How to negotiate a home inspection contingency

Buyer Education

This is oftentimes the most complex of contingencies that must be negotiated.  There are real dollars on the line, no "best practices" or common understanding of how this contingency should be negotiated.  What is customary to ask the seller to repair or credit the buyer?  What should the seller expect the buyer to ask for?

In a nutshell, all of the items on a home inspection report should be divided up into two categories:

1.      Health & Safety.

Examples are:

• Leaks in the natural gas pipes near the furnace/boiler and hot water tank. 
• Double/triple tapping wires attached to a breaker in a panel. Un-grounded 3-prong electrical outlets.
• Plumbing leaks
• Mold
• Structural, framing, water intrusion

2.      Deferred Maintenance - These are minor items such as strike plates that don't align, improper grading, tuck-pointing, windows that don't lock properly, etc. 

Sellers should be prepared to correct some or all of the health & safety items.  Buyers should not ask sellers to remedy deferred maintenance items. 

A buyer has two choices in asking a seller to remedy health & safety defects:

1. A buyer can ask the seller to repair the items, or
2. Ask for a monetary credit from the buyer so these items can be repaired by the buyer once the buyer obtains ownership. 

I personally like to see buyers obtain a financial credit from the seller as most sellers will go out and hire the cheapest contractor they can find to hold their costs down.  While the repair may be sufficient to satisfy the contingency, it may not be the optimal solution.  Some buyers may end up having some of these trades (plumbers, hvac, electricians, etc.) in their new home to make modifications that they may need and therefore end up being more efficient.  Having control over which contractor to hire, and to call them again in case something may need to be addressed again is much easier if the new buyer is the one who paid the contractor and needs to get them to come back out again.

Date: Sunday, December, 21st 2008 @ 03:15:04 PM
Views: 154

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