Under contract inspection findings

13 Replies

Hi All,

I am in the option period for my first duplex(full rental property). The inspection report came back, and there are a ton of deficiencies( roof in bad shape, pier and beam findings suggesting movement of the property, improper electrical fittings, gas lines not to code, etc). I am just starting out, and wanted to know if it would be reasonable to negotiate a decrease in sales price given the inspection findings, without having a specific roofer, electrician and plumber come out and give actual quotes for the work that needs to be done. To schedule the other folks to come out to the property would put me beyond the current options period per the sales contract. Anyone have some experiences to share in this situation? Thanks!


Hi Patrick,

I'd recommend getting 3 quotes per project (3 roof estimates, 3 electrical estimates,...) If you and the seller don't agree that the price has to be lowered to match the actual value, simply walk away and the next potential buyer will ask for the same concessions.

Once the owner knows, they are are not allowed to dishonestly sell the property without first disclosing the issues.

At this moment, the owner is "stuck" with the property, not you, so he's more motivated to fix it up than you.

Go get 'em!

Hey Patrick- this is the perfect time to negotiate. The sellers know that those things will come up on every inspection, so relisting it will do them no good, they'll have to face the music if they want to sell. Honestly, I usually make a fairly aggressive offer up front just to get the property off of the market and negotiate later, solely based on the inspection findings, because there are always findings. Good luck!

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It is reasonable to negotiate based on the findings, however, if you have little to no experience on what the issues cost to fix, you could really be causing issues. If you reduce the price by $10k but it ends up costing you $30k to fix, you now have to come out of pocket that money. with there being no time to get Contractors in for estimates, it might be best to do one of 3 things.

1.) Back out and avoid the risks.

2.) Require the seller to fix the issues to a certain level/standard.

3.) Try your best to estimate the costs to fix each item (do your homework, ask here). Add a bit of fluff to the numbers and ask the seller to reduce the price by that much.

No guarantee these work, but I would be doing my homework and deciding how to move forward like #3.

Do you know a reliable contractor who could spitball some numbers for you? Then pad them by say 25% to be conservative and come in with two options - a new PP based on that number or a new closing date that gives you time to get solid bids.

@Nathan Platter Thanks, I am talking to my agent to see who can take a look!

@Corby Goade Thanks for the information. How  much, if any do you buffer your second offer after you get some prices?

Account Closed Thanks Brian! Great point, the last thing I want to run into is underestimating these. I'm scheduled to talk to the pros about some numbers soon, thanks a lot!

@Patrick Ng The first step should be to negotiate an extension of your due diligence period.  Use that time to get accurate cost estimates.

If the seller refuses, then you should either back out of the deal or over-estimate the cost of repairs and look for a price reduction of that amount.

Decide in haste, repent at leisure.

If this is your first rodeo , and you dont have much experience , I would consider walking unless this is a killer deal 

You could always get a NTE bid and then either offer to use that OR get more time to get additional bids.  Chances are NTE bid will be super high if a place will even give you one, but you might get lucky if you explain what's going on.

Walk away, properties come on the market each and every day. No sense in tying up your time and money on  something you don't feel comfortable with. 

With the issues you described it sounds like this may be a tough deal for a first timer unless you are getting the place at an absolute steal.

Something to consider: Will the rehab costs you are walking into drain your reserve funds? If so, I would walk.

Hi @Patrick Ng ,

I agree with most of what others have already said. Only thing I will add: Check the seller's disclosures if you have not already. If the seller disclosed to you upfront about the electrical, roof, gas lines, etc, then it will really not come off as "good faith" negotiations at this point, since you had the opportunity to build that stuff into your initial offer price. 

@Charlie MacPherson Thank you for the reply, trying to extend the option period

@Matthew Paul Thanks for the feedback, it'd be a killer deal at a certain price, which is a lot lower than asking.

@Matt K. Thanks for the feed back...can you clarify what a NTE bid is? Sorry...newbie not familiar with allt he lingo yet.

@Joseph Profaci Thanks for the advice, trying to stay disciplined. Have been analyzing deals for the past 50-60 days, and this is the only offer than has been accepted thus far. Hard to walk away, but definitely not harder than having to do a bad deal.

@Michael Noto Thanks for the feed back. At the price I am trying to renegotiate, should have enough reserve funds but it is significantly lower than the asking/offer price that was accepted, and I doubt the seller is going to take the offer.

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