A residential Realtor® at Lakes Sotheby’s International Realty, Michael Bartus joins the show to talk about negotiations after the inspection and how to negotiate other real estate transactions. The focus of this show was to pick up on where last week’s show left off, talking about a document that Reuben put together titled Negotiations After The Inspection.
The show starts with Michael sharing his negotiating experiences and answers some questions:
What should a home inspector say to a client, when they look at them and ask, “Is that something we should negotiate?”
How recently have you heard of schools telling Realtors® they are not to attend the inspection?
Does the industry do good in teaching agents the skills to negotiate?
Pros and cons with home warranties, as well as
What triggers an agent to ask a seller to kick in a warranty? Are warranties any good? Who orders them? What do they cost?
What’s your process for having the furnace and the cooling system inspected by a specialist at the same time as the inspection?
What do you have to say about those known conditions, like peeling paint, holes in walls, etc., which shouldn’t be negotiated as a home inspection thing but should be something that is to be addressed ahead of time?
Reuben also tells the story of a not-too-old water heater with a draining schedule affixed to it, which was ready for replacement.
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: This is a document where I did some deep dives with probably about half a dozen to a dozen real estate agents, what do you negotiate, what they successfully negotiate, and what stuff just drives sellers nuts.
Bill Oelrich: Welcome everybody, you’re listening to Structure Talk, a Structure Talk presentation. My name is Bill Oelrich, alongside Tessa Murry and Reuben Saltzman, as always. And on today’s episode, we have a special guest, Michael Bartus, real estate agent extraordinaire. We will get to Michael’s introduction here in a minute, but I just wanted to set this up real quickly. On the last episode, we were talking a little bit about code and how items come up in inspections that are code items, and then we started talking about negotiations and all these areas that home inspectors should stay well away from in terms of trying to work through the deal.
BO: So immediately we reached out to Michael. Michael’s done hundreds and hundreds of deals. He knows how to negotiate these kinds of real estate transactions. He knows when something’s an item to be talked about or just an item to be aware of. And so we wanted to bring Michael into the conversation and just pepper him with a thousand questions about… We as home inspectors can stay away from getting in hot water with agents because we talk too much or talk too forcefully about things, or maybe give our opinion about something that should be negotiated when our opinion doesn’t really matter. So Michael, why don’t you take a minute and just introduce yourself again? This is a second go for you, so I’m sure people are familiar with this. But why don’t you go through what agency you’re with and your experience and all that good stuff?
Michael Bartus: Hello, I’m Michael Bartus, residential realtor over at Lake Sotheby’s International Realty. I’m licensed in Minnesota and Wisconsin. My dad was a builder for 40 years, and so I grew up in a building and real estate family, so it’s in my blood. And I absolutely love what I do.
BO: Awesome, thank you very much. So, Reuben, I’m gonna throw this over to you. You’ve got a document that I’m looking at on my screens called Negotiations After the Inspection by Reuben Saltzman. This is your interpretation of what should and should not be negotiated, correct?
RS: Well, a little bit, yeah. It’s not necessarily my interpretation. This is a document where I did some deep dives with probably about half a dozen to a dozen real estate agents who we work with a lot. I think I looked at our database and said, “Who do we work with the most?” And I had the conversations with all of them, saying, “What do you negotiate? What’s a successful thing?” And I’d give them a list and I’d say, “What about this? What about this? What about this?” And I’d have them get back to me on all this stuff, saying what they successfully negotiate and what stuff just drives sellers nuts, and it creates a lot of bad feelings when people ask for sellers to fix things. So it’s not necessarily mine, it’s more a compilation that I put together. It’s not… Not much of this is my opinion. I know that it’ll come across sounding that way ’cause I put it together, but this is all a bunch of real estate professionals who really wade in to get this put together.
BO: Okay, we’re gonna talk our way through this document a little bit, but first, Michael, can I ask you this? What should home inspectors say to a client when they look at us and ask, “Is that something we should negotiate?”
MB: I would definitely defer to their real estate agent because the real estate agent knows all the background on the negotiations, the inspector has no idea the difficulty that we may have had up to the point of inspection. Sometimes it was a really, really brutal negotiation just to get to that point. So the inspection, it should be just, “Hey, this is the inspection. I’m gonna hand it off to your realtor. I’m gonna let your realtor negotiate this for you.”
BO: Thank you, that is required listening. Everybody, I’m gonna pause here and just put a stake through this comment right now. Every single home inspector in the entire country should listen to what Michael just said. Set your ego aside, deliver the facts, allow real state agents to do their job. I think we’re done with this podcast, Reuben.
[laughter]
RS: Alright, that’s a wrap. Thank you for coming on the show, Michael.
BO: I don’t mean to be that upfront, but there’s just something that we do where we just can’t help ourselves sometimes and want to inject ourselves into this conversation. And thank you, Michael, ’cause I’ve done that in the past, where people wanna press a third party for what they should do is. It’s like, “No, no, I don’t know your financial background. I don’t know how hard you negotiated,” just exactly everything Michael said. And if you turn it around and just be like, “This is between you and your agent,” I think people just relax a little bit. Now we can go on and just do our job, fact-finding.
MB: I could add a little bit to that too. Sometimes the real estate agent is not at the inspection, so you are their only body to talk to. And if I just gave you bad news, if I’m your doctor and I say, “You have cancer,” let’s say, but I say, “I’m not gonna talk to you about it. Go talk to your best friend,” that would be kind of a little unsettling, so I think it’s important… With COVID, it’s been hard, because you guys were not allowing the realtors to be at the inspection. I go to all my inspections if allowed to, for that exact reason, because when they are gonna turn to you, I’m gonna have them turn to me, and I’m gonna say, “You know what? That is something that we will probably be able to ask the seller to fix ’cause that is a health and safety concern.”
MB: But if something else comes up that says, “You know what? The insulation is only five inches high, and it should be 20 inches high,” and the buyer’s freaked out that it should be 20 inches high, I’m like, “Nope, we’re not getting that.” So it’s important to nip in the bud right then and there versus no realtor there, that’s putting you guys in an awkward situation, then this 40-page inspection report comes over, and now the buyer has to digest all that. And then they remembered the awkwardness during the inspection, and then the realtor is kinda left with this really goofy kind of situation, and we might be under a deadline to kinda clean up this mess. So I think it’s important that the realtor be there. Now in real estate school, they tell us not to be there because it creates a liability. Because if I suggest something like, “Hey, I think we can ask for that water heater, or don’t worry about that insulation. It’s not a big deal,” then I could be somewhat held liable for making those suggestions. So there’s kind of a slippery slope that we ride in real estate as realtors.
RS: Well, and Michael, it’s so funny you bring that up. There’s a class that Tessa and I teach. It’s a two-hour class called Hassle-Free Home Inspections, and we discussed the topic of attendance, and we talk about whether real estate agents should attend the inspection. I mean, the mood has definitely changed over the years, but I remember there was an article that came out in the Realtors Magazine put out by the National Association of Realtors, and it was written by an attorney. And it was giving some pretty specific language to real estate agents saying, “You have no business attending the inspection.” And it told a story about this agent that got sued. And when you read the story, it sounded a little innocuous. She was just there to help her clients, but you kind of read into it a little and it’s like she was pointing stuff out. She’s going, “Hey, did you see this? Did you see that? Be sure to put this in the report.”
RS: And I’ve been at the inspection with her. I know exactly who this person is. Maybe not… This happened in a different state, so not literally the same person, but I’ve done inspections with this type of person. And she put herself in a bad situation, so a lot of agents took that to heart and a lot of brokers said that for a long time saying, “Don’t come to the inspection.” Now, I think the mood has changed a little bit. People are a little softer, but it’s interesting to hear you say that schools are still doing this. How recently have you heard of schools telling you not to attend the inspection, Michael?
MB: Well, this is from when I first got in the business 15 years ago, but that stuck at me.
RS: Okay.
MB: An I do have continuing education that I have to do every year and every two years. That tone hasn’t really come up in the most recent training, but I remember it from my very first years of being instructed, and I was very impressionable because I was a sponge and I wanted to absorb all this information, and you kind of stick to what you grew up knowing. And that’s the problem too with some of the realtors out there that don’t believe that radon is a problem, that it’s some sort of plot from the EPA. So depending on how long a realtor has been in the business, you might have different training that you had and you may have had a change or adapted to it.
Tessa Murry: Reuben, wasn’t that article from 2000 or 2002 or something?
RS: Yeah.
TM: I think up there in age.
RS: That’s about right. I wanna say 2002. That sounds about right. Yeah.
TM: Okay. Yeah.
MB: When I got in the business.
TM: Yeah, well…
RS: Yeah, it was right around that time.
TM: Right. And wasn’t she sued by her clients because something was… Yeah.
RS: Yeah, the real estate agent was sued. The article was written by an attorney, but the real estate agent was sued, and the article never said how it turned out. So I contacted the author, and she got back to me and she said that basically the real estate agents insurance company ended up paying out on that claim. So in other words, she lost.
TM: And she was sued because the clients moved into the house and they found something that “she missed” because she was behaving like a home inspector? So they sued her?
RS: Exactly.
TM: Okay.
RS: I mean they sued everybody. They sued the seller, the home inspector, but they also sued the agent. So everybody ended up having to pay out on this one. I mean, really, it’s something the home inspector missed, but unfortunately, the agent had to pay.
BO: So Michael, can I ask you a question just as a… On the industry. Do you think the industry does a good job of teaching you as an agent the skills to negotiate?
MB: No, they don’t. It’s all been trial and error. It’s me selling hundreds and hundreds of homes and dealing with certain situations, and these certain things come up. And so I’ve had to adapt to what I’ve been thrown into more or less. I’m a big home warranty guy, so I sell a lot of home warranties. The reason is I had an inspector inspect the home. It wasn’t Structure Tech. It was before I got introduced to you guys, unfortunately. And the buyers moved in, and their right burner on their stove went out. And my buyer called me up and said, “Hey Michael, your inspector missed the burner the stove and now I gotta go out and buy a new burner. I don’t think this is right.” Now, I could have could’ve said, “Too bad, too sad. It’s a home. Things fail. I’m sorry that happened, but there’s really nothing we can do. We’ve already negotiated what we can negotiate. You would’ve had a chance to turn on the stove when we did our final walkthrough.” And I ended up buying them a home warranty. So that’s where I kinda learned about home warranties, and then I started researching home warranty companies. So, like I say, I’m a big home warranty guy.
RS: Can I ask you what home warranty company do you like?
MB: I like Cinch Home Warranties. It used to be HMS.
RS: Okay.
MB: And the reason why I like them is they often don’t decline the claim. And I have a local resource that I can call and say, “Hey, my client made a claim and they didn’t really like how it went. Can you get involved in this?” And she gets involved and does an amazing job.
RS: So you’ve got a good advocate.
MB: I do, and you really need that because in the North, like in Minnesota, the percentage of home warranties that are sold compared to the South is very different. We’re not used to home warranties up here in Minnesota. I’d say it… I don’t know the statistic. Maybe someone can look it up, but I think it’s maybe like 10 to 15% of homes up in the northern areas get sold a home warranty, wherein the South, it’s like 75%. It’s like some huge…
TM: Why is that?
RS: Yeah.
MB: I don’t really know. It could be where the home warranty companies are based, and they do a better job of marketing. That’s where the source of the warranties are from. I don’t know where ServiceMaster is based or some of these home warranty companies are located, but it’s just we’re not used to home warranties in the North.
BO: And Michael, can I ask a question? Is that kind of broken out to per capita as a percentage or is it… Could it just be pure numbers that more transactions are happening in the South versus up north?
MB: Yeah, I don’t really know where I heard that from. It might have been from the home warranty company themselves, I could ask my rep at Cinch and ask her for the differences out there, ’cause I think it’s an important thing because if you’re not conditioned to something, you may not… ’cause there’s a lot of horror stories of home warranties out there, and I have horror stories of home warranties where something should have been covered and it wasn’t. So there’s a lot of bad press of home warranties out there, and I think if you have the right team in place, and that includes getting your furnace and air conditioning looked at by an HVAC Professional, that will set the stage for a successful warranty claim on a furnace or air conditioner. But if you don’t have a line in the sand where your HVAC was looked at and deemed in good working order, you don’t really have a good basis to get that claim to happen. So I’m a big HVAC certification guy as well.
TM: So you’re saying there’s no pre-existing conditions that are allowed for HVAC equipment to be warrantied then?
MB: No, it’s not saying that. It just gives you a better case.
TM: Okay.
MB: It gives you a smoking gun.
TM: Gotcha.
MB: ‘Cause you can say, “An HVAC professional was here, they looked at it, and there were no issues found. There was not a cracked heat exchanger. Now there’s a cracked heat exchanger, not a pre-existing condition. I want a new heat exchanger. I want a new furnace.”
BO: This is interesting because we’re kind of back to setting expectations, and this negotiations conversation is a lot about expectations, and the home warranty conversation is a lot about expectations too. I know a lady who bought a house about 18 months ago, the furnace was from literally 1955, and when they moved in, it failed and they had a home warranty. And the home warranty actually paid a little bit of money towards this furnace, which to me, I think they had every right to be like, “Are you kidding? From 1950?” But it feels like somebody should have prepped them that, “Yeah, you’ve got a home warranty, but you have a furnace that by any standard is ancient. So if it fails, it’s no surprise to anybody.”
MB: But I bet if they would have had it certified, I bet you would have had a bigger gun to point at them.
BO: I agree with you, totally agree.
MB: Because then it’s not pre-existing.
RS: There’s so much to talk about here, Michael, got a big list of questions I’ve already written down about this. We may not get to negotiations after the inspection, but we might have to do a part two. But for home warranties, what’s the average cost on one of those?
MB: About $650 if you really beef it up with $100 deductible and then adding a washer and dryer. You have to be careful when you order them, and definitely this is to all the realtors out there that maybe don’t sell home warranties, just make sure you have a conversation with your local rep and make sure that you understand what boxes you’re checking and what they cover, because I’ve made that mistake ’cause on the Cinch one, it says washer and dryer combo, for instance. Well, washer and dryer combo to me means, “Oh, that’s a stackable washer and dryer combo,” but no, it means it includes the washer and dryer together. So that’s like a simple mistake that I’ve made because I didn’t understand the language, and then I had to call and get clarification and say, “What does combo mean?” So just make sure you understand when you’re ordering the home warranty that you understand what boxes to check.
RS: Sure.
MB: I find it’s about $650 for the ones that I do for how the way I set them up.
RS: Okay, alright. And so is it usually the real estate agent who orders that, or is it the home buyer?
MB: Well, on the Minnesota purchase agreement, there’s actually boxes you check, and it spells out what is supposed to happen, so there should be no mystery to it. But in terms of negotiation, a lot of times I’m writing my offers with no home warranty, and then later on, negotiations after the inspection is done, I’ll add the home warranty, because when you’re negotiating, you wanna make your offer look as clean and simple as possible and have the highest net to the seller. So if I already know a home warranty is gonna cost $650, and my offer is $250,000, it’s $250,000 less the $650, well, that can put me in second position if people are looking at what’s really truly the highest net offer, if that makes any sense.
TM: Yeah, you’re creating the strongest offer you can.
MB: Yeah, yeah, ’cause really in Minnesota, everything, the entire purchase agreement, is negotiable until you come to terms. So if you wanna change the closing date, you could change the closing date. If you wanna add a home warranty, you could add a home warranty. If you wanna ask the seller to pay for your buyer’s closing costs to cover some of these inspection items, they could do that. So there’s a lot of things you can do during that inspection contingency. It’s really loosey-goosey here in Minnesota.
BO: Clarify one thing, Michael. Signed and terms agreed to, that means everybody’s put their final signature on it, right?
MB: Yep.
BO: Okay.
RS: And for the warranty, what would trigger you to ask a seller to kick in a home warranty?
MB: Yeah, it’s a good question. So I kinda look at the body of work of the inspection, and I look at some of the things that kind of came up. And so let’s say there’s an old water heater, but it works, so it’s a 1972 Sears Roebuck water heater, but it cranks out the water hot to a large family, let’s say. Well, in your inspection report, you’re probably gonna say it’s end of life and should be replaced. Right? ‘Cause it should. But it works. So if I think that’s something that the seller is gonna say, “I’m not replacing the water heater,” because in my opinion, they shouldn’t if they disclose it works, then the home warranty would cover a water heater if it failed, and you wouldn’t have a pre-existing condition because it worked.
RS: Okay, alright.
MB: The appliances are from 1990, and I’m kind of nervous that some of the stuff’s gonna fail there, that would be a good home warranty situation, or if there’s just a lot of head scratching, maybe electrical stuff that we’re not gonna be able to get fixed, and I think it’s gonna become a problem down the road, that maybe that’s something that a home warranty would cover.
RS: Sure, that makes a lot of sense. And bringing that up, I mean, that’s a big part of the reason that we put this document together was because so often… And, I mean, I’ve said this so many times, I’ve probably said it on the podcast before, I’ll be talking to one person who’s at the inspection and I’ll be talking to the husband, and I’ll say, “Yeah, the water heater is 20 years old. They usually last about 10 years, maybe 15 years, so you’re kinda on borrowed time and then, that’s all I’ll say. I’ll just say it’s old, and I tell people this, because we follow the ASHI standard of practice, the American Society of Home Inspectors. One of the things that they say is that we are required to report on components that are at the end of their serviceable life, and there are national standards for how long a water heater is gonna last, and if it’s at the end, we are required to report on it.
RS: So we’ll tell people about that. We don’t tell people, “Look, you gotta replace it.” We just say, “Look, it’s old. Plan to replace it at some point.” But then, I’ll have the husband turn right around 30 seconds later and go to his wife, “The home inspector said we gotta replace the water heater now.” And I’ll go, “That’s not what I said at all.” Well, I’ll think that, I won’t contradict him, but people totally bend your words around, and they say, “The home inspector said this,” and you said nothing of the sort, and that’s part of the reason we put this document together, so that real estate agents can share this with our clients and say, “Look, here’s what the home inspector says about negotiations.” One of these line items in here is, old items means no negotiations. You don’t need to ask a seller to replace something just because it’s old. But on the other hand, I like your take, Michael, about how you will frequently ask for a warranty when you’re expecting it to fail really soon. Not a bad idea, man.
MB: It’s a bridge, right? It’s a bridge because it’s a bridge really to it’s cheaper than what it’s gonna cost to put in a new water heater. ‘Cause let’s say with a permit, depending on what city it’s in, that might be a $1,500 to $1,600 expense. If I’m seeing a home warranty is $650, well, Mr. And Mrs. Seller, you just saved $1,000 buying us a home warranty. It’s kind of a win-win, and that’s really what negotiations are all about is win-win.
RS: Sure.
BO: Michael, does your HVAC team look at water heaters to give some sort of certification on those?
MB: They don’t. They have a different team with plumbers. You probably have to have a plumber look at that, I think it’s what jurisdiction a water heater would be under versus just an HVAC person.
BO: Have you ever been denied of water heater replacement on a failure?
MB: Yeah, actually, I have an interesting story, I’ll try to be brief, but I had a client have a water heater, it had stickers on it for every year it had been maintained. So someone was draining the water heater every year. I don’t know anybody that does that. I’ve never seen a water heater that had stickers that showed, this was serviced this year, this year, this year, this year, this year. So client bought it. We got a home warranty, not from the company that I endorsed, and they denied the claim. Right after they moved in, the water heater failed, and the home warranty company denied the claim, and I’m like, “How can you decline this claim? It had all these stickers on it.” And they said, “It was a pre-existing condition.” And I’m like… Anyway, I no longer use that company because of how they treated my client and me during that situation. I just thought that was absolutely crazy.
RS: That’s horrible.
MB: It was horrible, yeah. I severed my relationship with that company, and I’ve never recommended them again, and if their name comes up, I’ll tell my clients not to use them.
RS: And you know, you bring that up, Michael, and I’ve got this anecdote that I like to share on that topic about draining water heaters. I just had somebody email me the other day asking, “Should I drain my water heater every year?” And I remember, there was one house I inspected, it was for an engineer, and this guy lived in Champlin, and he had a spreadsheet printed out on his water heater, and it was labeled water heater draining schedule. And he had all of the dates where he drained his water heater, and he’d filled in the spreadsheet, and he even tested the relief valve once a year. I mean, he charted all of this.
MB: Wow.
RS: And this was affixed to the dead and broken water heater in his garage that was only 10 years old. My point is, despite all of this, his water heater still failed in 10 years, which that is not a long life on a water heater. So after seeing that, I just kind of went, “Dude, I am done.” Any time somebody asks me, “Should I drain my water heater?” I’ll say, “Don’t bother. I’ve seen proof that this does nothing. So don’t even waste your time. I don’t care what the manufacturers tell you about this. Don’t waste your time with it.”
TM: I wonder if that guy tests his GFCI outlets every month.
RS: Oh, Tessa, he was also an electrician, and you’re not gonna believe this. I’ll never forget this. I found a reversed polarity outlet.
TM: Oh no.
RS: One of the outlets. And this guy freaked out. ‘Cause I pulled him aside, I’m like, “I hate to do this, but my tester is probably broken, but you gotta check this yourself. You got a tester?” And he was mad, he was like, “Let me see.” And he’s like, “By golly, it is backwards.” And he was so embarrassed. And he fixed it right there on the spot. But I was tickled. It was pretty fun.
TM: Oh, that’s funny.
MB: That’s awesome.
BO: Reuben, you’ve got this picture that we can see on the screen. Great pod viewing, right?
RS: I’ll share it in the podcast. We’ll put this in our show notes.
BO: One of the days that he actually drained his water heater was July 4th. I’m like, “Go find some parade or something to do.”
MB: He was expecting some guests.
RS: Alright, Michael, before we move on to the next topic, I just gotta ask you, ’cause we’ve talked about this a couple of times during the podcast, you do something really unique with appliance inspections. You mentioned how you like to get the furnace certified, and this is unusual. Can you share what your process is for having the furnace and the cooling system inspected at the same time as the inspection?
MB: Yeah, sure. I’ve worked out an arrangement with a local heating and cooling company, and we have what’s called the Michael Bartus Special. I give my client a $100 gift card to use for this company, and then they come out and they certify the furnace and air conditioner, and we try to do it at the same time as the general home inspection if we can, but I do so many services like radon, sewer line, general home inspection, and then HVAC, it’s really hard to get everybody there at the same day, but this company’s done a really good job of at least getting us looked at during the inspection contingency widow and… ’cause you guys at Structure Tech, you guys do a great job of looking at the furnace and air conditioner, but you guys don’t scope the furnace, where you’re getting in there and looking for cracked heat exchangers. You might be able to get some results with CO levels, but not necessarily know if there’s a crack. So I’ve had enough situations where my client did end up getting a cracked heat exchanger. And I’m like, “You know what, I never want this to happen again,” ’cause it’s obviously very dangerous. So we do this HVAC test, and it just gives my clients and me a ton of peace of mind.
RS: I think it’s awesome that you do that, Michael. And you’ve talked to me about how awesome this is before. And you’ve been like, “Dude, Reuben, when are you gonna start doing this?” And it’s enough people like you saying, “When are you gonna start doing this?” that made us start doing sewer inspections with our home inspections. And so far, you’re the only one beating down our door to get these furnace certifications done. I’m still trying to do it just for you, Michael.
MB: But the thing is, you’ve gotta be careful, too. So in my purchase agreements, I add in the purchase agreement, “We will be doing an HVAC inspection.” So if the furnace gets red tagged and, trust me, I’ve had some get red tagged right there at the inspection, it’s not a mystery then to the listing agent or the seller that this could’ve happened. And I used to not add that language in the purchase agreement, and that created a more awkward situation. So again, a lot of this negotiation stuff I’ve learned by trial and error, and really, often ’cause of my failures. But if you don’t learn from your mistakes, you’re not growing and learning. And adding the language in the purchase agreement is just key. I even add that you guys are gonna do a sewer line inspection, ’cause some people get upset that you’re doing that. Is that intrusive testing or not? I guess that depends on where the sewer line access is, if you have to take a toilet out or rip up carpeting, that sort of thing. So the more the realtor can do upfront, it really sets the stage for a smoother inspection. And then also the results after, you’re gonna have the most knowledge possible for your buyers.
RS: Man, we are just kindred spirits. Yeah, Tessa’s clapping in the background on screen here. We’re kindred spirits, Michael. I love this, ’cause you just… You keep screwing stuff up. You make this mistake, that mistake, that mistake, and finally you change your ways and you learn what not to do. And I feel like that’s where we’re at with our company at Structure Tech, too. I mean, whatever mistake you could make at a home inspection, one of us has made it. It’s probably been me. And the goal is, let’s not repeat these mistakes. That’s how you learn. But if you’re not trying new things, you’re not gonna make any mistakes. And you are kinda on the cutting edge with having all these new procedures done. I love that.
MB: Thank you, yeah. It creates a lot of work for me, I’ll be honest. I’m kind of setting myself up for more work. But to me, we get paid very well as realtors. Why wouldn’t you do the most work you can for your client? We are a fiduciary. We act on behalf of our clients. Why would you do the best that you can do for your clients? And some agents don’t look at things that way always. They don’t wanna do the hard work sometimes. This is a hard business, and I believe I owe it to my client to do this.
RS: That’s awesome.
BO: Michael, it feels like, for you, a home inspection is nothing more than the seal of approval. I mean, how often do you find that things are coming up?
MB: Oh, you guys have way more equipment that I do. I have a ground tester, that’s about it. And I don’t, again, claim to be an inspector, so I don’t act like one. I happen to have a lot of knowledge, and I will speak in generalities. I won’t sometimes speak in specifics to inspection-related items. So actually, you guys find a lot more than I do. But I would say the Captain Obvious stuff, like water heater. If you can see when it was manufactured and it says, “This was manufactured in 2005,” and the warranty says a big number six on it, you do the math and it’s like, “That’s good through 2011. It’s 2020. Hey, this thing is probably end of life.” So the more things I can do upfront that way, it’s gonna make for a smoother inspection. But you guys always find stuff.
RS: Always making your life miserable, right? [laughter]
MB: Well, yes and no. I mean, again, getting back to my stance, why wouldn’t I do the best inspections possible for my client? Why wouldn’t I want the best for my client? Yeah, it creates extra work, it’s stressful with the timelines that we have, but it also is helpful to have partners that you can call. Like I mentioned, my home warranty person, I can call her and get answers. I have a radon installer; I can call that person, get a quote within 24 hours.
MB: So if you have all these resources where you can make a quick call and you can get some numbers, there’s power and knowledge in numbers. And if you don’t have a team that you work with on a frequent basis as a realtor, you really need to get that because it’s really powerful when you’re negotiating inspection items. ‘Cause if I’m gonna ask for $5,000 for a water heater replacement, let’s say, well, that’s not a realistic number. So if you’re gonna come back as an agent and negotiate and you’re not playing with the same playbook, me as a listing agent? I’m gonna say, “You know what, this agent doesn’t know what they’re doing. They’re asking for crazy stuff. I don’t think I wanna work with this buyer.” So now you’ve got a seller who’s not gonna work with a buyer because their agent doesn’t know these things. So the agent needs to have some general knowledge on this stuff. You’ve gotta be realistic. To me, a good negotiation is a realistic negotiation, not one that’s pie in the sky, ’cause you’re not gonna get anywhere with that.
RS: That’s good. Getting back to this document, Michael, and you’re talking about negotiations. You and I started chatting about this before the podcast. I said, “Hang on, let’s save it.” There’s basically four things that we list that could be done for negotiating… Well, that can be done after the home inspection. One is do nothing; we always say that’s what should be done with about 95% to 98% of the stuff that comes up with a home inspection. You have the understanding that it’s a used house, nothing’s going to be perfect, and you don’t need to ask the seller to fix everything that shows up on the report. You shouldn’t. Another is cancel the purchase; that does happen. Another is asking the seller to fix stuff, and then another is asking to change the price. Re-negotiate the price, I guess there’s usually a few different ways that could happen. It’s a matter of just changing the purchase price, it might be a matter of shifting some of the closing costs to the seller. A few different ways to do it, and you had said this should probably be expanded. Can you talk about what else could be added to this list, Michael?
MB: Well, as I mentioned earlier in the podcast, we talked about in Minnesota, during the inspection contingency window, you really can negotiate just about anything that comes up. So let’s say on the front end of the negotiation, a closing date was really important, let’s say to the seller, and then the buyer maybe said, “Alright, I’ll give you that closing date, but I don’t really feel good about it, but I wanna get the deal done.” Well, let’s say five grand worth of stuff comes up during the inspection, I might be able to use it as leverage to get that closing date that my buyer wants. So really, any terms in the purchase agreement that are negotiables can be negotiated during this period.
MB: Now, I don’t recommend changing a lot of stuff in the contract. I usually try to stick to the dollars and try to keep everything else firm, but you really technically can change other terms. You could add the home warranty that I mentioned earlier, so that’s an often add that I put in there. But the seller-paid closing costs is a big one, because… And, as you mentioned, that kinda goes under negotiating the price. So if the buyer wants to conserve cash because there’s gonna be repairs that are gonna be needed right away… So, you guys recently did an inspection for me, and the furnace is bad. And I got that verified by my HVAC guy. Well, that’s gonna be money out of their pocket the day they move in, and the seller didn’t really want to do the work because we don’t know if we can get an HVAC person in there in time to get the work done before closing by the end of November. So we basically got the seller to pay the buyer’s closing costs of $5,000. And in total, they’re getting $10,000 in seller-paid closing costs, and I was able to do that in a seller’s market.
MB: So again, if you’re realistic with your numbers, you still can negotiate some pretty big things. It’s all on how you structure it and how real you are, how transparent you are with the other side, the listing agent in this case. He and I developed a good rapport that he knew I knew what I was talking about and I wasn’t asking for pie in the sky things. So the seller-paid closing costs is probably the biggest one. And if you wanna put that under your “negotiate the price” thing, it’s less net to the seller when you negotiate the seller-paid closing costs.
RS: Sure, that makes sense. So moving along with this document, we start out by talking about stuff that shouldn’t be negotiated. And, again, gotta say, this is stuff that I’ve heard from a lot of other agents share with us. Number one is known condition. When you already know about it, stuff like peeling paint, holes in walls that are blatantly obvious, deteriorated driveways, things like that, generally shouldn’t be negotiated as a home inspection thing. It should be something that is addressed ahead of time. What do you have to say about that, Michael?
MB: Well, it depends on what kind of loan your buyers get. So if I’m doing a VA loan or an FHA loan, and the house was built before 1978 or sooner, peeling paint is a problem. So you will probably negotiate that possibly in your inspection period, but you may have to negotiate it during your appraisal period. So when they send out an FHA or VA appraiser, they’re not only looking at the value of the home, they’re also looking at the condition of the home. Where most of the sales right now are conventional in today’s markets, we don’t really have to deal with that, but there are still buyers out there doing FHA and VA loans. I do a lot of VA loans. I do try to address that with the seller and listing agent on the front end. There’s a place in the purchase agreement under the VA section that says they will pay up to a certain dollar amount for repairs. So you can plonk a number in there. So if I look at the house and say, “You know what, an appraiser might find some chipping paint and they may make the seller repaint the entire garage, ’cause it’s from 1925 and it’s got a chipping paint all over it,” I might throw a $750 number in that spot. But otherwise, yes, I don’t really negotiate paint.
RS: Okay. Another item for no negotiations we talked about is old stuff. We already kinda covered that. Another one would be minor defects, little things like missing cover plates at outlets, missing caulk, dirty furnace filters. The one that I love, I had to do this when I was selling my house in Minneapolis, was putting on a window well cover. You know, like a $10 window well cover. That’s what I had to do. Normally, these things shouldn’t be negotiation items when you’re buying a house. What do you have to say about those?
MB: So these are the dirty furnace filter, caulk, those sorts of things?
RS: Yeah.
MB: Yeah, I do come across this caulk thing a little bit, where they’re… Let’s say you guys have the moisture meters and there’s water around, let’s say like a toilet or shower, and it’s excessive levels, I might have them rip out the flooring and see if the floor boarding’s okay and then re-caulking. But just caulking in general, not usually something I negotiate there, unless I think there’s a bigger problem that includes caulking.
RS: Yeah. So you’re saying not home maintenance. You don’t negotiate home maintenance items, right?
MB: Right, right. Sometimes there’s things like people don’t put their downspouts on, and you guys will write that in your report, like, “You should put these up.” So I might just say “sidebar, not negotiation, but it would be nice if you put your downspouts on so we don’t have more water in the basement.” And that’s something else you can do is you can negotiate inspection items in a binding agreement. And then sometimes you’ll just have a conversation with the listing agent, if I’m the buyer’s agent, and just say, “Here are some questions that we have. Can you answer some of these questions?” Or, “Can you do a few of these little things, just ’cause we’re worried about the safety of the home.” But we’re not gonna make it binding in a contract, ’cause I don’t wanna have a huge laundry list of stuff in my amendment. So maybe I’ve got four or five things I’m negotiating in the actual binding contract, but then I might have three or four sidebars, just a little note to the listing agent like, “Hey, can you just kinda take care of these things? We’re not gonna negotiate on this, but this would be nice to have, if you wouldn’t mind doing this for us kind of as a favor.”
RS: Good stuff, Michael. One thing you brought up is just some of the nuances of even your financing vehicles and the things that their people might be looking for that we as home inspectors… Again, we’re out of touch with VA financing or FHA financing. This means really nothing to us, so when we get on our soapbox and be like, “That chipping paint, that’s nothing.” Well, maybe it’s something to somebody. And chances are, if they’re in that financing vehicle, that 750 bucks might be a make-or-break deal for them. So, great point. And also, again, talking me off the ledge where I wanna send everybody back to their agent to have these conversations, you do need an advocate inside the house. I just hope we all understand, as home inspectors, our place in this equation, which is fact finders, not negotiators.
RS: So Michael, thank you for all the time. I think we have to put a wrap on this show, this episode, because we could talk literally about this all day long and never run out of topics. Thank you so much for your time. I’m sure you’ve got a busy schedule. I know agents in your position are crazy busy right now, so we really appreciate you taking this time out of your schedule to give it to us. Thanks everybody else for listening. We do appreciate your time as well. You’ve been listening to Structure Talk, a Structure Tech presentation. My name is Bill Oelrich, alongside Reuben and Tessa and Michael Bartus. Thanks, everybody. Have a great day.
MB: Thank you, guys.