After months of searching for the best home for your needs, you’ve made an offer, negotiated back and forth, and finally agreed upon a price. Your finances are in good order, so you know it’s unlikely the deal will be derailed now. Or will it? Most buyers opt to make the sale contingent on first going through an inspection and this is where negotiations get tricky. Here’s some advice for parties on both sides of the transaction to help avoid unnecessary surprises.
Buyers want to lower the price when they find a need for major repairs. Property inspections often bring forward issues that weren’t known when the buyer made an offer. A leaking roof, the presence of termites, high radon readings, and faulty electric are all examples of significant items that will either make a buyer renegotiate the price and/or demand the seller address and fix before the home closes. In fairness, the original offer was based on assumptions that the house was in reasonable working order and safe to live in. Or the offer was made to reflect defects that were already known. So it stands to reason that a buyer will either ask for credits or renegotiate the price downward when they learn they’ll need to invest time and money in significant repairs. Sellers aren’t obligated to give in to any concessions, and then the buyer is free to ask for fewer concessions or walk away.
Sellers can avoid surprises with a property inspection before listing. Once you’re under contract, you want to avoid further negotiations because they won’t be in your favor. The way to avoid a reduction in price is to identify your home’s defects, get them repaired before listing, or simply be upfront about what was found in your own inspection. That way the buyer will be working from a more informed starting point when making an offer, thus avoiding the likelihood for major reductions if they choose to have their own inspection. Having your own inspection done upfront also puts you in a better position to use an “as-is” clause in the contract. This sends a message to buyers that you’re not open to more negotiation.
Sellers can opt to get the work done rather than give credits at closing. If the buyer has found several defects, they may ask for credits at closing, which obviously reduces your proceeds. You can opt instead to hire someone to have the work done. This type of agreement helps protect the seller because sometimes buyers ask for steeper credits than necessary and never intend to actually make the requested repair. It also can help you as a seller if the requested credits were overstated estimates.
Buyers sometimes ask for credits just to get the price down. Sometimes buyers agree to a purchase price just to win the house, knowing they will have a chance to use inspections to lower the price or get additional concessions. Such buyers might feel empowered as they assume a seller won’t want to kill the deal and start all over again. This strategy can backfire, especially in a seller’s market where competing buyers are plentiful. The seller may actually be the one who feels empowered as she knows you’ve already invested in an inspection and the hope of getting her home.
Sellers should allow for some cushion on the agreed upon price as buyers often ask for concessions or credits. Knowing that buyers often ask for some kind of repair work or credits, it’s wise to leave some cushion in your initially agreed upon price. That way you can be agreeable to a few minor repairs while still essentially getting the price you wanted. This can help make a deal go smoother as no one has to quibble hard over several hundred to a thousand dollars.