This isn’t our first discussion about home inspections – I know. I wrote 5 reasons to wait to negotiate until after the home inspection To relay a strategy in which I personally have had considerable success over the past three years. I find it very easy to negotiate after your inspection, which I don’t recommend paying a buyer unless they have a binding contract. While some people disagreed, hopefully this update clarifies my position.
With an inspection in hand, you know exactly the condition of the property and the function, or dysfunction, of major systems. In my opinion, this is the only appropriate time to negotiate. If you try to negotiate at any other time, you are doing so from the perspective of emotion and the unknown.
Connected: 5 reasons to wait to negotiate until after the home inspection
1. Real estate is a people business.
I always believe in putting people first. That said, asking for an inspection shouldn’t offend a seller, or be perceived as disrespectful to the seller in any way. It is a buyer’s right, a right that I think all buyers should exercise if the situation permits.
It is not malicious or unethical for a buyer to ask for an inspection and then to repair what is returned upon that inspection, especially when it is a property for which the seller is asking market value.
If a seller does not wish to allow an inspection, he should not accept an offer with an inspection contingency.
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2. You should know what to expect.
An inspection allows a buyer to see what issues the property currently has, or may have in the future, and provides a great opportunity for the buyer to make sure they are in good condition.
If the inspection turns up with major issues, especially structural, safety, or major systems, I encourage the buyer to ask for those issues to be rectified, one way or another, before closing. That said, every buyer is different and has different preferences. I encourage buyers to bargain only on the things that are of utmost importance to them.
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3. Time is of the essence.
This is true in almost every real estate contract. Even if it is not explicitly stated in a contract, no buyer or seller should aim to expedite any part of the process.
If you are a buyer, do not exceed your inspection and settlement timelines. In extenuating circumstances, or when an expert is needed to investigate a problem at a property, make sure the seller is on board with the extension and maintains open communication throughout the process. If a vendor is unwilling to allow such an extension, they may reject it or terminate the contract.
how it works in practice
I have been investing for about three years now, and currently own 38 doors. I’ve also done over a dozen flips and been the buyer and seller on several transactions. While I know my success so far has been somewhat limited, and I am just starting out, I have worked as both seller and buyer in both MLS and off-market positions.
Not once have I made a contract that I do not intend to close. I have never delayed closing. I have never exceeded the inspection period, or resolution period, that the seller and I agreed upon. I have never made an offer on any property that I did not intend to buy.
I’ve closed on all but one contract in about three years. The seller decided to cancel the contract, and voluntarily returned my earnest money back to me after two different foundation specialists confirmed that the property needed more than $44,000 worth of work. I was the 4th buyer to offer on this house, and the 4th buyer to ask for the same repairs. seller was not ready to help, And the home is still on the market, at a price that can’t be assessed. I’m thankful I didn’t inherit that problem.
I believe we are only as good as our word, and reputation is everything. When I ask for an inspection, I treat the seller with respect, through the due diligence process, as soon as possible (and always within the agreed upon time frame). I always give the seller options on how we can work together to rectify any issues so that I can close and we can all move on.
The highest concession I ever made was $12,000, and that was on a 10-unit property that required hundreds of thousands of dollars of work. The average rebate on the single-family home I bought is $2,500. In every case, the seller is the one who offered that dollar amount.
Since every transaction in which I’ve used this strategy, both me and the seller walked away happy with the closing on time, I’d call it a win-win. This strategy is not to take advantage of anyone.
Note by BiggerPockets: These are the views expressed by the author and do not necessarily represent the views of BigPockets.
