The number one reason most purchase contracts for homes fall through is due to the inspection. And I had two contracts that fell through in the last few weeks, which for me is unusual. And that’s a lot of work for me and my clients with no results.
Bulbs to Basements
Home inspections are an important part of the home buying process. As a objective third party, they provide a comprehensive list of issues and concerns with the property. The list may include small items like burned out bulbs to issues like major structural weaknesses. Occasionally they miss some small things but the list is usually pretty comprehensive, even including code updates.
Put Things Into Perspective
It is important to know what’s going on with a house before you make the biggest financial investment of your life, but you also need to be realistic. Take a look at the bigger picture and put the needed repairs, if any, in perspective. I may repeat this a few times through this article because I can’t give this advice enough.
It’s A Tough Market
One recent buyer, who was looking in a very competitive price range, backed out of the contract at inspection because there was some indication that the water heater was on its last legs and the seller would not do any repairs or budge on the price. There were a few more small items that needed attention but nothing of immediate concern or major proportion. As a rough estimate if they had tackled every thing on the list, the costs may have been around $5,000. Given that the purchase contract was for less than $150,000 that amount could be substantial.
But if you take a look at the bigger picture, that might not be the case. The buyer had been looking for some time and not many properties meeting their criteria came on the market. And often when they did they were sold before they had an opportunity to put an offer on it or they lost out in multiple offer situations. Other similar properties were selling for $10,000 to $30,000 more. Given that $5,000 in repairs was probably pretty reasonable. And unfortunately nothing else has come on the market since then.
First Time Home Buyers
For first time home buyers, inspections are probably the hardest. Many times they have come from an apartment or their parent’s home and have not had to take care of maintenance issues, so often feel overwhelmed with any repairs. They might also have limited funds, having just saved enough for the down payment and closing costs, so any immediate repairs can stretch them financially.
This is when you need to look at the bigger picture. Is everything on the list of immediate concern? If not would you be able to budget for the repairs over the year? Of course as with any buyer any major repairs or concerns should be negotiated with the seller. Most sellers realize many items will need to be fixed for any buyer so will do needed repairs or adjust the price accordingly.
A recent purchase that went sour was due to the sellers unwillingness to make a major repair or price adjustment. We tried to negotiate but the seller has a price n mind and just would not budge. Once a seller is notified of issues with their property they need to disclose that to any future buyers. The Realtor also has the responsible to disclose any adverse conditions of the home if the seller is unwilling or unable. So working with your buyer to come to a reasonable compromise on repairs is in the best interest of all parties. Reasonable of course being an important part of the negotiation.
Sometimes people think when they buy a new homes they don’t need to have an inspection. Especially since the builder is required to provide a one year written warranty by state law. However that warranty is limited. Some builders are very responsive during the first year and will fix anything that is uncovered down to the nail pops. Others are not quite so responsive, so it’s best to get as much fixed on the front end as possible. Builder’s vary in their attention to detail and inspections can often find things that need immediate attention that can save you time and money.
Negotiating inspection repairs is one of the more difficult parts of the homing buying process which is why you need a good Realtor. It’s important to work with them to look at the bigger picture. Do you know someone who is thinking of buying or selling their home? Connect us so that I can help them through the inspection of their home as well as all the other steps of the process. They will be happy you did.