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The Inspection: Abused as Negotiating Tool?

I work on both sides of the aisle – buyer and seller side (but never in the same transaction). So I get to see the deal from both perspectives. Understanding what motivates the seller and the buyer helps me to become better at representing either party.

Nowhere are those perspectives more different than when it comes to inspections. (We are talking re-sale here.) The seller sees the inspection as a necessary evil. The buyer often sees another opportunity to renegotiate the price. The seller would like to sell “as is,” the buyer would like to buy “as if new.”

Both are right and wrong in their own way. The seller thinks of the home as a place with memories; where the kids grew up and Fido had puppies. What could be wrong with such a place? The buyer sees the hairline crack in the wall and the stain under the kitchen sink and wonders what else could be wrong.

Fly in the ointment Most inspectors write their reports as if imagining being taken to court for having left out even the minutest detail. I don’t blame them. We do live in a litigious society. Buyers, especially first-timers, who have never seen an inspection report usually run for the hills. The savvy buyer often looks at the inspection report as an opportunity to renegotiate the agreed-upon price. (Obviously, housing market conditions will have an impact on how seller and buyers react to inspections.)

In my experience, the inspection can be the most difficult aspect of a transaction. I tell my sellers to be brutally honest about all they know before listing and I tell my buyers that they will be looking at “used” homes and to expect flaws. When making an offer, buyers should take into account the defects they where able to see. If the inspection reveals hidden defects and/or serious reasons for obvious defects, the buyer has a legitimate right to seek remedy or take a walk.

Inspection time is when the truth comes out; not only about the condition of a home but about the motivation of seller and buyer. This is the time the buyer finds out that the home isn’t as charming as first thought. This is the time a seller’s willingness or need to sell will be tested.

Is the buyer right to ask for the old but still properly functioning furnace to be replaced? Should the seller take the position that the functioning furnace’s age was known before the inspection and goes with the house “as is?”

There are no easy answers.

Posted by Gerhard Ade on 11/04/2006 09:26 PM

Comments (22)

home inspection, inspections

22 Comments on The Inspection: Abused as Negotiating Tool?

NOV

2006

The best answer is educate the client, whichever side, upfront as much as possible. It won't eliminate these problems, but it will reduce the amount

How much does the buyer want to buy and how much does the seller want to sell? Is the buyer bluffing at the pot or seriously concerned about the age of the furnace? Is the market in the area such that the seller should do everything short of some acts I can't describe in a family forum to make sure the sale happens?

Just a few of the considerations that go into the decisions on both sides. I had one townhouse, rather inexpensive, where the buyer's uncle did the inspection (not licensed of course) and determined all of these items that ought to be redone, updated, etc. Nothing that would have been a non-working warranteed item, but still.

My seller's response was simple: you're paying $84K for this townhouse. If you want a $130K townhouse, go write an offer on one. If you want the $84K townhouse, then this is what you are going to get.

NOV

2006

I agree with Adam. You need to educate the client, whichever side, you are representing. Everything is market driven, three years ago buyers would not ask for anything but today we want everything including that furnace replaced. The market dictates, we adapt.

The games people play....

If it sounds reasonable, it probably is....
If both sides are a little grumpy about the inspection requests, its probably fair. (Buyer Doesn'd Get Enough, Seller Gives Up Too Much)

Educating the client is the key, on both sides of the transaction.

I hate one company in our area who advises their agents to only use AS IS contracts, which give the buyer an easy way to walk out of the contract, with the intention of renegotiating everything at the inspection. Having that as your intent, while selling the "as is", to me is unethical.

The answer is to advise sellers to have a home inspection done prior to listing the property. It saves so much grief! Now convincing the sellers to do it is the hard part!

Very true Gerhard! I think it is more of a negotiation tool than what it's supposed to be. Some home inspectors butcher the homes up to and scare clients badly. We serve as mediators.

Home inspections are relatively new to some areas of my market. I believe I did one of the first home inspections in Southern Maryland in 1992. In more affluent areas around DC, they were popular before the 1900s, but not as prevelent as today.

I believed then and believe now, that the home inspection is one of the most important aspect of our representation of buyer or seller.

Few agents truly understand the home inspection dynamic until they receive one of our Home Inspection Notice documents.

My goal is (1) contract compliance, (2) disclosure requirements, (3) fair value.

We don't renegotiate the contract, just make sure that the buyer is getting what they paid for IN THE CONTRACT.

I'll write a blog about how we do home inspections. It's an adventure.

Hi Gerhard,

Great point, educating the buyer and the seller in the beginning stages will help reduce problems along the way.

I like certain home inspectors in our area that present the inspection as more of an educational process of owning a home. They point out problems but don't present it in a way that ALARMS the buyer

We have one inspector that usually uses the phrase "this is not a deal killer" when explaining flaws.

You are absolutely correct when you said the home inspection is done this is when the truth comes out.

Good job, Thanks Jay

I have had some bad and good experiences with home inspections. I am proud to say I have never lost a deal on the buy side as a result of home inspection because i tell my buyers up front that it is NOT a tool to renegotiate the price unless something seriously mechanical is wrong ie roof is at the end of its life, plumbing problems, safety hazards etc. I am now used to hearing buyers say well we can get more money off at the inspection right? NO, if there are problems we will negotiate repairs and credits that are fair, we will not get 10,000 off for a broken window.

But on the other side I have buyers and their agents do just that. I had a deal come apart because the buyers wanted a credit because their were vines on the side of the house and the home inspector wrote that there was cat urine on the DR carpet. What he didnt know was that the carpet was brand new just installed a couple of days before and the cat out front wasnt my sellers. There were over 30 items listed on the request and the home was the least priced house in any area in our market. The biggest thing about it was the home inspector wrote on every issue-needs to be evaluated by a licensed professional. What were the buyers paying him for? He didnt want to take any responsibility because the buyers were using him to get out of the deal.

I have a few inspectors that i like because they dont make a big deal about every little item unless it is a big deal. And they educate buyers along the way. I have been advised recently however to not recommend anyone because if something were to go wrong the buyer can come back and say the I told them to use that particular inspector.

Do you refer specific inspectors to your clients?

I agree with Linda - so much so that it is our policy to have every home we list inspected by a licensed, bonded, insured home inspector - at our expense - to avoid surprises. Good topic for a blog - perhaps tomorrow!

As Suzanne mentioned - we have all listings inspected - regardless of age. This has resulted in surprise avoidance for several of our sellers - but I'll leave to Suzanne for her blog.

A while back I lost a deal after an inspection from hell that not only scared the buyer but also upset the seller because of the inspector's attitude. The inspector had picked apart the home (almost 30 years old) so much that the buyer wasn't able to distinguish the necessary from the would-be-nice/cosmetic and his agent didn't seem to help much. When it came right down to it, the inspection revealed a few items that needed attention that the seller was fully prepared to comply with although it exceeded the repair limit. Ironically, a subsequent inspection by another home inspector found a couple of minor things that the first guy had missed.

I give my customers a list of three inspectors to choose from and encourage them to interview these people themselves. However, don't blame me for not including inspectors on this list who I have had negative experiences with.

My advice is to get a Pre-Listing Inspection

You'll see your home through the eyes of an impartial third-party.
You'll be able to price your home realistically.
You'll be able to make repairs ahead of time.
Your buyer may waive their inspection.
You'll learn about items of immediate personal concern, such as unsafe electrical or an improperly vented furnace.
You may relieve your prospect's concerns and suspicions.
Your liability is reduced by adding professional supporting documentation to your disclosure statement.

Shawn MartinMartin Home Inspection Serviceswww.martininspect.com

Inspectors can make or break a deal and sometimes over the smallest of things. I had an inspection which called for replacing a few pcs. of vinyl siding that were near the ground about 6" off the griound because thay has a small split/crack from using the grass edger/whip also he wanted 4 bolts put in the deck posts, all minor stuff because he could not find anything else to pick on and the sellers said this is sold as is and the buyers wanted the things fixed. The sellers felt the items were minor and the buyer thought they were major because the inspector said so.... Well in the end the buyers agent and sellers agent split the $500 repair bill to get the deal done.

I like your statement you make to the buyer. " they will be looking at “used” homes and to expect flaws." Buy even new home have flaws.

I think Mr.Wills put it best. Stating a reality up front will avoid misunderstandings.

it seems like it's mostly used as a negociation tactic as well. it definitely is one of the major deal breakers as i have came to understand.

cheers,

cindy

i stage & redeisgn to sell, live and work in san francisco bay area!
cindy@staged4more.com
www.staged4more.com
http://stagingtipsandmore.blog.com/

You are 100% correct to educate your people whether they are buying or selling. Depending on who I am representing determines how I approach the contract. If I represent the seller I always tell them that the buyer will likely use the home inspection as a weapon to renegotiate the contract. When I counter back I always give a definite time for the buyer to either accept or reject the contract. I also put a dollar amount that the seller is willing to spend on repairs. Most important I tell my seller that I have never had an inspector not find something. This simplifies things for the seller. If I represent the buyer I also tell them that I have never had an inspector that did not find something wrong. I remind them that there is no perfect home and to be concerned with major problems not minor flaws.

Thanks to all for your comments and insights. Judging by the number and depth of commnents, inspection is an important topic. Educating the clients is key, to be sure. Unfortunately, the temptation to use the inspection to re-negotiate price is too hard to resist for some.

NOV

2006

I tell my buyers to expect flaws. Our main concern is to be sure there are no health or safety issues.

NOV

2007

When should an inspector hold some responsibility? Or is it the agent/broker's fault for recommending the inspector? The buyer is paying to have the home inspected in order to make a sound decision as to whether or not to put down a huge sum of money and buy the home. What should be caught in an inspection and if it isn't caught, is it the buyer's fault because they don't know anything about construction or repairs? We bought a home in April and had it inspected by a local inspector. We are not from the area and our realtor wasn't either, so she asked around and found an inspector for us. The inspector mentioned the basement walls may need repairs and to have a contractor in to look, but never said it was an issue or that it could be costly or that it needed to be repaired immediately. We brought in a contractor for other work and he wouldn't touch the house prior to having an engineer in to inspect the house because he says our foundation on the south wall needs to be completely replaced!! Shouldn't our inspector have been able to see the bowing and warned us? Or is it our fault because we bought an older home and should have known better, even though we are first time home-owners? We knew we would have to pay a couple hundred to thousand dollars for repairs that we wanted to do (new floors, appliances, etc.). We had no idea we would possibly have to pay 1/3 of the price of our home in necessary foundation repairs that, according to the contractors and engineer who have been in to see our home, should have been obvious to the inspector. Now we don't know what to do or if we should seek legal assistance. Can anyone in this forum give advice? We don't know what to do or where to begin...

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