Am I Out of Line? Negotiating After Inspection

88 Replies

I have a house under contract here in Omaha. I agreed to buy the house as-is with no repairs to be done by the seller. I had a home inspection and discovered a couple of repairs that will cost me a few grand. I had based my purchase price on the fact that I knew I was going to have to do some repairs and I had budgeted to complete those things I had personally identified. These repairs go beyond my initial planning and budget and my offer would have been different had I known about them.

After the inspection I told my realtor that I wanted to negotiate based on this new information. He immediately starts telling me that I agreed to buy the house as-is with no repairs, therefore it would be a bad idea to go back and ask for anything. I remind him that I am not asking for repairs, only a credit and that I will do any repairs myself.

Am I in the wrong for wanting to negotiate after the inspection? Why would my realtor believe that this was somehow unethical? I am looking out for my own best interests here and if I can't get the numbers to work with these new costs, I will back out completely. 

Depends on your contract. When we sell as/is here, we typically, though not always, remove the clause that allows the buyer to negotiate. If your contract has a clause that still allows negotiation, then have at it. 

@Anthony Gayden  You agreed to the 'as-is' when you signed the contract.  You can try to ask for more money back, but they are unlikely to go for it.  Most of the time when it is sold as-is the property has problems.  Was the inspection a condition?  If not, you are going to lose your deposit.

If the home is a good deal, is it worth losing it over a few thousand dollars?  Part of that depends on the price of the house.  The other thing is can you readjust your budget and do some things now and some things later.

Promotion
BiggerPockets
The one-stop-shop for REI
Find Local Home Improvement Pros!
Check out our network of trusted, local contractors for all of your home improvement projects.
Find a Contractor

I was in a similar situation when I purchased my first property. Don't expect any "credits" from the seller if it's being sold as is. You agreed to the price when you signed the purchase agreement. If you pressure the seller there's a good chance they walk. 

Buying and selling real estate is game where both parties need to win. If you're unhappy about the inspection cancel the contract and get earnest money back. There's always another deal man! Good luck.  

@Anthony Gayden this is not uncommon or unethical. The point of an inspection is to give you a better idea about what your asking price should be as well as what you're getting yourself into. I wouldn't deduct the full price of repairs from your offer but you can definitely lower your initial offer.

I would write a letter explaining your reasoning like "After review of the inspection I have decided the make an offer in the amount of _____ due to ____, ____, and ____." If you've already signed a purchase contract I would make sure you know what it states in terms of recouping your deposit. If you make an new offer, they decline, and you back out you could lose your deposit.

Originally posted by @Anthony Gayden :

 If you actually signed a contractual agreement stating that you would buy the house As-is without any additional inspection or clauses around it then YES, you are indeed out of line.

 However it doesn't stop you from trying though. The seller may be motivated to reduce the price. Please let us know how it turns out.

@Russell Brazil

I will take a closer look at the contract, however I do not remember anything stating that we would not be able to negotiate.

@Theresa Harris

I do have an inspection contingency in the contract. I agree that they are unlikely to go for it, however I do want to try anyway since the repairs throw my numbers off. 

The home is a good deal, but not a slam dunk. The offer is for approximately 80% of the ARV. I went in realizing that there were repairs totaling around $10,000 needed to the property. The additional repairs could add $5000-10,000 to that amount.

This is a rental and I do plan on holding it long term, however it throws off my numbers.

@Jaron Walling

I agree with you, both parties need to win, and if I feel like I am going to take a loss, I will back out.

@Aidan Mulligan

I was hoping that at least my own realtor would understand but he seems very reluctant to do any of this. 

@Anthony Gayden as others have said, a lot of this depends on the area and on the contract you are using. Here in the Chicago area, we are not supposed to negotiate when buying as is... with that being said I still do sometimes! I always tell clients, if you don't ask you won't receive. 

In my neck of the woods "as is" is absolutely as is. Once you sign the contract you bought it depending on the contract of course. 

I had a guy buying a duplex from me that needed work so it was priced accordingly.  He got hung up on a bedroom door that was a little out of square.  

After a week of trying to beat a dead horse I told my agent the matter is closed. Tell his agent we have other buyers and I'll be at the closing to either close the deal or pick up my earnest money check.  I don't play games but that's just me. 

@Anthony Gayden Wow. These posts are all over the place. There is a reason why there is an Inspection Contingency in contracts AND an AS/IS rep in the same document. One does not trump the other or hold more weight. For those of you claiming that the AS/IS means you take the property with all its faults, what do you do if you find out that the neighbor's driveway is entirely on your land? Do you get to renegotiate? Well, according the to 'AS/ISers', you should not be allowed to. Well, sorry folks, that's not how it works.

The Inspection Contingency gives you a window of opportunity to look behind the curtain and see if the seller's baby is as pretty as she says it is. If it isn't you have freedom to walk. If you walk, then the deal comes "out of contract" and the parties are essentially back in their pre-contract position - FREE TO RE-NEGOTIATE THE DEAL. 

There is nothing wrong with this provided that the parties entered into the agreement in good faith. Due to the fact that most inspection contingencies in contracts allow you to walk for any reason, proving bad faith is hard to do. The opposite is true though if you try to walk from a deal using the financing contingency when you have not even applied for a mortgage or engaged a lender. Courts have a harder time buying that excuse and you may be charged with breach.

Do not enter into contracts lightly. 

@Anthony Gayden it never hurts to ask. Even if you did agree to buy it as is, you were not aware of those specific problems. The seller may be motivated to give you credit because they don't want you to walk away from the deal and cause them to start the selling process all over again. You just need to decide if a few grand is worth walking away from the deal.

Agree with @Audrey Parzyk , never hurts to ask, the worst they say is no and you can walk if the additional repairs break the model and kill the deal. I recently did the same, lost the inspection $, but the bank actually returned our EM deposit... nicest thing a bank has ever done for me.

Since you have the inspection contingency clearly stated in the contract, if your agent won't write it up, ask his broker to assist you.  It should be as simple as providing the inspection report and stating in the contingency removal addendum that purchase price to be changed to x to reflect additional items 3, 10, and 12, or whatever, found in the inspection report.  If seller does not agree, you sign release and should get your deposit back.  Once seller receives inspection report, they should have to disclose it in the future if it's a material defect, so worth the attempt, at least, as seller should know the next offer will likely be lower, anyway, if they must disclose whatever major issues you found.  Our broker now makes us clarify in as-is sales that have inspection contingencies whether still negotiable or not, and specifically will not allow the use of "for informational purposes only" as it's caused too many problems.   

I suppose it depends on the market, judging by all of the responses saying it's in "bad faith." I don't know your market but in mine, there's nothing wrong with renegotiating the price (assuming the contract you signed allows for it, and allows a "get out of jail free" clause to back out, the standard contracts in PA do) or even backing out of the deal. You made an offer based on certian "knowns" and have since found additional "unkowns" that affect your numbers. If you can't make the numbers work based on the new information, then it is not a "win-win" and the seller shouldn't expect you to take a loss out of "curtesy." If the seller was so serious about implementing an iron-clad "as-is" sale then they should not have allowed the inspection period in the first place. What is the point of paying an inspector and wasting everyone's time if you cannot adjust based on the results? Like I said, may be a market thing, but it's common around here and definitely not out of line. When I have clients in a similar position, I advise them of the expectations and the risks associated with trying to walk or renegotiate based on the terms of their specific contract, but I would never "discourage" them from doing what's best for them, even if it means losing the sale. As a fiduciary, it is illegal, and it's my personal opinion that it is also unethical. 

@Charles Dobens - I think that the reason the responses were all over the place is that there was some confusion over whether or not the OP had an inspection contingency in his contract.  I have read here on BP that there are offers made with no inspection contingency - usually in a very competitive market where it is necessary to make the offer stand out from the crowd.  Since the OP clarified that he did have an inspection contingency the argument now seems moot.

I can think of a couple of ways that a financing contingency could be used to back out of a contract due to physical problems with the property. First, if the financing sought is FHA or VA an inspection is necessary to procure the loan. A serious defect or even a generally poor condition can cause the funding to be withheld. Second, a bank or mortgage company could decline to provide a loan if the property has a defect that would significantly lower the value below their underwriting standards.

How would the lender discover such a defect with no inspection?  The prospective buyer that wants to escape the contract could tell them.

Finally, in WI the seller has to fill out a property condition report as part of the listing contract.  If the seller refuses to negotiate on a problem that was not disclosed I would not hesitate to remind them that now that they have been informed it is encumbant upon them to pass the information to any future prospective buyers or be subject to litigation.  That reminder may coax them into further negotiation.

It sounds like this is an "area" thing.  To say a property is being sold "as is", in my area, is a standard phrase that is in pretty much every PA.  Usually there is also an inspection contingency.  And it's perfectly reasonable, even expected, that the buyer will come back with either repairs they want completed and/or a lowering of the purchase price.

With that said, the advice I've been given by my agent is to make sure to factor into my initial purchase price, any repair costs I can see from the showing.  Renegotiating after the inspection should be for things that come up during that process. 

Assuming an inspection contingency is in the PA, if the buyer and seller can't agree to terms after the inspection, then the EM is returned.

As a buyer, I've had it happen all three ways.  I'm still happy with the price after the inspection and don't counter.  I've successfully renegotiated the purchase price after the inspection (I've never asked for the actual repairs to be done).  And I've also walked away when the seller and I couldn't come to a new agreement.

In fact, that actually happened earlier this year for two duplexes (same seller). I knew there was a lot of deferred maintenance and accounted for about $60K in rehab in my initial purchase price. But because tenants were living in all the units, I assumed the major systems were at least in okay shape. They were not. Including one of the properties that was years past when it should have had a new roof. After my inspections, I substantially reduced my purchase price. I even wrote a letter that outlined the specific items and their repair costs...none of which I could have known from the showings...that was prompting the price reduction request. The seller didn't even counter-offer. We went out of contract and my EMD was returned and the properties were re-listed at $15K less than they were before.

Fast forward 5 weeks later.  The asking price for both properties drastically dropped.  Almost to where my second offers had been.  I put my second offers in again and we went back under contract.  I still had an inspection contingency.  But passed along that I wasn't bringing my inspector back out again.  I just wanted to pop back into the properties and make sure they were basically the same as they had been for my inspections.  Assuming that was true (it was), I had no intention of asking for a lower price (I didn't).  And I closed on those duplexes two months ago. 

@Anthony Gayden there are two ways that an "as is" property can be put under contract, with and without inspection contingency. If it is without a contingency, then you have no legal rights out of the contract. If there is an inspection contingency, usually the understanding is the seller will not make repairs or take concessions. (Ultimately repairs and concessions are the same thing). That means in this case the inspection contingency is mainly a "get out of deal" clause. 

Of course you can offer a new price. There is nothing wrong with that, but the seller has already stated it is "as is", so your request could be met with frustration and rejection. 

You have nothing to lose if you are ready to walk anyways. 

As far as if it is unethical, I would argue by the seller accepting your offer with inspection contingency, they opened the door to this. 

I see a lot of "it never hurts to ask" comments here.  It can hurt to ask.  If you send back an addendum with a price reduction you have submitted a counteroffer voiding the original contract.  You no longer are in contract to purchase the property.  If you make the seller mad they can simply go to the next buyer who may have already submitted a backup offer...  This is important to know in competitive markets.  We are in contract to sell a house now, I have 3 backup offers.  My willingness to negotiate after inspection was very low.

That being said, if you have an inspection contingency you can submit a counteroffer with a price adjustment.  

 A lot of people think that "as-is" is the end all phrase and that when a buyer agrees to it they are committed no matter what.  Well as the attorney mentioned above that isn't how it works.  Read your contract and you can see how it works in your state and what is agreed to, all your answers are there in the contract.

As Charles mentioned what if a survey finds out someone's driveway runs across your property?  The whole point of an inspection contingency is to give you the out that you are looking for in this case and that's why the contract was written that way.  If your agent thinks it is unethical to do what's right for you then I suggest finding a new agent that represents your best interests and can read and write contracts properly.

You are most certainly not out of line looking out for your own best interests.  However, as just mentioned above it depends on the market you're in and whether or not it's worth risking the entire deal.  If the deal doesn't work for you without the reduction then you already have your answer...

An As Is contract simply states that the seller is not agreeing Upfront to do any repairs, as in a certain amount of repairs to meet fha/conventional required property conditions.  It has Nothing to do with the right to inspect, or renegotiate afterward.

Either you are confused about the “counter offer” ramifications, or you have some very strange laws there.

While it is true that a counter offer invalidates the enforceability of an Offer.....a request for a price reduction, or “counter offer” as you want to call it, does Not invalidate an executed contract.  I have heard this misconception from agents here, and it simply does not apply to Executed Contracts.  Only a mutual signed agreement by both parties, or a breach by one party, can invalidate an executed contract.

I agree that it depends on your contract, if it allows you to back out after inspection. If it does, then all is fair game, negotiate away. BTW, your purchasing agent only gets paid - by the seller - if you close the deal. He or she is more invested in closing the deal, than in representing your interests. This is a conflict of interest, but built into the system. Good luck!