When buyers go through your home for the first time, they often do so with rose-colored glasses. They’re looking at the furnishings, the open space, the way the sun bathes the kitchen. The home inspection process forces them into the darkest, dingiest parts of the home and points out many potential problems. For some first-time buyers, this is enough to make them want to cancel the sale. If this is their first time going through the process, they may mistakenly believe that another house will be more “perfect.” For all buyers, it can be a wake-up call and as the seller, you’re likely to find yourself back at the negotiating table.
If you paid a home inspector to review a home and at the end of two hours, they said: yup, looks great, you’d likely be asking for a refund. That’s why, even with new construction, the inspector will take the buyers through the home, explaining how the systems work, telling them about regular maintenance they should perform to keep things working well, and certainly pointing out anything that could – now or in future – be a problem. It can be overwhelming for buyers who aren’t handy or are new to homeownership.
In a previous blog, we talked about the home inspection contingency. If a buyer finds problems in the home that will cost more to fix than the threshold they’ve set in the contingency, they can cancel the sale and get a full refund of their deposit. You may think that means that if the number is high, say $5,000, you’d only hear from them if there are major defects in the home. In reality, there’s nothing stopping the buyer from trying to renegotiate regardless of what the home inspection reveals, and most will ask for something.
What to do?
In any relationship, the person with the least emotional commitment can call the shots. Ask yourself: do I need to sell more than the buyer needs to buy? If you had multiple offers on your home, you’re likely in a strong position. If the buyer asks you to have the furnace cleaned, for example, you can just say no and move on to the next offer. If you’ve been trying to sell for months and this is the first buyer who expressed interest, you may be in a less favorable position. In either case, there can be times when you should give in and times when you should put your foot down.
When to give in
Even if you got 20 offers on your house, you most likely chose the one that was best for you. Do you really want to start the process over again with another buyer – who may ask for the same or more? There can also be a stigma when a buyer walks away after a home inspection. Future buyers will wonder what’s wrong with the house and may be hesitant to move forward with purchasing it themselves. There’s also karma to consider. Put yourself in the buyer’s shoes. If the request is reasonable, why not say yes?
When to stand your ground
I’ve seen buyers hand over the home inspection report and expect the seller to fix everything on the list. They ask for financial concessions, ask the seller to fix minor problems and want to approve and nit-pick everything. You can try to choose a few items from the list or throw some money at them but this can be an early indication of how the entire sale is going to go. If the real estate agent allowed the client to submit the whole report, they are either inexperienced themselves or have not properly educated their buyers. All of these are warning signs that should not be ignored.
In these cases, it may be best to take a very hard line and invite the buyer to cancel the sale. “You’ve asked for 27 concessions. I will agree to address these three items and that is all. No price reduction, no money back at closing.” Nine times out of ten they will say okay or come back and ask for another item or two. If you really need to sell to these people, this strategy may be too risky. Your real estate agent should have met these buyers and have some insight as to how long they’ve been looking, how much they like the home, etc. Discuss it with her and decide what makes the most sense in your unique situation.
How to avoid this situation
The more problems or potential issues you disclose up front, before the buyer even enters the home for the first time, the less likely you’ll be asked for major concessions after the home inspection. If you disclose to buyers that the furnace is 20 years old or that the roof is at the end of its life, it won’t be a surprise when the home inspector tells them the same thing. If you have several buyers all interested in the home, you can let them know that you’ll give priority to offers that don’t include a home inspection contingency. In most states, a home inspection is not required and not having one can make selling your home quicker and more straight-forward. It can be worth accepting a slightly lower offer without a home inspection, knowing that the agreed price won’t come up for renegotiation later.
If you’ve lived in your home for a long time and think there could be problems lurking, you can have a home inspection yourself before putting the house on the market. Address major problems and disclose the rest and you’ve gone a long way toward avoiding issues down the road. If you bought the home less than five years ago, go back to the home inspection report when you bought the house and make sure that you’ve already fixed things that came up then.
In any case, talk with your real estate agent about disclosing before the offer and negotiating after. If you have more questions, I’m here to help.