After weeks of home shopping, you’ve found a house and signed a contract to purchase. Then the inspector finds problems that need repair — expensive repairs. How should you handle them? You thought negotiating the selling price was all there was to the haggling. Now you have to make decisions on who covers repair costs.
Certainly you, the buyer, don’t want to move into a house saddled with a list of costly repairs. The seller, of course, doesn’t want the financial burden either. That’s where compromise comes into play. You need to be reasonable with each other.
First, be sure to schedule the inspection immediately after you go under contract. Many states’ real estate contracts give you a “due diligence period” for getting the inspection done and making decisions on repairs. Most contracts also have provisions for resolving inspection discoveries, so read and navigate those provisions carefully.
The seller may insist that the house is to be bought “as is.” There may well be a box to check on the sales contract to that effect. Don’t agree to it unless you are willing to take the house, warts and all. The seller may say that any known repair needs are taken into account in the price, but don’t settle for that answer. There may be unknown issues lurking.
If you are working with a buyer’s agent the two of you should be present when the inspector does his work. Don’t hover over him; he will go over his findings with you afterward. Later, he will send you his official report. The seller may be present also, with the listing agent. Be smart and discrete in your conversation. No need to offend the seller needlessly.
Don’t insist that the seller fix everything that the inspector finds. Decide which items are significant enough to be addressed as part of the deal, but be reasonable about it. Understand that the inspector is going to find issues with any home, even a relatively new one. Even extremely minor things are noted on inspection reports.
A list of minor repairs can probably be negotiated easily between you and the seller. Buyers should insist that repairs addressing safety issues be repaired by the seller before closing. Non-safety related, yet costly, repairs present more difficult decisions.
Reaching an agreement on repairs can be handled a few ways. One option is to ask the seller to fix certain items before closing and agree to handle the rest once you own the home. Or, you can provide a contractor’s invoice for the repairs that the seller agrees to cover at closing and have the work done to your specifications after closing. This option is particularly helpful where the repair involves choices you would like to make.
What if the repair issues are costly and you cannot reach an agreement? At what point do you walk away from the deal? You must decide if the repair is crucial and if you can afford to pay for it after closing. If you decide the repairs will bust your budget, you need to make sure you understand your right to terminate the contract within the due diligence period so you don’t forfeit your escrow money.
