May. 8, 2006 - Small, after-sale, fixes

While it has not been my experience, escrow companies have indicated that more and more sales are "falling apart" due to home inspection disputes.

One of the reasons I do not see this in my sales, is that I do not negotiate small fixes.  Putting the contract in jeopardy over something the buyer would not walk from the house over, is not the best way to proceed.  At the time of the home inspection I make four columns on a piece of paper and note which items we will ask the seller to address and which items we "could" ask the seller to address, but instead I will hire a handyman to fix, after closing as the buyer's closing gift.

Sometimes, even when you win you also lose when approaching the seller to repair trivial items.  Often the seller has never met the buyer in person, and so suggesting that the buyer is willing to cancel the sale over something trivial that would cost less than $100 to repair, sends a bad message.  Often the seller will form an opinion of the buyer and think the buyer is not serious about the home purchase when he is asked to turn a screw or readjust a dryer vent hose.

While the buyer may not have meant to suggest he would cancel over such trivial matters, often that is how the seller percieves the request.  Some people say "it doesn't hurt to ask", but it does.  Maybe not at inspection time, but what if you need an extra week at the end because your loan isn't processed yet?  If the seller is already ticked off over the home inspection negotiations, he is less likely to give you that week extension you need at the last minute to consumate the sale. So asking for trivial items at home inspection time can do more harm than good and cause you to win the battle but lose the war!

As the buyer's agent I need to pay close attention to anything that can create disharmony between the buyer and the seller.  At the inspection I keep a running list of items, and if the cost to repair does not exceed $500-$1,000, we go from STI to Pending and I hire a handyman OR I offer the buyer a credit from my commission to cover the cost of the minor repairs.  It depends on the buyer which way I choose to go with the remedy.  If the fix is cosmetic in nature and the buyer is difficult to please, I prefer to give them money than to have someone fix it.  If the fix is a safety issue or a problem that can create more problems if not fixed right away, like a hot water tank ready to blow or a pipe joint ready to pop, I ask the seller to fix it or to let me fix it before closing.  If it is a couple of lose roof shingles that need to be nailed in place or a dryer vent hose pulling away from the wall, I send the handyman.

If I am representing the seller, I generally do the fixes before closing.  If I am representing the buyer, then often I have to wait until after closing, unless I can get the seller's permission to enter the home with the handyman prior to closing.  Only the "owner" can provide entry and permission to change out pipes, etc.  So sometimes I have to wait until my buyer client "owns" the property to complete the fix.

Don't let nit picky repair items start an emotional exchange between the buyer and the seller.  Just because something needs to be addressed according to the inspector, doesn't mean it contractually needs to be addressed by the seller prior to closing.

Feb. 16, 2006 - Home Inspection Negotiation and Timeframes

Over the years, I have often been asked to explain how the timeframes of a home inspection work, and how a buyer should act and react within that timeframe. I have also been asked how one MAKES the seller DO that which appears "reasonable" to the buyer

There are many, many different types of Inspection Contingencies, I will be making some general assumptions based on the type of contingency most commonly used around the country.  This is the one where the buyer has the right to cancel the agreement if they are not "satisfied". There are other types used.

Many people are under the erroneous impression that the seller is somehow obligated to "fix" stuff, or renegotiate the price, after the home inspection.  That is not the case.  If the seller doesn't do what you want him to do, usually you can walk away and not buy the house and get your Earnest Money back,  IF you respond within the appropriate timeframes.  You cannot MAKE the seller do what you want the seller to do.  That is the "art" of negotiation; not a "right" of the homebuyer to MAKE happen, contrary to some claims by home inspectors and agents. 

You also can not wait until the day before closing, under the guise of  "waiting" for the seller to act "appropriately", and then cancel on the last day.  If you cancel outside of the legal timeframe allowed for cancelling, you will likely lose your Earnest Money and possibly end up being sued by the seller as well, unless the contract protects you against the seller suing you for damages.

Example:

Buyer has a contract to purchase a home.  Execution date of contract is 1/1 and they have until 1/11 (ten days) to "deliver the inspection report to the seller", per the home inspection addendum of this buyer's contract. YMMV

WARNING:  If you deliver the contract on day 4...you do not have another 6 days under the first timeframe.  Phase two begins when Phase one ends...so you just cut your timeframe by delivering it early. 

I would venture to say that this is the most often, misinterpreted area of the inspection contingency.  Almost every Inspection Contingency says;

1.  Buyer has x days to deliver report (let's say 10)

2.  Seller has x days to respond to buyer's request (let's say 3)

3.  Buyer has x days to respond to seller's response (let's say 3)

If you deliver the report and your requests of the seller on day 4 of Phase 1.,  then the seller has 3 days from that day to respond.  The original 10 day period is moot, finit, caput, over!

Now, let's say in Phase 1. on day 4, the buyer askes the seller to address 10 items.  The seller delivers their response to the buyer within the 3 days allowed.  The seller says "I will fix item 3 and item 8 before closing".

Ball is now in buyer's court.  No, the seller does not HAVE to fix all 10 items you asked him to address.  Yes, the seller DID address all 10 in his response.  He said yes to two of them, and he said no to the other 8 by omitting them from his response.  No mention IS an answer...the answer is "no, I will not fix those". 

Now what do you do??  You want the house, but you want the seller to address more than two of the items.  You only have 3 days to act on this under Phase 3. regardless of how many days have transpired since the agreement was signed. Sometimes buyers want to add the days as 10+3+3 and think they have 16 days to be done with this.  Not the case!  Each timeframe stands alone and expires the minute someone acts within it...and you move to the next phase.

Now, you are in Phase 3 and you are not happy.  What do you do?

You have to be very, very specific about what exactly it is you want the seller to DO, and you have to be willing to walk if they do not give you that.  You can't just hand a laundry list of "stuff" over to the seller and leave it up to him to be a mind reader to figure out exactly what you really want.  Do you want $1,500 off the price?  Do you want him to fix #6 or you won't buy the house.  You tried the laundry list in Phase 1. and didnt' like the answer.  Now be very, very specific before your timeframe runs out in Phase 3. 

The buyer is the one for whom time is "of the essence", not the seller.  Most inspection contingencies require the buyer to proceed, regardless of what the seller does or doesn't do, unless the buyer cancels, in writing, within the timeframes allowed.  The seller can just go to Bermuda for two weeks and hope you let these timeframes pass...then you lose your Earnest Money at the very least, even if you walk.

Sadly, the seller usually doesn't have to do a thing.  But if you are both reasonable and very specific in your request as in "I will buy the house "as is" if the price is reduced from $514,000 to $512,000, then you will most likely be successful...even if it takes all three rounds to get there. 

The only way to be absolutely sure that you will "win" is to be "willing to walk" if you don't get what you want.  You can't bluff on that.  If you really, really want the house...don't cancel that contract to win a battle and lose the war, unless you really liked that game of "chicken" when you were a kid.  I was not a big fan of that game, myself. 

Remember, you are buying your future home, you are not playing a game of win/lose or win/win  Don't forget the real objective.  Buying a place you would like to call "home".