Inspection = Yay or Nay

thumbs-downAn alternate title for this post might be “The seller doesn’t ‘have to’…anything”.

I am writing two offers today and the one MOST IMPORTANT thing to keep in mind when making an offer on a house is, the seller does not have to do anything during escrow except pack and move out!

In this market, if you have successfully achieved the lowest possible price at time of contract negotiations, there is often NO MORE ROOM for the seller to give at time of inspection negotiation.  This is not always the case, but is clearly more often the case IF you have achieved a hard bargain at time of contract. The better you were at getting lowest possible price in the beginning…the less likely you will get anything at all at time of home inspection “negotiations”.

There is a misconception that the seller has to compensate, or even give a RA, about the negative items in the home inspection report. Not so! You have a Yay or Nay vote, that is true. You can say, “I don’t want this house because of that $50 defect”, in fact you don’t have to give a reason at all. You have the right (in the Seattle area under our standard Home Inspection Contingency, assuming you attached one) to “cancel on inspection”.

BUT there is absolutely nothing in the contract negotiations to compel a seller to fix or compensate the buyer for defects found during the home inspection timeframe. “Timeframe” the key word(s) there. IF you are going to cancel, there is a drop dead date for your having the right to do that. Every contract is different. Most often it is in the first 10 days from when you originally achieved a “signed around” contract. Could be 5 days…could be 7 days…pay attention to the blank as filled in on your Inspection Contingency.

When you make an offer, inspect the home as carefully as you can and make sure your initial offer “compensates you” for clearly obvious negatives. Inspection negotiation is no time for you to start wanting money for something you could easily have seen without the help of a home inspector. To be clear, you CAN do that. But do you want to lose the house because you didn’t take that into consideration at time of offer?

Look at the date on the hot water tank, look at the date on the heater (sometimes harder to find), try to determine the age of the roof. Turn on all the lights, the appliances, flush the toilets. There are many things you can check before you are “in contract”. Often with short sales and bank-owned property, you are pretty much buying “as is”. Even with a regular sale, often the seller simply has no money to give in a 2nd round of negotiations.

Understand that your contractual rights are “yay or nay”, and NOT that the seller “has to”…anything.

This entry was posted in Agent Advice, Home Inspection by ARDELL. Bookmark the permalink.

About ARDELL

ARDELL is a Managing Broker with Better Properties METRO King County. ARDELL was named one of the Most Influential Real Estate Bloggers in the U.S. by Inman News and has 33+ years experience in Real Estate up and down both Coasts, representing both buyers and sellers of homes in Seattle and on The Eastside. email: ardelld@gmail.com cell: 206-910-1000

60 thoughts on “Inspection = Yay or Nay

  1. And the buyer can say “never mind” and terminate the contract. Goes both ways. No different when buying a car. What, floor mats are extra?!? Perhaps there is this undercoating … (classic scene in Fargo). Do you walk away? Or do you accept less and pay the same amount? Your choice. (Thankfully, my wife married me, anyway).

  2. I have mixed feelings on the topic as a whole, but I do know many buyers are surprised to be told during escrow that the seller does not “have to” address problems from the inspection. I’m hoping this post will at least remove that expectation from the minds of some buyers, as losing the house over that emotional exchange over a small item is often in no one’s best interest.

    The primary purpose of the inspection is to educate the buyer as to what he is buying. Last year when the market was weak and prices were still high, inspection negotiations went well. In today’s market with sellers often behind the 8 ball and bringing money to closing…not so much.

  3. “Last year when the market was weak and prices were still high, inspection negotiations went well. In today’s market with sellers often behind the 8 ball and bringing money to closing…not so much.”

    Maybe Seattle is “different”, but in California (and Hawaii), your quote is wrong for non-distress sales over the government garanteed loan amounts ($700Kish). You get a real buyer, you try to hang on to them. On the other hand, for REOs and short sales, you are probably right-on (As is, take or leave it).

  4. PG,

    Can’t give you more detail on that at the moment, as it involves stuff I’m working on…but when the dust settles…I’ll come back and talk some more 🙂

  5. This post is so true; however, be careful. I gave options to two sellers this past summer. They felt they both had given as much as they could to to the buyers. Both didn’t budge during the inspections and both buyers left. Both sellers ended up selling for much, much less the second go around.

  6. What sellers don’t realize is it is very scary for buyers right now. Those that are stepping up to the plate and buying in this market are worried about future declines. They are worried about what will happen if they are forced to sell sooner than expected. They don’t have a lot of tolerance for negatives outside of general market conditions.

    I’m thinking a biz model that reserves a portion of the negotiated commission to do inspection repairs is warranted at this time.

    The $8,000 homebuyer credit has helped a lot! Buyers can afford to buy homes that come up with a repair list, even when the seller can’t offer anything to fix those things, because they can use part of the $8,000 credit to complete the work in the first year.

  7. What sellers don’t realize is it is very scary for buyers right now. Those that are stepping up to the plate and buying in this market are worried about future declines. They are worried about what will happen if they are forced to sell sooner than expected. They don’t have a lot of tolerance for negatives outside of general market conditions.

    I’m thinking a biz model that reserves a portion of the negotiated commission to do inspection repairs is warranted at this time.

    The $8,000 homebuyer credit has helped a lot! Buyers can afford to buy homes that come up with a repair list, even when the seller can’t offer anything to fix those things, because they can use part of the $8,000 credit to complete the work in the first year.

  8. Ardell-

    As to: What sellers don’t realize is it is very scary for buyers right now. Those that are stepping up to the plate and buying in this market are worried about future declines. Architects’ clients are equally leery of committing to alterations or additions.

  9. I often have to council my clients not to get emotionally attached to the house until after the home inspection. If it is sinking then we are outta there.

    But if the HI finds a roof leak, for example, I am certainly going to do my best to get the seller to have it fixed and show us a receipt prior to closing. If the Seller says no, then it is a “moment of truth” for the buyer… take it or leave it.

    Man, this is an exciting business!

  10. Doug,

    Often roof leaking is not a “fix”…it means it’s time for a new roof. Sellers’s doing minor fixes and providing receipts at closing is a leftover from the days when we all represented sellers. Not good enough for buyer clients…only buyer “customers”.

  11. Hi Jerry,

    I just got home from dangling head first into the crawlspace, but almost slid down on my head. I should have had someone hold my feet on the slippery hardwoods above 🙂 Not a normal thing for me to do, but it was an as-is bank owed. Just wanted a peek.

    • Hi Ardell-

      I just got home from looking at a home in Broadview which it appears I’ll be redoing for the new owners. Some very exciting concepts emerged from our on-site meeting at the ’50s home which stood vacant for a year. A new gallery entrance will give access to the Master Bedroom which was reached (only) through the Master Bath. By moving a glass wall out on the to be enlarged deck, we’ll have a great Dining Room with an expansive view of Puget Sound out over Karkeek Park. Lots of small touches to go with the above. I’m really excited at this opportunity to make this nice enough home into something extraordinary. Jerry

  12. Ardell, I can imagine that scene of you sliding into the abyss. Always give the flip camera to the client so they can capture these events for posterity……..or would it be posterior?

    I just carry around a tyvek zoot suit and wedge my not so slim body into the crawl space with a camera for a look-see. If there’s a water problem or rotten posts we know way before the inspection.

  13. Hi Bob,

    Hope you are well. Nice to hear from you.

    The house was only a couple of years old, so crawlspace was my only potential concern. The buyer’s Dad got his flash light and jumped in after my “head first” cue. Kim was having no part of it 🙂

  14. I’m saying this is an over 2,000 sf almost new house for about $300,000 and my expectations are slightly different than the one my clients bought from a higher quality builder earlier this year for more than twice that price.

    Not sure what your reference to commission has to do with anything. There may or may not be a difference in commission, and that is not a consideration when talking about home inspection…nor is the price of the inspection. I never choose an inspector based on cost factor.

  15. I’m saying this is an over 2,000 sf almost new house for about $300,000 and my expectations are slightly different than the one my clients bought from a higher quality builder earlier this year for more than twice that price.

    Not sure what your reference to commission has to do with anything. There may or may not be a difference in commission, and that is not a consideration when talking about home inspection…nor is the price of the inspection. I never choose an inspector based on cost factor.

  16. Jerry…the home inspection is tomorrow. This is a Yay or Nay as it is bank owned with “no repairs” in the bank addendum. At one point the buyer said he wasn’t going to do an inspection if he couldn’t ask the seller for anything, So I looked in the crawlspace in case he decided not to have one.

    But you’ll be happy to know, he decided to have one, and it is tomorrow at 2 🙂

    Whether or not a buyer chooses to have an inspection (and it is very, very rare that they do not), I always write in that they should have one prior to closing, even if it is just for their own knowledge and info. In this case, the offer is not accepted yet, so the buyer paying for an inspection prior to offer acceptance is rare, and why we checked it out thoroughly in case he did not want to waste money on an inspection, not knowing if there would be other offers over the long weekend.

    Bank owned “as-is” properties are a bit unusual, as the bank signing and returning the contract often takes several business days. They are not as hard as short sales, but still offer many challenges, especially as to timing. No seller disclosure and often “as-is” no repairs.

  17. The biggest problem right now in our biz is many only learned one way to do all things…and one way worked in 2005 through 2007. In today’s market you often have to be both creative and know how to roll with the punches, as “the norm” fades away and most all transactions have “exceptions to the rule”.

    If you can make 80% of the people happy in a market like this one…it’s a badge of honor. All too often, in a weak market, no one is happy at the end of the day.

    “Market Value = the price at which neither party is exceedingly happy.”

  18. Jerry,

    No, I don’t think you can add “or exceedingly unhappy” to my quote. Often at today’s fair market value, the seller is exceedingly unhappy, as a seller tends to compare to a price he might have gotten at peak.

  19. Nope. That requires a deeper discount like a short sale or bank owned, which is not selling at “fair market value”. We have lots of those. Usually about 35% under peak prices.

    Fair Market Value = NEITHER party exceedingly happy. That’s about 12% to 20% under peak, depending on the neighborhood and house. They can be happy…just not “exceedingly happy”.

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