that the above listed four options come into play.
Side note: The Inspection Contingency is a period of time in which a buyer can have inspection(s) performed. The parenthetical plural in the contract means that a number of inspections could be performed during this period. If the home inspection is performed on the second day, there may be electrical issues that need to be further evaluated by an electrician. Buyers can also take the opportunity have Level II chimney inspections performed and sewer lines scoped. More on those two inspections next year.
Without further ado, here’s my list of items that should typically not be negotiated after the inspection.
Known conditions = no negotiations. No price or repair negotiations should take place regarding conditions that were known prior to the home inspection. If a condition is readily visible or apparent, it’s not something that was “discovered” during the home inspection. A few examples of known conditions include:
- Peeling paint
- Damaged interior walls
- Damaged floor coverings
- Deteriorated driveways or walkways
- Any conditions listed in the Seller’s Property Disclosure Statement
If any of these are going to be negotiation items, they should be negotiated before the inspection.
Old = no negotiations. I frequently hear discussions of old components, or components that are at or near the end of their service life expectancy. This shouldn’t be a negotiation item. If a water heater is 20 years old and still functioning properly, should the buyers ask for a new one? I say no. Technically, the buyers can ask for anything, but to ask for replacement of a fully functioning used or old component in a fully functioning used or old house is a bit much. Here are a few things that need to be periodically replaced on homes:
- Windows
- Furnace
- Air Conditioner
- Water Heater
- Appliances
- Garage door opener
On the other hand, if a home seller advertises a “new” feature, but that information is not accurate, that would be a completely different story. For example, I was recently involved in a transaction where the seller had mistakenly listed a 30-year-old water heater as “new”. The buyer negotiated for a price reduction after the inspection. No problem there.
Also, if a first time home buyer finds out that a bunch of these items are at the end of their life and they know they won’t be able to afford replacements soon, they might decide that the home they’re buying isn’t the right one for them… unless perhaps the seller would like to help out. It’s not unreasonable to renegotiate at this point, but a price negotiation typically won’t help a buyer, because this doesn’t give the buyer any more cash to deal with repairs or replacements.
Minor defects = no negotiations. Used houses aren’t perfect. Part of being a homeowner means spending time and money on the house. This is something that home buyers should expect, and something to be budgeted. Anyone not cool with that might be better off renting. Here are some small, petty things that home buyers shouldn’t ask sellers to address:
- Missing cover plates at outlets, switches, and junction boxes.
- Missing caulk
- Dirty furnace filter
- Dirty AC condenser
- Damaged insect screens
Code changes / safety upgrades / energy upgrades = no negotiations. While a home inspection is not a code compliance inspection, home inspectors often recommend safety upgrades due to changes in building codes. It’s bad form to ask a seller to make these types of upgrades. That’s not to say these safety and energy upgrades are not important, but I think they make for somewhat petty negotiation items. A few of these conditions include:
- Lack of AFCI devices
- Lack of GFCI devices (I know my opinion isn’t popular, as this seems to be a fairly universal negotiation item)
- Lack of safety glazing in hazardous locations
- Anything related to stairway safety, including wide spacing on stairway balusters
- Protection of the municipal water supply against backflow
- Minimal attic insulation
Of course, there are always exceptions. If new work was performed at a home and advertised as such, it’s only fair to expect the work to be done to code. Code is sometimes known as “current safety standards”. Immediate safety hazards might also be a good point of negotiation. More on those next week.
In closing, if a home seller is already upset because they’re selling their house for less than they wanted, they won’t be happy to receive a list of small chores from a home buyer in the form of a purchase agreement amendment. This can be the straw that breaks the camel’s back, leading to the deal falling apart. I hate to see this happen, because items that cost hundreds of dollars to fix should never hold up the sale of a property that costs hundreds of thousands of dollars. If you’re a home buyer, my advice is to not put yourself in this position. Treat the home purchase like a relationship; do you want to be right, or do you want to be happy? Let the little stuff go.
In next week’s post, I’ll cover a number of home inspection conditions that I consider to be reasonable negotiation items.
Author: Reuben Saltzman, Structure Tech Home Inspections
Debbie Nelson Scheffler
December 15, 2015, 5:00 pm
Hi Reuben,
I think your post is interesting and I appreciate you candor in the first few paragraphs that it is merely your opinion. As a real estate professional I work on these issues every day. I have to say I agree with some statements and disagree with others. Of course, because all things are negotiable at this point in the transaction, there is not necessarily a “right” answer. I believe in the 25 years I have been doing this, I have seen every market and every situation possible. One of my biggest “pet peeves” in the real estate industry is when one professional (mortgage, inspector, closer, agent) crosses into another ones area of responsibility in the transaction that all are working on as a team. As an example, a mortgage broker should not automatically tell the buyer to ask for closing costs, unless it is impossible to do anything else to make the deal happen. There are situations that leave the buyer expecting to get a “freebie” from the seller (which this is not) and it may not be in the buyer’s best interest. A mortgage broker would most likely be very unhappy with me if I promised a rate or advised the client on which type of mortgage loan portfolio would fit their situation best. Another would be a closer (or loan officer) negotiating a new closing date or terms to the contract – the real estate agent negotiates, not the previous two professions in our transaction in the markets I work in. Finally, I come to the home inspector. I can tell you I have sat through more than one home inspection in which the inspector instructed the buyer what to counter offer on as a result of the inspection. I will also make it a point to say, I have never experienced this with you – thank you! This is very frustrating to me because of the follow:
1. They set buyer expectations to a level that may be completely impossible or unreasonable.
2. The inspector has no idea whether the buyer received a screaming good deal when they purchased the home or it went into multiples and they chose to pay a premium price to get the home. Expectations for each of these situations creates a different scenario.
3. The inspector has no idea how difficult was to meet this buyer’s specific need. Sometimes buyers have needs for a specific type of property or feature. Sometimes that means there are 2 homes in 10 years that meet their criteria. Okay, yes, that is an exaggeration, but you get the idea. The buyer needs to weigh the inventory, price and inspection with their agent before making a decision as to whether or not to counter and is so, how.
4. There are so many different possibilities on how to counter. Again, it needs to be weighed out. There is no one “right” answer and no hard rules.
5. Remember a counter offer is as good as a rejection. The seller can say “no”, thereby rejecting the counter offer and immediately pursue a different deal that came in just after they agreed to this buyer’s offer. Who knows – that new deal could be better for them. The seller may just be hoping and waiting the buyer will make a counter offer after the inspection so they can get out of that deal and pursue the 2nd deal which is better for them. Once the counter offer is delivered – it is wide open for that. If this happens, the buyer who just paid quite a bit of money had a cancelled deal. They can’t come back and say – well now that I know I will lose it, I will not make a counter offer. Nada – goodbye! I have seen it happen. There is always a risk and you never know…
6. Every market, every neighborhood varies in tradition and practice. I have negotiated in the Twin Cities, in the Brainerd Lakes Area, and St Cloud. I have assisted family in Wisconsin. My assistant from 20 years ago is a Broker in Phoenix and we compare notes frequently. I find the practices and customs in regards to this issue to vary a great deal market to market. A good agent will counsel their client to their unique market so they can make the best decision possible.
7. So to answer your question – when do you counter after an inspection? Well, my answer: “depends, every situation is unique. Let’s examine the circumstances.” And that is what I do for a living, every day.
Stay warm out on those roofs and I will see you soon.
Linda Johnson
December 16, 2015, 7:26 am
Reuben,
I agree with both your observations and with Debbie’s comments. I will say that you have not ever told one of my buyer clients ‘how’ to negotiate after the inspection either. In my professional opinion there are far too many ‘routine maintenance items’ that are requested in negotiating an offer. Part of this could be due to the buyers requests, but many times I see agents requesting the same items for their buyers. Sometimes, when negotiating I bring up the big bold print on line 3 of the MN Addendum to Purchase Agreement: Inspection Contingency–The property, if not new cannot be expected to be in new condition. Routine maintenance items are not part of this addendum. The most surprising response I receive from agents is “Oh, I never saw that part!” Really? Perhaps agents should READ the purchase agreement and find out the definition of what routine maintenance items are before having their buyers ask the sellers to upgrade everything. Maintenance is NOT upgrading. Buyers need to know there will not be a landlord for them waiting in their new home. Thanks for some great points!
Negotiations after the inspection, part 3: reasonable negotiation items | Structure Tech Home Inspections
December 22, 2015, 5:25 am
[…] inspection in part 1, and gave a list of what I consider to be unreasonable negotiation items in part 2. For this post, I’m going to cover some common home inspection findings that are frequently […]
John Klein
February 15, 2016, 5:13 pm
We had an issue with our deck. Although not a code issue, the insurance company would not write a policy because there was no hand railing for the 5 steps from the sidewalk to the deck. I think issues regarding insurability should be something the homeowner disputes with the seller.
Vicki H
February 16, 2016, 6:49 pm
Love the blog but you have some technical glitch that makes reading the comments, especially a lengthy comment like Ms Scheffler’s causing the text to “jump”. Even trying to track my own writing is very difficult. Please get this issue fixed. I rather enjoy reading the comments.