How to Negotiate the Home Price After a Home Inspection
The ultimate guide to negotiating for the biggest discount after a home inspection
Navigating through a home inspection report and negotiating the next steps is a situation that should be considered with care.
Is this your first time negotiating after a home inspection? Do you want to know which fixes are mandatory after a home inspection and who's responsible for them?
From the seller's point of view, learning about post-home inspection repairs can be troubling, especially considering that these issues will persist, no matter who buys the property. So, use this opportunity to your advantage, but also find a way to negotiate repairs after a home inspection that allows both the seller and the buyer to shake hands with a smile on their face.
From a buyer's point of view, after receiving a home inspection report, learning how to negotiate for repairs or a reduced sales price on the cost of a home can make a big difference to both your cost of ownership moving forward, and also your enjoyment of the home. Whether the HVAC system will be replaced by the sellers themselves, or if you're willing to negotiate and knock down the cost of the home to accommodate this need and purchase the HVAC unit on your own dime, the act of negotiating, when it comes to buying a home, could be considered an art.
As a buyer, when thinking about addressing the responsibility of the home repairs with the seller, it is important to be informed about the rules and regulations in your state, but below we have put some answers to the most common questions we get from across the US.
This is probably a better question to ask, as there are no legal guidelines for what HAS to be fixed. So what should you look for? We recommend focusig on the following items:
- The Roof: Look for soft spots, excessive wear, moisture penetration or anything that could signify the roof is failing. This is one of the most expensive and important repairs you will ever need on a house.
- Electrical System: Is the electrical system old or has it been updated improperly? Look for things like a LOT of outlets not working, overloaded fuse panels and pigtailed wiring.
- Plumbing: Leaky pipes can stay hidden for years and cause considerable damage. Does the house have a musty smell? Did you home inspector use a moisture meter to identify any problem areas? Are the slow draining sinks or toilets? These could all be sign of potential plumbing issues.
- Foundation: In some areas foundation settling is common, and shouldn't be a cause for concern. But if there is major movement with sticking doors, cracking windows, cracked tiles/paint or other signs of serious imbalance we would recommend contacting a licensed engineer to evaluate the home.
- Termites and pests: If there are pests, wood destroying insects and/or vermin in the home that should be a red flag. If a home owner can't take care of these easy to solve issues, what else is wrong with the house?
- Mold: Often caused by failing roofs or plumbing leaks, mold can grow unseen for years. If you see mold visibly, we'd recommend getting a test for it, just in case. Again, this can be a sign of bigger issues.
- Window and door issues: Failed thermal seals, leaking windows, doors that stick, broken locks - while these things may seem minor, they do affect your safety and enjoyment of the home, so we recommend having the seller address them if possible.
- Asbestos or lead paint: These can be serious, life threatening issues, especially if the home was constructed before 1978. Make sure you request a Lead Based Paint disclosure from the seller just in case they have discovered LBP present in the home before. Was there anything about it on the seller's disclosure notice? Has the home been renovated since it was built?
Normally, no. Outside of FHA transactions (and certain limited States), a seller is not contractually obligated to fix anything after a home inspection, and we would always advise caution when letting a seller handle repairs. Do you think they will get the best, most reliable contractor to do the work or the cheapest bid they can find? We think that the latter, which is why we always recommend negotiating for a repair credit instead.
If you are the seller, seeing your property from the point of view of a curious home buyer—and making the necessary adjustments—before you put your house on the market, to begin with, can make a big difference.
In an ideal world the seller will give you a repair credit or price reduction on the home to allow you to perform the repairs after you move in. This is the best of both worlds as you get the repair paid for by the seller, but you get to choose the contractor who actually completes the work. Meaning you can oversee the repairs AND get a warranty for the work that has been done.
So you've found your dream home. It's perfect, your offer has been accepted and you're excited to move ahead with the purchase but like any smart home buyer, your order a home inspection. The inspector shows up, does his work diligently, and then presents you with what looks like a nightmare.
A 50-80 page report of everything wrong with the house.
How can this be you think? The house looks great. Where did all these defects and problems suddenly spring from? The first thing you need to understand is that you're not alone and if you're reading this you more than likely want to move ahead with your home purchase, but you think the seller needs to kick in a little $ to help out. Keep reading to discover how to negotiate home price after an inspection, and actually win the negotiations!
Almost 20% of US home transactions “fall apart” at the inspection phase because home buyers get cold-feet, or parties simply can't agree on price reductions or new terms. In reality most of these contracts could have stayed together if both sides had just been realistic about expectations. For the seller, the cost of putting the home back on the market and waiting months for new offers (if any at all) could be greater than doing the repairs, and for the buyer this means you and your agent now have to start all over again looking for the perfect home.
So we're going to assume you still want this home, and guide you through the process to make sure you get the biggest discount possible without killing the deal.
Step 1
Whatever you do, DO NOT SEND THE WHOLE INSPECTION REPORT TO THE SELLER. We can't stress how important this is. In most US states a home inspection report is considered a disclosure notice, so if your deal falls apart for some reason this means the seller now has to disclose any noted defects to a new buyer. EVEN IF THEY HAVE FIXED THEM! All this is going to do is upset the seller and more importantly the listing agent who is essentially going to be negotiating on your behalf with the seller. If you have a buyers agent representing you, and they suggest this, we would recommend you question this action and point out our reasoning above. We have found that this only makes the situation worse.
Step 2
Only focus on the big stuff. Cosmetic issues like paint, cracked tiles, dirt etc. really aren't worth negotiating over, and more than likely were already present when you viewed the home. This means that you would have been aware of them when submitting your initial offer, so should really have included those in the contract if you wanted them remedied. Consider it too late to negotiate for them now, and focus on any large items regarding HVAC, electrical, plumbing issues etc.
Step 3
Don't let the seller fool you into thinking that they'll address any issues before you move in. If you do decide to have any issues repaired before you close, remember if the closing falls apart YOU will be left to foot the bill with the contractor if you hired them - even if it's not your house! Of course you could let the seller choose the contractor, but then more than likely they'll pick the cheapest repair possible and let you deal with the repercussions after move in. Outside of any major structural/foundation issues (that you should hire an engineer to investigate anyway), or anything that is simply not functioning at all, most problems can be addressed after move in, and should be negotiated in the form of a credit for closing costs or check paid at closing to the contractor of your choosing.
Step 4
Get bids! So if you can't send the inspection report, what do you send the seller to show them the true cost of repairs? One way is to simply get contractors out to the house. While not the most efficient, this can still work, but you should expect this to take anywhere from 48 hours to a week to get bids back, and it may cost you trip fees for professionals like plumbers, electricians and HVAC contractors if you're just having them bid and not do any work. Also, keep in mind that you may upset the seller by bringing a constant stream of contractors out to the house to bid on every item. The odds of getting everyone there at one time is probably minimal, and if the home is occupied you can actually make things worse by using this method. Think about it from the seller's point of view. They've already had multiple showings, a home inspection and most likely an appraisal, and now you decided to bring contractors into the equation? Trust us - it's not a popular option.
Your other solution is to order one of our home inspection repair estimate reports - with pricing starting at just $79.99, you'll get an accurate estimate for EVERY item in your home inspection delivered back to you in 24 hours or less. When you consider that the call-out fee for one licensed contractor is normally $50-$100, you may decide that our online option is the right one for you. Find out how it works!
Either way, understand that just providing a bid/estimate to a seller is not enough for them to just throw up their hands and accept your negotiation. Expect there to still be some back and forth as they work to accept that there is actually something wrong with their home, and that they're going to have to pay for it. Essentially what you're looking for are major, unexpected expenses that will affect your enjoyment of life in the home. Stick to your guns, be realistic, don't try and “fluff the numbers”, and push for a closing cost credit vs a price reduction if possible. Remember, unless you've already maxed out your seller contributed closing costs in your contract, this method will put money in your pocket vs a minor monthly reduction in your mortgage.
So there you have it - a simple 4 step guide to help you in negotiating your home price after an inspection. Need more info, we recommend you check out this quick video from our co-founder that walks you through how to use our reports to negotiate after the inspection.