Properties “falling out of escrow” due to the home inspection negotiation failing, is on the rise. In many cases this is because the buyer is asking for something the seller can’t really say yes to, because what they are asking for just doesn’t make any sense. Consequently the answer often becomes no and the escrow “falls out”. See this example of a recent Extreme Home Inspection to see how difficult it is to say “no” when no is the most appropriate response for all parties, and still keep everything moving forward to a right conclusion.
A home inspection is not the same as the original contract negotiation. The original negotiation is more about price and terms than the house itself. Consequently both parties can decide what to do, and what to do next during the negotiation, in email or by fax. To successfully complete a home inspection negotiation, the negotiations need to start AT the property, and may take a few inspections by experts to complete the inspection negotiations properly.
The example in the link gives a better picture of why this is so, than I can describe here. But let’s look at the three main causes for inspection negotiations going sideways, and how the buyer is often moving in the wrong direction.
1) The new norm of not letting the seller’s agent be present at the inspection is not a good one. I agree that the seller should not be present, as the emotional level can get out of control and unmanageable. But the agent for the seller needs to take the ball and run with it once the buyer starts making a request. The BEST way for the agent for the seller to negotiate to a good conclusion is if they are AT the inspection and heard and saw what the inspector was talking about. Not permitting the agent for the seller to be present can lead to the seller fixing the wrong thing, or fixing it incorrectly. If the paper report were an adequate representation of all facts at hand, the buyer would not need to attend. We all know that is not the case, and to understand the inspection in its entirety, so as to negotiate the appropriate fix, requires that all relevant parties be present.
It is a great disservice to the transaction as a whole for buyers to insist that the agent for the seller not be present. Yes, I’ll agree that a lazy, crappy agent in the room doesn’t help anyone. But the right agent in the room can make everything work out even better than the buyer hoped for. The agent for the seller has the best chance of getting the seller to react appropriately to the “issue at hand”. Give that agent what they need to help you best. Let them be present during the inspection, in fact insist on it. The paper report does not replace being in the space with the inspector as he finds and discusses the issue at much greater length and detail then ends up in the written report.
If you have an agent who sits on the front step reading a book or doing “work they brought to do during the inspection”, and doesn’t stay “engaged in the process”, well…I think you know what I want to say there and can’t say out loud.
2) Successful negotiations require you to put yourself in the other side’s shoes. Often agents who have represented hundreds of buyers and sellers can do this better than any buyer or seller. When a buyer’s agent writes up an inspection response, they then have to read it back to themselves pretending they are the agent for the seller. How would the agent on the other side of the table take this request and run with it? Often the answer is, they can’t. The agent wrote what the buyer asked for, without analyzing whether or not the other side has enough information to respond well.
Example: “Fix everything.” Even if the seller says yes, there are some things you don’t want the seller to fix. Some things need a credit, some things need to be fixed, and most things need a whole lot more detail as to HOW to fix them than “fix everything on this list” explains. RARELY does ANYONE say yes to an unknown cost. Fix everything is just lazy. The buyer’s fix might cost $6,000. The seller’s fix might cost $300. The seller may be saying “yes” to $300 while the buyer is thinking they said yes to $6,000. Then you get to the end after closing and the fix is horribly inadequate. You must be VERY specific if you want a “fix”, and that fix has to have a “work order” attached. The work order dectates WHO will fix it and the cost of that fix, so the seller is saying yes to what the buyer really wants and needs.
3) The request has to make sense. When the inspector says (and they all do) I can’t tell what’s behind the wall, it is NOT usually appropriate for the buyer to ask for the wall to be opened. Sometimes yes (as in the linked example in the first paragraph) sometimes no.
Example: 200 amp panel is of the type that was recalled. The inspector says it needs a new panel (cost approx. $1,000). The inspector suggests the panel be moved from outside the house to inside the house (generally not an appropriate request – it’s like asking for the washer and dryer to be moved from the second floor to the first floor. A home inspection should not include a request to change the home from what it is, when that something is not “a defect” and is a suggestion vs. a needed repair.)
The inspector says “I see no problem besides the panel itself”, but as a CYA he adds, “I can’t trace the lines throughout the home as I can’t see behind walls”. Buyer asks the seller to replace the panel AND move it from outside to inside AND asks them to trace the lines throughout the home…no possible answer to all that besides “no”. The inspector can’t see through walls and neither can the seller or the seller’s electrician. You’re basically asking for someone to rip out every wall and see the wiring behind the wall and check it. Unless the inspector sees a problem in the wiring, and even when they do, there is a limit to what you can expect a seller to do. Handing them a to do with no work order…no cost…no detail as to what they are to do next, is begging for a no response.
1) Make sure both the agent for the buyer and the agent for the seller are in attendance and “engaged” during the inspection.
2) If there is a “potential” but unidentified problem as to specifics CALL FOR A 2ND INSPECTION of that item by a qualified specialist, before making a request.
3) Don’t simply ask for the biggest number you can get. Make sure your request matches the issue at hand.
Example: 35 year roof is 6 year’s old. Inspector sees 3 cracked shingles and flashing issues around the chimney. If you really want to buy the house, don’t ask for “a new roof”. Sure, getting ten grand is nice. But asking for a new roof when it doesn’t need a new roof will likely lead to the seller not trusting anything you want as “real”, and leads to the seller simply saying “NO!” and not wanting to negotiate any further and that equals #FAIL!