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Repair Negotiations When Buying/Selling a Home

3/22/2017

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I've written before about the home inspection process, and several items that home inspectors routinely call out. But this post is more focused on the actual negotiation process once a home inspection has taken place. Of course one's perspective is going to be different, depending upon whether you are the buyer or the seller, but hopefully there is something to be gained by looking at the situation from the other party's point of view as well.

So an offer has been accepted, and escrow is open -- it's all downhill from here -- right? Not! There is still at least major negotiation with which to contend -- repairs!

I'm of the opinion, whether you're a buyer or a seller, that clearly visible defects in a property should be accounted for in one's original offer. For example, if the driveway or pool is completely cracked, crumbling, and clearly on its last legs, or the roof is clearly shot, then that should be taken into consideration when making or accepting an offer. From a buyer's perspective, to ask for a major credit for these kinds of items, while allowed per the Agreement, seems a little disingenuous.

On the other hand, if the furnace or AC unit is faulty, or if the roof has issues that are not visible from the ground -- or other problems are uncovered during the inspection which wouldn't be obvious when briefly viewing the home -- the a buyer is justified in asking for the items to be repaired, or a credit issued via a formal "Request for Repairs".

That's where the fun begins! When representing buyers, I recommend focusing on the larger reasonable items, and not worrying so much about the minor items, especially if a home is generally well maintained. I also recommend submitting as much detail as possible when requesting a credit -- line item pricing for labor and materials for each item. Prices are easily obtained from online sources such as Home Depot or Lowes, and after seeing the same repairs many times, it's fairly simple to estimate labor costs. For more specific costs, one can obtain a quote from an electrician, plumber, roofer, or chimney sweep, for example. Once all of the facts are collected, the request for repairs can be presented to the seller.

When representing a seller, I also like to collect as much detail as possible regarding repair items. While the buyer's estimates are a good start, it also makes sense to compare their estimated costs to your own estimates, just as a check an balance. I'm not a big fan of blanket requests for credit - "credit of $3,500 for items mentioned" -- how did they arrive at that number? One other pet peeve are requests that simply list the page number and paragraph number of each item that they want repaired/replaced/credit. It's very time consuming to have to continually reference the inspection report for each item (and these requests tend to have a longer list of items). It's much simpler for all parties if the items are just written down in plain English (i.e. "hall bathroom vanity faucet leaks" or "GFCI outlets to be installed in kitchen, baths, and laundry room" - easy peasy - vs. "page 7, #1.2, page 11, #7.8, 7.9 and 7.11")

Of course a buyer will work to obtain the largest credit and/or have as many items as possible addressed -- completely understandable. Likewise, a seller will either want to minimize the number of items addressed, and/or reduce the credit to a small a number as possible -- also completely understandable. In practice, and in any negotiation, both sides want to feel as though they've "won", or at least feel as though they've been treated fairly. And of course this negotiation comes on the heels of the original price/terms negotiation, where in the current market it is not uncommon for one of the parties (usually the buyer) to feel a little beat up. That's where a little common sense comes into play. If either the buyer and the seller adopt a "take it or leave it" position, a deal can rapidly fall apart. The seller loses the sale, and the buyer loses the house, their home inspection fee, and possibly an appraisal fee. With a little give-and-take this can almost always be avoided. If the buyer is willing to accept a little less, and if the seller can give at least a little, it shows good faith and is usually the last hurdle (other than the loan!) to successfully getting the transaction closed, and all parties walking away feeling good about the deal!

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    Tony Trabucco is a real estate Broker who lives in Old Towne Orange, CA

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Tony Trabucco
Orange Realty, Inc.
1537 East Chapman Ave
Orange, CA 92866
714.288.9369
Tony@OrangeRealty.com
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CA DRE Lic #: 0982321
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