Post Inspection Negotiations.

11 Replies

Hey BP community!

First let me say that you guys/gals have been a humongous resource in helping me through my RE journey. I appreciate the feedback I have received on the few posts I have made concerning this specific deal.

On to the topic at hand. After fully reviewing all the home inspections I ordered I have decided to consult with a GC about my next move. I'm under contract on my first deal. It is a 4-plex. Excluding cosmetic issues, there are definitely a few somewhat costly things that will need to be fixed most of which are safety issues but some other things too like small leaks, exposed wiring, broken windows etc. Taking into account that I live in a buyer's market, I wouldn't think the seller would want the hassle of starting this process over again with another buyer. Plus I know for a fact that he's tired of the headache of property management which tells me he's motivated. On the other hand, he is an experienced RE investor so I know this isn't his first rodeo.  

All things considered, I think I can get away with asking for something fairly decent in the post inspection negotiations. I would like to get aggressive and am considering asking for a credit based on what info I get back from the GC.  I know it's asking a LOT but is there anyway someone could walk me through how to analyze the reports and come up with what I should ask for? I can DM you the reports upon request.

Thanks!

Hi @Jeremy Swanson ,

My advice is to not bring up anything that any competent person would have seen at walk through. For instance if a door is off a hinge, the roof is old or a broken stair. These are things that most people selling figure you have already built into your price. Now things that a "layperson" would not know... The exhaust for the hot water heater is 3 inch instead of 4 inch pipe, the electrical panel is a model that has a recall on it, There is slight seepage at the galvanized water main coming into the basement etc. Those items in my experience have owners who will at least stop and be a little more objective to the requests.

If you should have seen it, they almost always feel like you are trying to be slick. If they are things they didn't even know about themselves they are usually more receptive to at least hear out your request. 

Good Luck!

I love the negotiating process. I believe this is where the magic happens and where good deals are made. You are on the right track, have the GC write up a very detailed estimate for the repairs needed. Pay him for his time, and provide that to the seller. You should be doing your own research (along with your realtor if you have one) on comps. Basically, as I look at it, I want to subtract the repair costs from the market value, and then get the house even cheaper than that so I can get my money back and some.

@Jeremy Swanson Doesn't matter if it's a buyer or seller's market, as your title indicates, post inspection repairs are always a place for negotiation.

I always ask for everything basically, "when will the repair list be completed?" It's not unusual for everything on the list to be completed.

If you get push-back from the seller, negotiate what you want. Sometimes they are willing to take less on our offer if we say we'll get all the repairs done ourselves. Many sellers just don't want to be bothered with the hassle and possible delay of doing all the repairs. Plus, as in any property repair, taking care of one problem often opens up other problems. 

Determine what you want and go for it. This seller doesn't want to lose you.

Originally posted by @Mike Cumbie :

Hi @Jeremy Swanson,

My advice is to not bring up anything that any competent person would have seen at walk through. For instance if a door is off a hinge, the roof is old or a broken stair. These are things that most people selling figure you have already built into your price. Now things that a "layperson" would not know... The exhaust for the hot water heater is 3 inch instead of 4 inch pipe, the electrical panel is a model that has a recall on it, There is slight seepage at the galvanized water main coming into the basement etc. Those items in my experience have owners who will at least stop and be a little more objective to the requests.

That is a great point. Unfortunate for me, this is my first deal and only second home that I have bought so I am still learning how to catch things during the walk through. Thanks Mike I really appreciate your advice.

Originally posted by @Brian Ellis :

I love the negotiating process. I believe this is where the magic happens and where good deals are made. You are on the right track, have the GC write up a very detailed estimate for the repairs needed. Pay him for his time, and provide that to the seller. You should be doing your own research (along with your realtor if you have one) on comps. Basically, as I look at it, I want to subtract the repair costs from the market value, and then get the house even cheaper than that so I can get my money back and some.

Dude, I freaken LOVE the negotiating process as well. It's ridiculously satisfying. I think I may be becoming addicted to it.

So today I am in the process of getting a GC. I don't know why but for some reason I thought I would be able to get a quote straight from the inspection report instead of having to have the guy come out in person. wishful thinking I suppose. Thanks for your advice brother.

@Jeremy Swanson an inspector wont write up an estimate of cost for repairs, its not what they are there for, they just point out the obvious then its up to you to decide. Sometimes they miss a lot too. 

What I would do is call around and get estimates for the work that needs to be done, then provide that along with the inspection report to the seller. But act quickly. And remember, you and the seller will find a middle ground. Very rarely will your bottom number be accepted, there will be a middle ground. 

@Jeremy Swanson

Jeremy, I think what you're asking for, a remote cost estimate, is dangerous for you. When it comes down to brass tacks, it really doesn't matter how good your inspector's pictures are, or how thorough the reports. To get an honest idea of the cost of what needs to be done, you'll need good eyes on the problems. And your seller has been around the block and knows the score. You try to float any sort of inflated BS numbers past him about his own property, even by accident, and he'll get his back up. Anyone (no matter how good) looking at those pictures and reports and giving you an opinion has a much higher chance of giving you BS numbers than someone who puts good, knowledgeable eyes on the problems.

By all means, if you can manage it, find a local GC and pay him to do a walk-through with you, even using FaceTime. or something like that plus the reports. IMO, the tech's not there yet but it's getting better every year.

Disclaimer: I am a local 'Burgh investor and registered home improvement contractor specializing in renovating and renovating SFR and small multifamily from 50-100 years in age here in a sharply limited target area which includes an entire district included in the National Register of Historic Places. I have never invested in a long-distance property. I freely admit I have deep trust issues that have been heavily reinforced by the conditions I work under and the kinds of properties I've invested in.

Originally posted by @Karen Rittenhouse :

@Jeremy Swanson Doesn't matter if it's a buyer or seller's market, as your title indicates, post inspection repairs are always a place for negotiation.

I always ask for everything basically, "when will the repair list be completed?" It's not unusual for everything on the list to be completed.

If you get push-back from the seller, negotiate what you want. Sometimes they are willing to take less on our offer if we say we'll get all the repairs done ourselves. Many sellers just don't want to be bothered with the hassle and possible delay of doing all the repairs. Plus, as in any property repair, taking care of one problem often opens up other problems. 

Determine what you want and go for it. This seller doesn't want to lose you.

 I was thinking the same thing as Karen! If you take the actionable items in return for a reduced price they might be more willing to accept the offer.

Get some counsel on repairs that really matter to get renters in there, find your bottom line price based on the best estimates you can get, ask what you know is going to be needed to address what you have decided must be addressed for you to buy, and fairly so, and his answer will dictate whether you stay or move on to the next opportunity. It's the numbers, numbers, numbers... or you move on.