Am I Out of Line? Negotiating After Inspection
Anthony GaydenPro Member
Rental Property Investor · Omaha, NE · Member since 2014 · 2k+ posts · 3k+ votesI 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.
@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.
@Brandon Cline there are definitely times when you have to offer site unseen like you mentioned. In that case I think you can drive by the property to assess the outside best you can (Roof, HVAC, windows, paint, landscaping) and make an educated guess on interior repairs to give the best offer possible. Of course the offer full price and work it back technique is employed by many, and usually results in the first offer falling out.
I can't complain though, I often make my best contacts with agents who have been caught up in accepting the highest (But not best) offer 2, 3, 4 times and then finally coming down to my "lowball" offer that actually gets closed. They agree with me when I say "Next time just bring it directly to me and avoid this whole fiasco"
In a hot market if an agent accepts a 10 day inspection period with low EMD on a fixer upper single family house they are setting themselves up for a walk back
@Anthony Gayden
I was recently in this exact situation. Under contract on a duplex for 118k, inspector found around 10-12k worth of repairs needed (price reflects hiring contractors for all of the repairs). I told them I wanted 12k credit at closing and was prepared to walk, they came back with 10k!! All in all I only had to bring 5k to closing and only a couple grand of the repairs need done ASAP, the rest can wait. I wouldn’t hesitate to try to negotiate, most sellers don’t want to start over with a new buyer unless your market is on fire. My .02
I'm very up front with my clients when I'm making an offer. If I'm making an preliminary offer based on ARV alone, I let them know that this offer is pending my inspection and that if there are repairs needed the price will need to be renegotiated based on those repairs, since I'm buying as is. As-is means that THEY don't have to do the repairs, not that I make an offer and it's final regardless of them. They still need to be taken into account.
We're in contract for a property that has two duplexes on it. The seller wouldn't allow anyone to view the inside of the units until there was an accepted offer, yet has stated on the listing "being sold as is". It puts a potential buyer in a bit of a predicament because naturally we'd like to assess the condition of the property and base a well reasoned offer off of that. In this case it wasn't feasible and so we offered full asking in order to get it under contract. I can see why @Dustin P. said this type of thing drives him crazy, it would bother me too. Unfortunately, without being able to see the property (per seller's request) they opened themselves up to something like this.
Of course the listing agent has reaffirmed to our agent that they're selling this property as is...in an effort to let us know they probably won't want to renegotiate if we find anything during inspection. Our agent let their realtor know that we are aware that the roofs need to be replaced since they can be seen, but as far as ANY other condition or defect it's impossible for us to guarantee we will not ask for any consideration before closing.
Like what @Trevor Emmett referred to in Oregon as far as the meaning of "as is", I believe it's the same, if not almost the same, here in California. We'll have our inspections next week and if something is discovered that significantly changes what we view the property to be worth, then we'll absolutely ask for some consideration. The sellers will then have to decide what they want to do. I also don't believe asking for the consideration is one sided. If we come to terms with a price reduction, it may be in the sellers' best interest too...now they don't have to relist, disclose what was found, hope for a better offer (including the subsequent reduction), risk a softening market, etc. I will say that if we get into each unit and there's some chipped paint, stained carpet, or missing cabinet hardware we won't be petty and ask for a price reduction. I feel if you're reasonable with your request and present it in a polite manner, then there is no harm in asking for some consideration if you feel it's warranted..."as is" or not.
In wholesaling, when a potential seller refuses to give me a key or allow me to show it without them being there, I drop them like they're hot. Sounds to me like there's something the seller wants to hide.
I think this is why contingencies in contracts are important. I'm not 1000% sure that it would save you, in the long-run, but at least if you had a "offer contingent upon inspection", or something similar, you could point that part of the contract out to the seller.
@DJ M. They very well might tell us to pound sand, but we can still ask. And if they do, we need to decide if the additional costs we find are still worth continuing with the purchase.
@Scott Johnson Totally agree in most cases. The only thing with this particular property is the 4 units are all rentals and my assumption was the seller didn't want to either 1, let the tenants know he was selling or 2, want them to be disturbed every time a potential buyer wanted to come see the property. I can see how it would be a pain to try and coordinate 4 walk-throughs for every "buyer" who ends up not being serious. I bet that would get old fast for all parties involved. We'll see next week how it shakes out.
@DJ M. They very well might tell us to pound sand, but we can still ask. And if they do, we need to decide if the additional costs we find are still worth continuing with the purchase.
@Scott Johnson Totally agree in most cases. The only thing with this particular property is the 4 units are all rentals and my assumption was the seller didn't want to either 1, let the tenants know he was selling or 2, want them to be disturbed every time a potential buyer wanted to come see the property. I can see how it would be a pain to try and coordinate 4 walk-throughs for every "buyer" who ends up not being serious. I bet that would get old fast for all parties involved. We'll see next week how it shakes out.
Very cool! Make sure to keep us up to date! I just got my first multiple unit deal under contract, but the sellers were able to get us into the properties quickly. Not sure exactly what they told their residents :P
I think where things get tricky is in your decision to accept sold as is; however, I don't think this is out of line at all. In fact, a big part of the due diligence phase is to uncover things like this. Now you have to try to figure out a way to present a clear communication around why you'd like to proceed with additional negotiations on price. And as Wayne carefully noted in his response prior to mine, that As-Is agreement has nothing to do with the right to inspect or renegotiate afterward. Again, figure out which local area laws are binding as far as that agreement and think through inspection contingency. I'll defer to a few others on this but interested to learn how things turn out! @Anthony Gayden
@Megan Hirlehey Great points. PA also has “Sellers Assist” for closing if I’m not mistaken as well?
As a seller, if I sell something as is, there are only two possible outcomes. 1) They walk and I keep a meaningful amount of earnest money or 2) They buy with zero further negotiations. Call me old fashioned, but it's pretty black and white to me. Thats the entire point of making such an offer, the buyer can leverage price by shifting risk to themself. What other definition of "As is" is there?
FINALLY closed on the multi unit I referred to in my previous post. Just wanted to revisit some of the things we were able to negotiate even after the property was being sold "as is". Again, it seems CA is different than some other states in regards to the technicality of this wording so if this doesn't exactly jive with the way it's handled in your state, just keep that in mind.
A little recap: Sellers wouldn't let us view the inside of the 4 units until there was an accepted offer. Listing was being sold as is. We knew until we saw the inside of the units it would be difficult to make an informed decision as to what we thought the property was worth. To that end, we figured that there would have to be some negotiations after our home inspection and visual inspection if anything substantial came up.
So we knew that the units needed a new roof and that was factored into our offer. What we didn't know is that the existing roofing material was an abestos based clay type shingle (sellers didn't either). We had the material tested and it came back positive with up to 30% asbestos. Because of this most roofing companies will not touch that project...or at least the removal. We had to get bids from abatement companies for the removal and they were substantial. Again, remember this is CA and it seems everything is super expensive. Our bids, just for the removal, were anywhere between $22K and $36K with most abatement companies asking for the units to be vacant for a week while they do the work. So not only would we have a $22K expense added to the new roof, we'd have to place the tenants somewhere else for a week.
The reason I bring this up is because if we would of just bought the units "As is" and had no negotiating power after our offer was accepted then we would be out a ton more money than was expected. That or we lose our earnest money if we walked. Our initial accepted offer was $291k, we ended up paying $245k. We negotiated down the cost of the abatement company removing the roof, placing tenants, and because we figured the sellers wouldn't want to have to disclose the fact the roof contains asbestos if we were to walk, we asked for much more and got it. So for those of you guys out there asking if it's ok to renegotiate after making an offer on a listing being sold "as is", I would say absolutely. Every state seems to be different and each purchase has it's own nuance, but I'd for sure do it.
One other thing I really had driven home on this purchase is it's ok to ask for the moon. I've always been a little hesitant to ask for too much because I didn't want to blow a deal and upset the sellers. If you catch someone on the right day you never know how much they're willing to negotiate, but you have to ask.