Home Buying: Make Your Offer Contingent on a Home InspectionOctober 1, 2020
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A home inspection is one of the last boxes to check off before a home is officially sold. Unsurprisingly, it’s also one of the most important, as a home inspection is the last chance for a buyer to uncover any problems. It’s common for the home inspector to turn up needed repairs, and it’s just as common for buyers to want those repairs dealt with before moving in.
This raises the question, who pays for the repairs: the buyer or the seller?
The answer really depends. One of the key determining factors is what (if any!) sale contingencies were included in the purchase contract. It’s also wise to consider the types of repairs that are important to you, as that can make repair negotiations with sellers easier.
You can buy a home as-is, but you’ll almost certainly have to pay for home repairs.
Some buyers—particularly those in competitive markets—decide to buy a home as-is. This means even if a home inspection uncovers issues, the buyer is still contractually obligated to move forward with the sale.
Buyers that purchase a home as-is don’t have much wiggle room in case an issue pops up. You can ask the sellers if they’ll consider doing the repairs, and if that doesn’t work, maybe ask if they are willing to split the cost with you. But the reality is that sellers don’t have to budge—whether it’s extensive wood damage or plumbing problems, if you agree to buy the home as-is, you have to follow through.
Sale contingencies included in the purchase contract give the buyer more negotiating power.
We talked about why sale contingencies are so important for home buyers: as the buyer, they allow you to opt out of the deal after the home inspection is completed if you deem the repairs are not worth your time or money. You can walk away penalty free.
To put it simply: including a home inspection contingency in the home sale can save the buyer money.
A home inspection sale contingency gives you time to negotiate the repairs with the seller. No, sellers are not obligated to pay for repairs. However, if they are unwilling to negotiate, then they risk losing the deal altogether. Most sellers, especially motivated sellers, are responsive and willing to negotiate.
This negotiation process can take various forms: the sellers might agree to pay for the whole repair, or may push back a bit and reduce the sale price by a few thousand dollars. Particularly savvy sellers might even offer to leave behind furniture and appliances for the buyers as a way to offset the cost of repairs. Discuss your options with your real estate agent or a real estate lawyer, as they should have experience with these types of deals. The bottom line: you don’t have to settle and can actively negotiate with the sellers to get a fair deal.
It’s clear that sale contingencies protect the buyer and give the buyer more negotiating power—a lot more negotiating power than when it comes to buying a home as-is.
Many buyers’ agents will advise their clients to focus only on major repairs to avoid a lengthy negotiation.
A home inspection is very thorough and will most likely uncover issues both large and small—however, giving the seller a laundry list of repairs can stall a sale completely.
A realtor will probably tell you to focus the negotiations on major repairs or issues that are particularly important. While a damaged door is not ideal, it pales in comparison to extensive mold, dry rot, wet rot, insect infestation or a broken HVAC system.
In the State of California items correlating with fungus damaged wood and insect infestation are referred to a Structural Pest Control Specialist. The contactors are regulated and licensed by the State. It is important to at least quantify the damage caused by water or insect intrusion. This can be another “big ticket” items that should be quantified in the investigation process.
Other maintenance issues can be dealt with over time and for relatively cheap—such repairs might be best to leave out of negotiations.
Sellers are required to disclose known issues prior to closing a sale.
California law requires that residential property sellers disclose, in writing, any known issues before a home is officially sold. This allows buyers to make more informed buying decisions and craft appropriate offers.
Seller disclosure is very important, whether the buyer intends to buy a home as-is or a sale contingency is included in the final deal. It also limits a sellers’ liability after the sale is completed. If they don’t disclose known defects in the disclosure, buyers may be able to sue the seller after the deal is completed.
A seller disclosure will include some or all of the following:
- Previous remodels
- Lead paint, toxic mold, radon, or asbestos
- Pests or wood-destroying insects
- Toxins in the local soil or water
- Structural, electrical, or plumbing issues
- Flood or wildfire danger
According to the law, a seller must provide these details “as soon as practicable before transfer of title.” This usually occurs in the beginning stages of the sale, as many real estate agents will have their clients prepare the disclosure ahead of time. It’s wise to discuss the seller’s disclosure with your realtor before signing the purchase contract, just to ensure the deal is transparent and fair.
So, who pays for repairs after a home inspection?
It depends on what you, the buyer, agree to.
If you agree to buy the home as-is, then you don’t have much negotiating power and will probably have to pay for repairs out of pocket. However, if you include a home inspection sale contingency in the purchase contract, you can demand that the sellers make the repairs and opt to walk away if you are not satisfied with their response, or come to a compromise with the seller.
If you are in the process of purchasing a home and need a home inspection, contact North American Home Services! Our professional inspectors leave no stone unturned, thoroughly inspecting homes from top to bottom. Contact us today!