First Investment Property - Inspection Period

1 Reply

I'm under contract on a my first property. It's in Tampa, FL and I'm planning on using as a AirBnB short term rental. Very excited!

However, preliminary inspection feedback is just coming in (full reports working). There are quite a few issues, but as a 81 year old house, that's to be expected. I'm still in the inspection period. How would you handle a price negotiation based on the following issues? I've never done a negotiation on a home purchase before.

- Roof and some inside remodeling was not permitted

- Some cracks in drywall and flooring/wall joints

- Lead based paint on front of home

- Electrical wiring hookup outside of home is fire hazard and should be moved (so lengthen metal pole) - Not sure what the metal pole note means, but I was told moving electrical hookup is pricey.

- Some termite damage in main house (will need tenting and underground treatment) and shed will eventually need to be replaced due to damage.

- Electrical panel not attached to home, so failed 4-point inspection

As I will be sprucing this place up for Airbnb, it will also need cosmetic work like landscaping and some painting. 

Should I wait to get the full inspection reports, and then get quotes for all essential fixes (electrical, termite, drywall repairs) and then negotiate the price down based on that total? I.e. $10K of essential work, bring price down by $10K? Any advice is appreciated!

@Neil G.

HI Neil! So those are some bigger ticket items on the docket it seems maybe. I would absolutely wait until  the full report is in- if you don't and you go back with a purchase price reduction counter offer of to little (in terms of asking) and another bigger item comes along, you're only the seller's acceptance away from being locked into the deal. 

I'm assuming you're not using an agent on this transaction or they would be advising you on how to proceed, which his fine, only pointing out as you said this was your first investment property.

Now the waiting to get estimates on these expected repairs - you need to keep in mind how many days you have in your contract to reply/as it pertains to predetermined closing date (otherwise you've essentially accepted the inspection as you've not offered a counter). 

I'm not positive about FL, but in IN you have to give the seller the opportunity to either offer to adjust the price or make suitable repairs (this could (should likely)  cause a subsequent inspection post repair period)

Again, verify for FL, but under IN law (when you go to read your full inspection keep in mind) 

 Under Indiana law, "Defect" means a condition that would have a significant adverse effect on the value of the Property, that would significantly impair the health or safety of future occupants of the property, or that if not repaired, removed, or replaced would significantly shorten or adversely affect the expected normal life of the premises.

So to ask for a purchase price reduction it would need to meet that qualification most likely. 

Now with all of that said- if the full report comes back and it seems like the repairs are going to be far too numerous (and costly- you're going to have to have the capital to finance these repairs even if purchase price point is lower (well, assuming there's a loan involved to purchase). 

If you don't have the capital to make these repairs, even at the right (or better price point) it would be time to "ask for the moon" in your response to inspection (your exit option if it's just too much). This would be best submitted with another inspection clause so if the seller DOES do the repairs, you can sign off on them as up to your standards. 

Last bit of advice, in terms of 'legal writing' in your response to inspection addendum (where you list out all the repairs to be made {if you don't go the lesser purchase price point}), make sure that it's clear you're asking for all work to be professionally done. 

But yes, in a nutshell wait for full report = ) 

Hope that helps!