Homebuying 101: Negotiating repairs

5/6/2019

Found a house to buy - check. Purchase agreement signed - check. Earnest money delivered - check, literally. Inspection results - deferred maintenance, safety hazards, broken appliances. What options does a buyer have at this point to negotiate repairs?

This is a question my buyers wrestle with all the time and they turn to me for advice. Every home has issues, in fact, it is very rare for a home inspection report to have nothing but glowing results. No matter how careful and conscientious a home owner, things fall apart. For example, even if the furnace is still working, it may be nearing end of life so it can be a challenging decision for a buyer to accept an appliance that while technically in working order may break irrepably within a short time frame, leaving the new home owner with a hefty price tag to repair or replace. Home warranties and warranties from utility companies can provide some amount of peace of mind, but they may have maximums on replacement allowances which still leaves the homeowner with cash out of pocket.

The inspector may flag an item for further investigation, such as recommending the water heater be "tuned up" by a plumbing company, or the furnace be evaluated by an HVAC company. I always recommend that my buyer follow through on the inspector's recommendations. Earlier this year a tune up of a water heater resulting from the inspection turned into it being red tagged and the seller paying for a new water heater for my buyer. We had a home warranty covering the transaction which the seller used to affordably address the issue. This worked out very smoothly and quickly, but the timing of negotiation repairs can be very stressful.

There's always a time limit for a buyer to complete inspections and while it's different for each transaction it's generally between 7 and 10 calendar days from the day the purchase agreement is signed. If the inspection occurs toward the end of the period, the buyer will need to decide quickly what to ask the seller to do, if anything, and the seller will need to give a timely response or risk a cancellation from the buyer. If more information is needed for the buyer to make an informed decision I recommend that my buyers extend the inspection period. This would allow for a follow up inspection for the drain tile system or sewer line, for example. Ultimately it comes down to what the buyer wants and what the seller will agree to, so, for example, if there's concern about the roof (like my buyer had last summer), then a buyer might ask the seller to prove the roof is fine by having a contractor inspect it and give a letter saying so, or fixing any problems that are found. Or in the case of concerns my buyer had about water pressing against the foundation this spring, they gave the seller a choice to install gutters and downspouts (and extensions!) or pay for some of the buyer's closing costs. The seller chose to pay closing costs.

When it comes to negotiation strategy, it may be beneficial to offer the seller a choice. I've talked to my buyers about offering the seller the choice to make the repair, reduce the sale price, or give the buyer some money to make the repair after closing. In some cases, the buyer's financing will require an item be repaired before closing can occur so it's very important to know the lender's requirements for the buyer's loan type. FHA and USDA have different requirements from Conventional loans and knowing the rules ahead of time can make closing go a lot smoother. If a repair is being made, it's important that it be done by a licensed professional well ahead of closing so there's time for the buyer and lender to review it and any accompanying documentation such as warranties, paid receipts, permits, etc.

One trend I'm seeing in repair requests is around health and safety items. These are things that practically speaking benefit the seller also, like having working smoke detectors and carbon monoxide detectors throughout the home, verifying that gas appliances aren't leaking carbon monoxide, having hand rails installed on staircases inside and out, ensuring proper ventilation and exhaust, and having electrical up to code with GFCI outlets installed and working correctly, just to name a few. Often these are items that the seller wasn't aware of and in some cases these are things that passed inspection years ago when the seller acquired the home. But times change, and health and safety should be important to everyone.

Advice comes to homebuyers from all directions these days. Internet posts, stories from friends and family who've been through the buying process, all of these sources inform a buyer's decision. I encourage my buyers to trust the advice of experienced inspectors and contractors and sometimes get 2nd or 3rd opinions so they'll be confident in the decisions they make.