Preparing to negotiate after home inspection
GraceandEddie asked:
We'd like to be educated on the process of negotiation which comes after the home inspection is completed. We know very little about that part of the process. Can you give us an A-B-C on that please?
The home inspection contingency is in the Offer to Purchase contract to protect buyers from purchasing a house with major unknown defects. The phrasing on the contract allows the buyer to cancel the contract (walk away) if there is more than $X in structural, mechanical or other defects. I put $1000 in that space; with the properties that I work with, that’s a pretty easy number to exceed.
In some areas of the State, buyers sign a Purchase and Sales Agreement before the home inspection. I think this is not to the buyer’s advantage because they are much more invested in the property after paying for both the attorney (for the P & S) and the inspector before getting a shot at renegotiation.
Today, the A-B of negotiation. Tomorrow is C = Consideration. (That’s a word that means both courtesy and monetary negotiation.)
A = Anticipate
How much you are able to negotiate after inspection will depend on several factors:
1. What is the supply: demand ratio on this house? Is there a line of buyers waiting with back-up Offers or has the house been sitting there, lonely, waiting for you?
2. What is the condition of the house? What do the sellers think the condition of the house is?
3. What have you already been told? What is obvious to anyone walking in about the property?
4. How hard did you negotiate the Offer price? If you pushed the seller to the ropes, you are more likely to get a “no” at this point.
B = Be prepared
1. Get a good look at the house before you make your initial Offer. Make your Offer based on the problems that anyone can see; make sure the seller or seller’s agent knows that you know this house needs updating (sometimes I list the “excluded” problems.) It is not realistic to make an Offer on a house with a 1920’s kitchen, then after inspection say “the inspector says there are no GFCIs in the kitchen and that’s a hazard. We want $1500 to upgrade that.” Judge the house by its type; what you’d legitimately expect from a 2002 construction you’ll almost never get from a 1907 house that is totally redone.
2. If there is high demand on the property, you are likely to lose it if you negotiate after inspection. Therefore, you need to make your best offer when you submit an Offer to Purchase, with communication that shows you are not planning to be clueless about the condition of the property.
No two negotiations are exactly the same, so there is no single "how to." What would you add to the preparation list? (Tomorrow, I will write about the actual negotiation.)
