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Andy Wojtowski

Podcast: What should be negotiated after the home inspection?

Bill, Tessa, and Reuben discuss negotiations after the home inspection. Some home buyers turn to the home inspector for advice on how to negotiate with sellers after the home inspection, but this is something that we also lean on the real estate agent for. This is their realm.

Nevertheless, we at Structure Tech do have a list of things that make for reasonable and unreasonable negotiation requests, and the gang discusses those items in this podcast.

Also, here’s a document we put together that summarizes all of this: Negotiations After the Inspection

TRANSCRIPTION

The following is a transcription from an audio recording. Although the transcription is largely accurate, in some cases it may be slightly incomplete or contain minor inaccuracies due to inaudible passages or transcription errors.

Reuben Saltzman: That horrible question that people ask us, What should and shouldn’t be negotiated after the inspection?

Bill Oelrich: ‘Cause we really never know what goes on after we leave the property. Right? We go in, we find all the facts that we’re gonna find, we compile them in a report and send them over to the client. And of course they’re asking us questions as we go, but we really don’t know what gets negotiated.

[music]

BO: Welcome everybody, you’re listening to Structure Talk, a Structure Tech presentation. My name is Bill Oelrich, your host alongside Tessa Murry and Reuben Saltzman, the Structure Talk crew. On today’s episode I wanted to talk a little bit about negotiations. As home inspectors, clients put a lot of trust in our opinions, and it’s not uncommon for them to very discreetly ask us, “Should we negotiate this? Should we negotiate that?” And that’s a really sticky wicket from a home inspection perspective because, at the end of the day, we’re there to find facts. I really don’t have an opinion on how you should proceed with negotiations. All I know is that’s a great conversation for you to have with your agent. You determine what’s most important for you and you guys work through it, develop a strategy, so on and so forth. I’m gonna throw it over to Reuben and Tessa, and, What’s your opinion on answering questions about negotiations? Is this something you actively engage in?

RS: I’m totally with you, Bill. That is not at all what I am there to do. If I was gonna expound on that a little with my clients, I might say, “Look, I have no idea what you’re paying for this house. I don’t wanna know what you’re paying. I don’t know what has been negotiated, what the right house is for you. I don’t know any of this stuff. Or what your skill level is. You really gotta talk to your agent. If you’re gonna ask about what should be negotiated, if anything, you gotta talk to them. That’s totally outside the realm of what I do as a home inspector.”

BO: Gotcha. Tess, what are you thinking?

Tessa Murry: Oh, I can’t say it any better than that.

BO: Alright, so we’re dodging that hot potato totally, right?

RS: Yeah, yeah.

TM: Yeah.

RS: At least when it comes to our clients. That’s not to say we don’t have our own opinions, and I’ve put together a lot of this. I have a document I put together a couple of years ago, I spent a long time putting this document together. It was a conglomeration of a lot of different blog posts talking about negotiations after the home inspection. And I think that’s the title of the document. Yeah, it’s Negotiations After the Inspection.

BO: Where does one find this document?

RS: I’ll bet you if you Googled it you could find it. If not that…

TM: We should put a link.

RS: I’ll put a link… I will link to it in this particular podcast episode. But it’s a nine-page document where we answer that horrible question that people ask us talking about what should and shouldn’t be negotiated after the inspection. Actually, we don’t get quite that detailed, we don’t say that these things should or shouldn’t, but we say these things shouldn’t be negotiated, and then we talk about reasonable negotiation items.

TM: Things that get successfully negotiated, or have a higher success rate of being negotiated, that we’ve experienced in the last decades of doing this.

BO: It’s interesting because we really never know what goes on after we leave the property. We go in, we find all the facts that we’re gonna find, we compile them in a report and send them over to the client. And of course they’re asking us questions as we go, but we really don’t know what gets negotiated. But Reuben, would you say this is a company line, like this document is the company line when it comes to…

RS: No, I’d say it’s more just my own opinion on paper. There really can’t be a company line on this. I think different inspectors in our company will probably have different opinions, but I really put this together as a tool for real estate agents to use to guide them a little bit. And if you’ve got an experienced agent, it might not be of any use to them. But for newer agents… I created this because of being involved in so many different transactions where we end up getting hired to go out to do reinspections on some of the silliest, pettiest things, like, “Oh, we want you to come out and make sure they install the new furnace filter. And we wanna make sure they caulk these windows. And we wanna make sure that they fix this leaking faucet.” And I’m just giving you the list of stuff that I had to do when I sold my house.

BO: Sure.

[laughter]

RS: But it’s all these petty little things, and it’s trying to put together a document to guide agents a little bit, ’cause I haven’t seen a good document on the real estate side giving this type of advice.

BO: Okay. So hit the high points. What do you think is negotiation worthy?

TM: Well, known conditions. So things that you can see when you walk through the house before you have an inspection, you and your agent. Things like stained carpet, or holes in the walls, or maybe a driveway that’s cracked and in really bad condition.

RS: What do you think about this, Bill? Bill you’re always a contrarian, so I gotta know, what do you think about this?

BO: I think that should have obviously been factored into the price that you were willing to pay for the property, these straight up visual things. If you need me as a home inspector to tell you that the floor is stained then…

RS: Did you look? [chuckle]

BO: Yeah, exactly.

TM: Well I’ve had buyers though, they’re like, “Hey, make sure that you take pictures and comment on how bad the carpet is in here ’cause we’re gonna hit them hard on stained carpet.”

RS: Yes.

TM: Or same thing with driveways, “Hey, I really want you to emphasize this driveway needs to be redone because we’re trying to negotiate a better price on it.”

BO: I’m thinking here in real time, and I might be changing my opinion on some of this stuff. I think the emotion and intensity of selecting a new house is pretty high up there. And we talk about this, it’s really hard to unsee something that you saw, but before you saw it, you would just happily walk past it for years and years and years. And maybe that’s what it’s like when you’re buying a house. I’ve only bought one. I’ve been in the house we’re in for 18 years, and there were things that were obviously wrong with it and we accepted it, but maybe you just walk beyond it and you’re oblivious to the fact that there is a driveway with a big sinkhole in it or something like that. It doesn’t even matter. You’re thinking location and the house and so forth. So I don’t know where I’m at with this at this point.

RS: Yeah, we’ll go back to what you said the first time, Bill.

BO: Okay. I like it.

RS: Next one, Tess.

[laughter]

BO: Got you.

TM: Things that are old, but they’re still functional. So if you’ve got a furnace that’s getting older but it’s working just fine and safe, it’s definitely going to be an uphill battle asking that seller to replace that furnace just because it’s old.

RS: Yeah, and a lot of this comes from misunderstanding in what’s in a home inspector report. We are ASHI certified inspectors, everybody here at Structure Tech. We follow the ASHI standard of practice, that’s the American Society of Home Inspectors. Part of that standard of practice says that when we find components that are at the end of their serviceable life, we need to report on that. We can’t just gloss over it. If you’ve got a furnace that’s 20 years old, our SOP says you need to tell your client it’s at the end of its life. It doesn’t mean that we’re telling somebody, “You have to replace this.”

TM: Or that it’s a defect.

RS: Exactly, exactly.

TM: It’s just old.

RS: That’s where it is in its life cycle, that’s it. And then a lot of people make this big jump, and… I’ve had it happen where I say to one person there, I say, “Yeah, the furnace is 20 years old, that’s about what they typically last so just be aware of that”, and then I’ll have the spouse turn right around to the other one two seconds later, “He said we have to replace the furnace.” No! [chuckle] That’s not at all what I said, but that’s what people hear.

BO: Well, be careful with that too, only because if you decide to throw that in and they’re like, “Fine, I’ll replace the furnace”, you might not get what you think you’re gonna get. I like choice, I wanna make my own decisions.

RS: When you say throw that in, you mean go back to the seller…

TM: And ask them to replace.

RS: And tell the seller to replace it?

BO: Right, right.

RS: Yeah. You know what you’re gonna get if you tell the seller to replace it.

TM: A crappy furnace. [chuckle]

BO: Maybe.

TM: A cheap furnace.

RS: Cheapest thing that you can get. Yeah.

TM: Installed by uncle Larry. [chuckle]

BO: Okay Tessa, so what are some other trivial things, things that you would think were trivial?

TM: Yeah, so we talked about known conditions, things that you can obviously see, you don’t need a inspector to tell you. Things that are old but functional, maybe old windows or something like that. Just ’cause they’re old doesn’t mean they need to be replaced. The next thing would be what we consider to be minor defects. So, like okay, Reuben you said you had a bunch of things in the transaction of your house that came back that were really pretty petty.

RS: Yeah, they were all really small items.

TM: Like what?

RS: Well, fixing a leaking faucet. In fact, in the purchase agreement it said a leak at the sink, and I assumed it was a leaking sink drain that I wasn’t aware of. And it turned out it was one of those single handle faucets.

TM: Oh, those always leak.

RS: And it leaked at the stem. Yeah, if you push up on just about any single handle faucet you can get it to leak. And it’s like, “Come on, this doesn’t even leak unless you kinda jam on it. And even then, what are we doing? There’s so much… You’re buying a house.” [chuckle]

BO: So where is this coming from? Are buyers pickier than they used to be? Are they less technically capable to look at that faucet and go, “That’s not a big deal, it’s just a tighten this or tighten that”?

RS: That’s a great question. I think that sometimes if people see it in the home inspection report they get this idea that this inspection report is a repair list that I must present to the seller. I think that might happen sometimes, and when that happens it’s simply poor coaching on the real estate agent’s end. They weren’t telling them what the home inspection is all about.

BO: Just so we kinda clear the air here, I’m not suggesting this is one of the millennial things, ’cause it’s real popular to blame millennials for all the ills of the world, that they’re lazy or they want perfection. Whatever it might be, that’s not what I’m doing here.

RS: Yeah, Tessa.

TM: I’m shaking my head right now.

BO: I just think houses are expensive and maybe that’s what this is really about. If you’re gonna pay top dollar maybe you feel like things should be working just the way they’re supposed to.

RS: I’ve heard so many people say that. “For”, fill in the blank… “For $300,000 you’d think… ” And then…

TM: It was perfect.

RS: Yeah. Yeah, people say that a lot. I don’t subscribe to that a bit but a lot of people do.

BO: Okay.

TM: Yeah. So there’s one other category that we have that we don’t recommend trying to negotiate things over, and that would be co-changes or things that just have evolved over time based on standards, like safety things too. So you think about the space in between balusters and a guard rail in a 1900 house versus a new house today, very, very different. Same thing with riser heights and hand rails and all of that stuff. Lack of GFCI outlets, that seems to be another one that gets people all whipped up, if you’re missing any GFCI outlets.

RS: Yeah.

BO: Okay, nerd alert here. Break it down, GFCI what?

TM: You are the acronym king.

RS: Yeah, tell us what it is, Bill.

BO: Ground faults circuit interrupter.

RS: Yeah, that’s right.

[chuckle]

TM: Yeah.

BO: All it means is it’s got that button on there to…

TM: Yeah, the test and reset buttons.

RS: Yeah, the outlets with the button on there.

TM: Yeah, people get really bent out of shape. And as an inspector, we’re going to be commenting on these things, making recommendations on how to make things safer and how to make them just better in general. So if a house doesn’t have GFCI outlets in a kitchen or bathroom, or these wet locations that they should be, we’re gonna recommend adding them. But…

BO: Why? If it’s not wrong…

TM: It’s a life safety device, it could prevent someone from being electrocuted so it’s a good thing to have. And just saying that you should have it doesn’t mean that it’s a defect that it’s not there, it’s basically just a safety upgrade that we’re recommending.

RS: Yeah. And when you say when it’s not wrong, it’s like home inspectors aren’t there to tell you what’s right and wrong, we’re there to talk about safety, maintenance, performance. We are there to talk about some things that are wrong, but we’re not cold compliance inspectors. If we were, everything that was original to the home would not go in the report as long as it was done properly when it was put in. But with GFCI devices, this is a life safety device. The only job of a GFCI is to keep you from getting electrocuted, that’s what it does. So we’re really quick to recommend upgrading to GFCI protected circuits, and that’s why. It doesn’t matter if it was required when the house was built or not.

BO: And that’s pretty cost-effective to make those outlets.

RS: Exactly, exactly.

BO: It’s not like it’s gonna break anything.

RS: Those things cost like 10 bucks a piece.

BO: Okay. So we’re talking about the trivial, petty, however you wanna describe it. Let’s get to some bigger stuff. Where do you begin to get some traction over, “This is a conversation that should be had. Are we gonna adjust the price or walk away from this house?”

RS: That list of topics, the bigger ones that people do negotiate, it comes out of the stuff where when people do try and negotiate this stuff, people accept it. Sellers understand it, you don’t get kick back. I’d say number one would be a leaking roof. If a roof is leaking, or it’s about to leak where you’ve got shingles that are blown off and holes in your roof, nobody argues with that. Everybody gets it, and we see stuff like that successfully negotiated pretty much every time it happens, nobody argues.

BO: Alright. What else?

TM: Big electrical problems, things that are fire hazards. So for example, that would be a house that has aluminum branch circuit wiring, anything that… If a house has aluminum branch circuit wiring, it was built sometime between 1965 and 1974-ish, right Reuben?

RS: Good range, yeah.

TM: Yeah. So that’s a fire hazard, and that can be a really, really big expensive thing to repair or to fix. Probably one of the most expensive things to repair, right?

RS: Probably one of the biggest things we find, definitely the biggest electrical item. It’s up there for anything.

TM: Thousands and thousands of dollars to fix that problem. Federal Pacific Electric panels, FPE panels, those are bad panels, and they’re also fire hazards.

RS: We should cover that on our upcoming podcast.

TM: We should talk about…

RS: We should do one on electric items.

TM: We should, there’s a lot of things we could talk about with electrical issues, yeah. But FPE panels are bad news, and so negotiating replacing that panel is usually one that is a good thing to try and negotiate. If you find a house that has unsafe knob-and-tube wiring, that could be another big potential electrical issue. Or other hazards too like open splice wiring and…

RS: Yeah, big things. And we say unsafe knob-and-tube, but gosh, the more time passes the more I think we don’t need to qualify that. We could just say knob-and-tube.

TM: Knob-and-tube. I agree.

RS: Yeah. It’s at the point now where there are so many insurance providers who won’t insure a house with knob-and-tube today. I bring up knob-and-tube whether I find problems or not, I bring it up as a concern.

BO: Well, more or less, just understand what you’re getting, Mr or Mrs buyer. It’s buyer beware at that point, right?

RS: Understand what you’re getting, and make sure that whoever you’re planning to use for insurance is going to insure that home. I did a survey… I helped a survey get conducted this summer, and most of the insurance companies that we contacted said they will not insure a home with knob-and-tube wiring. And we contacted like 30 of them.

BO: That sounds like another podcast conversation with an agent.

RS: Probably so.

BO: And maybe they could explain why from their perspective that’s an issue. And let’s just dig into the final few pieces of home inspection findings that might be negotiation worthy.

TM: Yeah. Well, there’s a couple other things. Big exterior problems. We talk about masonry chimneys that might be falling apart. It’s always expensive to have to rebuild chimneys. If you’ve got a deck that’s falling off the house, unsafe decks, that can be really expensive. Reuben…

[overlapping conversation]

BO: Isn’t that every deck? [chuckle] I’m sorry.

RS: Oh, Bill, you are so a pess… Such a pessimist.

BO: I digress. My bad.

RS: The siding, big siding issues, big stucco issues, water intrusion behind the walls. That’s a pretty big one.

TM: Yeah, big stuff.

RS: Nobody argues.

TM: Yeah, or big plumbing issues. So if you’ve got a house that has poor water flow, either due to galvanized steel piping in the house or maybe a led or galvanized steel water main coming into the house, those are expensive things to have to fix.

RS: Yeah, I think you shared a story about that. It might have been the first podcast episode we ever did.

TM: Yeah, I think that was our first one. Yeah.

RS: Where you talked about finding a galvanized main. Yeah, that’s a big deal.

TM: Yeah, in bad water flow. Yeah, that can be very expensive, so those things could be good negotiation items. Or if you’ve got any issues with drains too. And it could be galvanized steel drains, and you’ve got slow drains, and the fix for that is replace the drains.

RS: Yeah, yeah, that can be a really big deal. You can clean drains, but if it’s galvanized steel and that’s where the problem is, that stuff, you can’t clean those galvanized steel drains. You can pour Drano down there, which will eat holes in your drains, but it’s not gonna make ’em work well. Yeah, we don’t advocate…

TM: Oh, and sewer. Bad sewer lines. If you’ve got a main sewer line that’s in bad shape or cracked or something, a structural issue with it, that could be a really good negotiation item too. So that’s why it’s a good idea to have a sewer inspection.

BO: Okay, so here’s one thing that I… I really empathize with real estate agents on this. You get this bad news, now what? You gotta go figure out how much, how long? How do you get a good answer? I feel terrible for agents in that situation, ’cause it kinda throws this whole thing out of whack. You gotta have a whole list of contractors to get these questions answered, and answered fast.

RS: Yes.

TM: Yeah.

BO: Or extend your inspection contingency period. Tessa, you had pointed at two other things that…

TM: Well yeah, those two other things on that list. I think that’s a good question, Bill. But if you’ve got a furnace that has a cracked heat exchange or other big HVAC issues, or a water heater that’s back-drafting, that could be a potential safety issue. Those things are…

RS: Yeah, those are immediate and serious.

TM: Yep, safety concerns. And then there’s this other category, Reuben, you should talk about this one.

RS: Yeah, this was kind of the catch-all, and this is stuff that didn’t just fit neatly into one box. We call it “other things that freak people out.” [chuckle] That’s as neat as…

BO: I like that.

RS: We could put it. I mean number one on there would be mold.

TM: Yeah, yeah.

RS: Like any type of mold. We just had Vicky on a couple of episodes ago, and she talked about how mold in a bathroom, it’s never harmful, but boy, good luck convincing that to any home buyer. They see something that looks like mold and they’re like, “Oh, the house is trying to kill me.” [chuckle] “We need professionals.”

BO: I don’t think she said it’s never harmful. I think she said most of the time it’s not a big deal. [chuckle]

TM: Yeah.

RS: Whatever.

BO: Yeah. [chuckle]

TM: When really they should be scared of their carpet, in the basement, really. Yeah.

RS: Yeah, but mold, as a home inspector, we don’t make a big deal about that. We let people know, “You got this black stuff. It looks like it could be mold, and have it cleaned up.” We don’t even advocate testing for it ’cause…

TM: Yeah, we don’t recommend testing.

RS: Yeah, we recommend fixing the moisture issue.

TM: If you can see it and smell it, you know you have it, and you know you’ve got a problem that you need to solve. And I don’t know about everybody else on the team, but I think we do our best just trying to figure out why that mold’s there in the first place. Is it bad grading? Is it a roof leak? Is it high humidity in the house? And then talking to the buyer about how to hopefully go about fixing that.

BO: I would test, simply because then I know how to better approach it. I know what I’m dealing with and…

TM: But what Vicky was saying is the test doesn’t tell you where it is and why it’s there, all it tells you is that you have mold, and here’s the species.

BO: Okay.

RS: Yeah. And the EPA and the Minnesota Department of Health say don’t test. If you can see it, assume it’s mold, treat it like mold, and clean it up. Identifying which type it is, there is no value in that.

BO: Alright.

RS: That’s…

TM: Sorry Bill. [chuckle]

RS: Yeah, sorry. Give him a hug, Tess.

TM: There might be some transactions…

BO: No, I’m testing.

TM: Where it’s good, where you might wanna have a test though, there are.

RS: Big foundation issues. Any time you got a big structural problem, that’s another thing that freaks people out. I’ve found a lot of the time foundation fixes are not as expensive as people think they’re going to be. I mean, I remember this home, the price of this home had to have been discounted $50,000-$100,000, it felt like that it was going for half of what it should’ve been going for, ’cause it had these big huge cracks in the foundation. Anybody could see it, and the guy buying it ended up getting a quote for like $15,000 to completely repair the foundation. They’re gonna do all the shoring up, they had a foundation repair contractor out there, he gave them a bid, and it’s like, “There, you’re back to zero and you’ve got a ton of equity built in in this house immediately.”

TM: It’s because too many people watch HGTV, that’s why. There’s so much misinformation, I’m sorry, that’s a tangent, but…

BO: Not everything I see on TV is real and accurate? [chuckle] I don’t even know what to say anymore.

RS: The foundation’s important but everybody wants to say, “I wanna make sure it’s got good bones.”

TM: People freak out about it.

RS: And it’s like, “Yeah, we’ll check for that, but boy, there’s a lot more than just good bones.”

TM: Well, and how many of those bones can you actually see when a basement has been completely finished?

RS: Yeah, exactly. There’s a lot more to a house than that. And then environmental things that are excluded from home inspection standards of practice, some of those things can freak people out too. We’re talking about buried fuel oil tanks… That is kind of a big deal, if you’ve got an abandoned tank.

BO: Oh, sure.

RS: High radon levels. Maybe that doesn’t freak people out…

BO: Fix it.

RS: But it’s always a negotiation item.

BO: Yeah, just take care of it.

TM: If you got friable asbestos or vermiculite insulation.

RS: Yep, that’s another big one that seems to always get negotiated. And I don’t know, there’s probably a lot more, but that’s a good list.

TM: Those are good ones. Yeah.

BO: So is there any way that this document’s available if people wanna read through your opinion of what can or should be talked about in negotiation?

RS: Yeah. Yeah, we’ll link this right on this podcast.

TM: It’s called Negotiations After the Inspection.

RS: That’s right.

BO: Fantastic. Yeah, you could always share it with your real estate agent and maybe they’d appreciate that, maybe not. I don’t know.

TM: Share it with your buyers, or share it with your nervous buyers, your engineers that think everything should be perfect. Let them read that list and…

RS: Yeah, that’s really the goal of this is for an agent to give this to their client to settle them down a little bit.

TM: Yeah, yeah.

BO: Perfect. And I feel like my company line is anytime we’re asked that question, “Should I negotiate this?” I’d talk to your agent with that.

RS: Amen.

TM: Yes.

BO: They’re the experts. Thanks everybody for listening, we’ll catch you next time.