You’ve found the perfect home. It fits within your price range. You’ve made an offer, and it has been accepted. Now comes the time to find out what you’re really buying. This is where the home inspection comes in.
It is really important to try and work ahead of time to warn your seller that the home inspector is going to pick their house apart, says Judi Gray, an agent at Century 21 New Millennium. “I don’t care how good of shape your house is in, the inspector is going to find something. That’s their job.”
Gray finds that setting expectations is the best first step as a seller agent, especially if the home is an older property. “There are going to be some code issues—electrical, plumbing—there’s bound to be. Don’t expect a perfect home inspection.”
Right now, Gray is negotiating the home inspection report with one of her clients, a buyer who has a number of items that are high-priority. “In this particular case, the seller is, I believe, a single woman, possibly a widow, and she doesn’t want to deal with contractors,” Gray says. “She doesn’t feel qualified to do that. She wants to be fair to my buyer.” Gray and her client sent over a list of items that need to be addressed, and the seller came back asking the buyer to consider a credit.
Gray recommended taking the credit instead of having the seller fix the problem prior to settlement.
“In this particular case, the buyer is more qualified to take that on and work with contractors. That way the buyer has control over what the contractor does and who the contractor is. Not that sellers are dishonest, but if you’re a seller, you may not put in the top-of-the-line water heater, for example,” says Gray.
Real estate agents are in business for a reason, and they earn their money at several points during the sales process. The toughest one, if the property is over 10 years old, is with the home inspection opines Gray: “That is when peoples’ tempers flare, buyers get scared, and sellers are mad because home inspectors picked their house apart. It’s a tough negotiation, or it can be.”
It also comes down to the type of loan a buyer has, says Claudia Cornejo, Realtor at Claudia and Associates. If the buyer is going with a conventional loan and there are minor issues with the home, negotiations can happen. But if the buyer is going with a Federal Housing Administration loan, issues with the home that don’t comply with the FHA guidelines have to be fixed prior to settlement unless they are cosmetic. If there is water or rotten wood outside or paint if the house was built prior to 1978, those items have to be addressed before the inspector goes to the house to make sure the house complies with the minimum Department of Housing and Urban Development requirements, Cornejo explains, something that is done when the appraiser goes to the property to check both the value and condition of the house. The appraiser will send a report of the items that need to be fixed in order to comply with the minimum FHA requirements.
Cornejo does state, though, that even conventional loans can be stricter than others depending how much of a down payment is put down. “Now there are conventional loans with 3 percent down payment, and they are more strict with the condition of the property compared [to loans] where there is 50 percent down,” she says. Those are a little more flexible.
After loan-requirement issues are addressed, everything in the home inspection is negotiable. But the seller does not have to do any of it, says Gray. This is where cordial communication and negotiation are key.
“Let’s say you list a house at $400,000 and someone gives you $400,000. [As the seller] you should be prepared to work with them a little bit on that home inspection list,” says Gray. “If they end up making a pretty lowball offer, you maybe wouldn’t negotiate as much. If [a buyer] is in competition with five other offers and one of them is in a backup position, you’re probably not going to nitpick that seller to death.”