Saturday, January 25, 2014

Dealing With the Home Inspection Condition Part 2

When dealing with the terms of an Agreement of Purchase and Sale, Sellers and Buyers often face-off over issues that me be identified as the result of the Buyer’s home inspection, which can jeopardize not only the negotiation process but the very sale itself

  Just like humans, every home will have its own personality if you will.  Certain characteristics and yes issues that may or may not constitute a “fault” and a reason for a Buyer to either abort the purchase, or solicit a price reduction.   Just as Sellers need to address the appearance of their home from a cosmetic standpoint when listing their home for sale, attention should also be paid to maintenance issues that have been neglected.  Does the roof need to be repaired or replaced?  Is there evidence of water leaks such as stains in the ceiling?  Are plumbing faucets leaking, have some windows lost their seals and are fogged up.  These are all factors that (a) represent how well a home has been maintained and (b) are  items that a good home inspector will identify and flag in a report along with some issues that may not be readily visible to the casual observer.

Depending on the property, Sellers may be well advised to have their own home inspection done prior to listing.  This is not meant to take the place of a Buyer’s home inspection but it will serve top identify items that should be addressed prior to listing the home for sale and eventually haggling with a Buyer over.

  From my experience, most Buyers are reasonable.  Buyers looking at a century old farmhouse will for the most part be prepared to deal with a host of things that a home inspector may find.  That is part of owning an old house.  Someone buying a newer home however may not be so tolerant.  Regular maintenance of small items that have been neglected will probably not be questioned by a Buyer as most of these will be duly noted when the Buyer views the property.  Personally, I do not feel that a Buyer should be looking to amend a price to repair items that were clearly visible when they viewed the property that is simply a Buyer trying to take advantage of someone.   It is the larger unforeseen items that are uncovered via a home inspection that will no doubt raise concerns and perhaps bring about a change of heart with the Buyer.  Is there inadequate insulation in the attic?  Is their aluminum or in the case of older homes, knob and tube wiring present?  Galvanized pipe in older homes is another issue that is of concern?  Is the furnace and or air conditioner, or the swimming pools liner on their last legs?  These are just a small sample of what a home inspection might uncover that could impact a Buyer’s decision to move forward with their purchase of a specific property.

  As a REALTOR®, I may handle the situation differently if I am representing the interests of a Buyer versus a Seller.  The following are some of the options available to Buyers and Sellers in terms of how to negotiate dealing with issues that may arise from a home inspection. 
  • -          First, the Buyer may simply not fulfill or waive their home inspection condition by the required date.  As such the deal becomes null and void and the buyer’s deposit is returned to them.
  • -          Second, the Buyer requests (in writing) that in exchange for the Seller fixing the items at the Sellers expense prior to the closing date, the Buyer will remove their condition and firm up the purchase.
  • -           Third, the Buyer can ask to have the previously agreed to price amended ie: reduced in order that they do the needed repairs at their own expense after closing.  This price reduction can be done up front or it may be done as a credit to the Buyer on closing.

 Sometimes a Seller may dig in their heels and insist that they will do nothing to remedy a problem that may have been identified in a home inspection.  That is most likely not the most prudent position to take.   Being unwilling to fix a problem or consenting to a price adjustment may result in losing the sale and they will only have to face the same issue with the next Buyer that comes along.

  As always, my best advice to Sellers is to get your home in top shape before you list it for sale.  In the event your home needs something like a new roof, furnace or other such item and the funds are simply not available that’s okay.  Your REALTOR® can price the property accordingly which should take the item off the table when it comes time to negotiate with a Buyer as the issue has theoretically at least already been dealt with via the price.

  For additional information about home inspections, see my Home Cents Help Tip “The Importance of a Home InspectionBefore Buying.”

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Rick relocated to Collingwood from Toronto in 1985 through a transfer with Goodyear Canada. In 1987 Rick was recruited by a major client of Goodyear’s, managing their Canadian business based in Barrie before moving to Chicago in 1992 as Vice President of Sales & Marketing. Upon returning to Canada in 1996, Rick ran an industrial products manufacturing company in Stratford, Ontario. In 1998 Rick returned to Collingwood with his two children. Rick is a licensed real estate Broker with Royal LePAGE Locations North in Collingwood and holds his MVA designation (Market Value Appraiser-Residential). He is an active volunteer in the community serving several years on the Board of Directors with the Collingwood Chamber of Commerce as Treasurer, 6 years on the Board of Directors for the Southern Georgian Bay Association of REALTORS® of which he is the Past President (2008) and currently serves on a committee with the Ontario Real Estate Association. Rick is a diverse executive manager with extensive experience in strategic planning, manufacturing, finance, human resources and quality assurance management.