How to negotiate with sellers using a home inspection in a seller’s market.
If you’ve had an offer on a home accepted, congratulations! Especially in a competitive market like today’s, that is a huge achievement.
Now that your offer is accepted, you’ll want to get an inspection to help you understand the condition of the home. If it's in a worse condition than expected, you should consider renegotiating the terms of the contract.
In this article, we’ll explore how buyers (and their agents) can use home inspection reports to renegotiate.
What is a home inspection?
A home inspection is a visual evaluation of the entire home, including the plumbing, heating, air-conditioning, and electrical systems. It also includes physical structures such as the roof, doors, windows, and floors.
A home inspector will walk you through the property and help you understand any defects and how severe they are. The goal of an inspection is for you to understand the condition of the property so that you can make an informed decision on whether to purchase.
What to expect in your home inspection report
Home inspections provide tons of insight into the condition of a property. However, if you just want a quick rundown, here are a few points to look out for:
- Heating system - in working order and not a fire risk
- Central air system - system age, adequate cooling, and thermostat
- Interior plumbing - piping is up to code, water to all faucets, and correct drainage
- Electrical - all outlets, lights, and switches are in working order, and the wiring is up to code
- Roof - any leaks, wood rot, or other hazards
- Attic and insulation - structural soundness, correctly laid insulation
- Walls and ceiling - any cracks or signs of pest or water damage
- Floors - loose boards, tiles, or carpet, and checking if floorboards are in good shape
- Windows - checking if they can open and close, meet the current fire exit requirements, and if they need weatherstripping
- Doors - ensuring all entries can open and close, and the state of the hinges, doorknobs, locks, and frames
- Foundation - cracks or leaks, and ensuring it is stable
- Basement (if applicable) - any cracks, hazards in exposed pipes and wires, or flooding issues
- Structures - the exterior of the home and any load-bearing walls and studs
It’s a seller’s market
Historically low-interest rates caused by the pandemic, on top of a host of other factors, have led to a red-hot real estate market. 59% of homes are sold in under two weeks, with multiple offers on almost every listing.
Home prices have also risen by 17% year over year. Additionally, the sale-to-list-price ratio has been over 100% since March 2021 - meaning that the average home is selling for over the asking price. Buyers, desperate to win a bidding war, are constantly looking for ways to increase the attractiveness of their offer.
However, just because it's a seller's market does not mean you can’t have some leverage as a buyer. More than 80% of home sale prices are negotiated twice: for the initial offer and after the inspection. Based on the results of the inspection (and how severe the defects are), you may be able to get a lower price or have the seller repair the issues before you move in.
Tips for negotiating with sellers using a home inspection
We're currently in a crazy seller's market, so it can be hard to renegotiate unless there is a considerable concern. Sellers have so many offers that if you ask for too much, they might just go to the next offer instead.
Your agent should be able to help you with better advice for your specific situation, but here are a few general rules to follow.
1. Review the report with your real estate agent
Once you receive your report from the home inspector, share a copy with your real estate agent. Your agent has gone through this process many times, so it’s wise to consult them about it. Your agent should also have a fair sense of what the seller might be willing to do to complete the sale.
2. Figure out repair costs
If you want to lower the price, you’ll need to know how much repairs will cost. Using the results of the inspection report, you can call contractors and request bids to do the work. However, this is a slow and manual process that will take you a lot of time.
Alternatively, you can use Inspectify. All inspection reports from Inspectify come with free repair cost estimates. We use localized pricing data and our own proprietary software to give you an accurate estimate.
This saves you time and energy during your due diligence period (which is already stressful enough).
3. Prioritize repairs by severity and cost
A home inspection can uncover many issues. Certain issues, like faulty wiring or leaky roofs, should be prioritized over cosmetic things like chipped paint. It is helpful to make a list of things you consider dealbreakers and another list of things that you would like to have someone look at, but for the time being, you can live with or fix yourself.
When using Inspectify, we’ll categorize the defects into 3 groups: safety, repair, or monitor. This helps you know how severe each issue is.
4. Request concessions for major stuff
When it comes to major repairs like electrical systems, plumbing, HVAC defects, and termite and roof damage, you should seek some form of concession from the seller. You can either ask them to take care of the repairs as a condition for closing or request them to reduce the selling price.
Major repairs are things that will be a problem for most buyers. So even in a seller's market, they’ll likely need to concede. You should also consult with your agent, and consider how many other offers they received, and how long it was on the market (and other things that might impact the seller's eagerness to sell).
5. Be reasonable
In normal markets, you will get much of what you ask for as long as your requests are reasonable. However, that might not be the case now. If your demands are unreasonable, sellers could refuse them and move on to the next offer. This is why you should consult your agent on whether you're asking for too much when negotiating house prices after inspection.
6. Know when to walk away
If you can't reach an agreement with the seller, the inspection contingency clause in your contract lets you walk away from the sale and keep your earnest money. Especially today, you might find that some sellers just won’t budge.
Before choosing to walk away, you should consider how much longer it will take you to find another home. While you don’t want to be stuck with a lot of extra expenses, it could be difficult to find a suitable replacement.
How Inspectify can help
With Inspectify, conducting home inspections is a breeze. Here are a few ways that we make the process easier:
1. Simple instant booking
Our online platform allows you to book home inspections within a matter of minutes. We will manage the logistics, allowing you to focus your energy on making sure you have chosen the right home.
2. Easy-to-read inspection report
Our inspection report presents the relevant information in an easy-to-read format. Each defect is classified into three categories: safety, repair, and monitor. This classification allows you to prioritize repairs.
3. Free repair cost estimates
We use data from your locality to estimate how much repairs will cost you. This saves you the hassle of calling contractors to get bids for repairs.
Negotiating with sellers can be intimidating and may not always go as planned. However, in most cases, both parties are trying to get the sale closed. A home inspection report provides a perfect opportunity to make requests for repairs or to lower the price.
Ask your agent for recommendations, make reasonable requests, and be flexible in arriving at a compromise. If the concession isn’t up to your satisfaction, you can also back out of the deal.
If you have any unanswered questions regarding home inspections, inspection reports, or Inspoectify - feel free to drop a comment below or contact us, and we’ll be happy to answer!