Renegotiate purchase price after inspection?

Boston, MA · Member since 2016 · 60 posts · 15 votes

Hi everyone,

I just got an inspection report on a rental property that I am buying and have an accepted offer on. It came back with a lot of minor fix ups that need to be done. I didn't expect this many things to fix up so I wanted to ask... is it common to renegotiate the purchase price after doing an inspection? I'm thinking about just taking a grand off just so I have some more funds to get the repairs done. Thoughts appreciated! Thanks

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David Faulkner

Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes

Never have the seller perform the repairs in escrow. What incentive would they have to spend the money to do a halfway decent job? Then you'd have to reinspect, etc. If you are going to renegotiate, it is better to get a discount on the sale price in lieu of repairs and complete the repairs after COE IMO.

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Jeff B.
Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
9y
could just ask for all repairs by seller prior to COE
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Emily Lopez
Real Estate Broker · Rock Springs, WY · Member since 2015 · 57 posts · 43 votes
9y
Absolutely common, as long as you are within your inspection objection deadline. You can either ask to re-negotiate price or to have them repair some of the items. You may also walk away at this point if too much came up and you can't come to agree on new terms.
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Kevin Hunter
Rental Property Investor · Carlisle, PA · Member since 2013 · 1k+ posts · 543 votes
9y
@Darsh Patel, this is absolutely common. It is the reason you have an inspection contingency in the first place. If you find something that doesn't pass the inspection, you have the right to negotiate. You can have them fix it all or renegotiate the price based on the fixes. If you are leary of having them fix the stuff, require them to pay for a re-inspection from an inspector of your choosing.
Good luck!
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Darsh PatelPro Member
OP
Boston, MA · Member since 2016 · 60 posts · 15 votes
9y
Thank you everyone for the quick replies! I needed the reassurance :)
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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
9y
You need to weigh too what is a common thing that will be found in every house versus an unexpected defect. You also need to weigh how hot or cold the market is. In a hot market, a seller is likely to deny any request for repairs or credits.
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David Faulkner
Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
9y
Never have the seller perform the repairs in escrow. What incentive would they have to spend the money to do a halfway decent job? Then you'd have to reinspect, etc. If you are going to renegotiate, it is better to get a discount on the sale price in lieu of repairs and complete the repairs after COE IMO.
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Scott Raley
Real Estate Agent · San Jose, CA · Member since 2015 · 84 posts · 50 votes
9y
Focus on the most important or safety related items that are recommended to be fixed or replaced on the inspection report. Take time to evaluate what's important to you on that report that gets fixed and what is the cost ? Submit the inspection report, along with a written estimate of repairs from a licensed GC or subcontractors. This may cost you a few $$$ but it adds credibility to your position. You could also submit at the same time, via a contract addendum, a written request for a price reduction. If your in a strong position, maybe you ask for the full cost of repairs. In this tactic you go "all in" and hope the seller blinks first and accepts without a counter. But, expect to have to negotiate on the amount of the price reduction. I also find it advantageous if you tie in full contingency removal within 24 hours of acceptance, all the terms on the addendum, creating a win-win at some level for both buyer and seller. Remember, try not to take the contract process personally. Stay level headed, make sure you have a talented agent who is working hard to serve your best interests, and try and buy or sell some property in a timely but unforced manner. Better to make no deal than a bad deal !
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Patrisha Leybovich
Real Estate Agent · Chandler, AZ · Member since 2016 · 53 posts · 34 votes
9y
Not only is it common, but its expected in most cases. My favorite approach is to list everything I want repaired, and then offer an alternative cash discount in lieu of repairs. I usually get close to what I want with this approach. This is written right on the BINSR.
Good luck!
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Arnie Guida
Residential Landlord · Greenfield, WI · Member since 2013 · 299 posts · 126 votes
9y
Ahhh. The "Home Inspection" racket, game, scam...
Or, "How to tie up a seller's property from other buyers. then get them to lower the price".
It's nothing but a devious, deceitful tool for buyers.
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Michael Noto
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
9y
@Darsh Patel In my experience as an agent here in CT, it is easier to just ask for a closing cost/prepaid credit if you do not mind coordinating the work to be done once you own the house.
There are two main reasons for this:
1.) From a logisitics standpoint it is easy to write up as an addendum to the contract, should just be a 1 line addendum that reads "seller will pay $1000 towards buyers closing costs and prepaids." This is much easier to execute than tearing up the contract and writing a new one, that can get a little messy.
2.) I see a lot of value in making sure the repairs are done correctly. Who knows who the seller will hire to do the repairs. Yes, you will get receipts that the work was done, etc, but it is hard to find quality contractors to do "minor fix ups" because their time is better spent making more money elsewhere.
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Will BarnardPro Member
Moderator
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
9y
Originally posted by @Arnie Guida:

Ahhh. The "Home Inspection" racket, game, scam...
Or, "How to tie up a seller's property from other buyers. then get them to lower the price".
It's nothing but a devious, deceitful tool for buyers.
While I agree this is a common ploy by many, it is not to say that is what is going on here and thus, this post is a bit unfair.
That said, retrading the property too many times and for things that should have been identified prior to a full inspection (unless offer was made site unseen) is not a good idea or a good business practice. In the residential field, you can get away with this as you likely will never deal with this agent again but agents do talk and retracing often will make a bad name for you. Without knowing the full details of how your offer and initial walk through went, I can not say if your desire to renegotiate is appropriate or not, however, you are not asking for a lot here, on the seller's side, they may or may not be motivated or willing to retrace the deal. You and only you can decide this.
For future reference, make sure you complete a thorough walk through before settling on a price and only renegotiate on "hidden" items that you could not possibly known about. For example, if mold was determined behind walls, electrical or HVAC problems, foundation issues, termite issues, etc are all acceptable items to renegotiate if they pop up on official professional inspections. To attempt to retrade because of minor misc items that you should have expected based on age and condition of home is not acceptable.
I have been on the selling side where buyers used a home inspection and asked for each and every single item on the list, minor or otherwise. This simply pissed me off and would any seller and I told the buyers agent to have their client take a hike or be reasonable, after all, it is not a brand new build home.
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Joe SplitrockPro Member
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Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
9y
@Darsh Patel I always ask for seller concession and it has always exceeded the cost of my inspection. I just make a list of all the issues and assign a dollar amount to each. I only ask for a portion of what it would take to repair the items, so my realtor can present it as reasonable. I would be careful on seller repair because in my experience, they either do a crappy job or don't complete all the items by closing.
The seller has less negotiating power at this point, because after being made aware of issues, they need to either repair or disclose, should they not close the deal with you. My concessions have ranged from 1% up to 10% of selling price.
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Shawn AckermanPro Member
Real Estate Entrepreneur · Mid West, East Coast · Member since 2015 · 3k+ posts · 1k+ votes
9y
Darsh Patel is the purchase "AS IS" or does seller has right to cure? That aside you can certainly re-negotiate the contact as you have the right o walk away from he deal if it was a contingency in the contract. Best of luck o you.
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Joe SplitrockPro Member
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Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
9y
Originally posted by @Arnie Guida:

Ahhh. The "Home Inspection" racket, game, scam...
Or, "How to tie up a seller's property from other buyers. then get them to lower the price".
It's nothing but a devious, deceitful tool for buyers.
That is a very blanket claim you are making. I have had serious problems revealed during inspection. Most every sale in my city has some concessions during inspection, so it is very common - at least in my part of the country. I have seen some cases where the seller had tried to cover up problems, so sellers can be deceitful too.
It sounds like you have been burned. My suggestion is to put "AS IS, no seller concessions will be made after inspection" in your next listing. That will scare off the scammers, but will also attract lower price offers.
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Arnie Guida
Residential Landlord · Greenfield, WI · Member since 2013 · 299 posts · 126 votes
9y
No, I haven't been burned.
I hadn't bought a property in years, and bought a 4plex in Sep of '14.
The realtor seemed complicit in this scam..."oh, I've got a good guy for the home inspection"...implying he'd find plenty wrong to get the price down...call me cynical. I thought it was unfair to the buyer, and just seemed like another industry trying to get another slice of the real estate pie.
Home inspector? Do you know how little it takes to get that designation? And do you really think that guy is going to know more than an HVAC guy who does it for a living? An electrician who does it for a living? A plumber who does it for a living? Etc, etc, etc...
Home inspector...that's funny...
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Jim Shepard
Investor · Edwardsville, IL · Member since 2015 · 432 posts · 481 votes
9y
Inspection concessions are very common, if not normal in our area. I try to be reasonable when going back to sellers. I just closed on a house in the end of January. I didn't list all of the petty items or items I knew about when I made the offer on the house. It came down to 3 items. Mold in the crawl space ($1200), no expansion tank on newly installed water heater ($300) & bad electrical box ($1500). The box was a Federal Pacific breaker box that was recalled due to being a fire hazard (look for orange breakers). I wasn't aware of any of these items until my inspector pointed them out. I went back to the seller and asked for half. I should also mention I thought the roof needed replaced at a cost of $4000 but should be good for another 10 years. That's why I thought it would be reasonable to split it instead of asking for all. The way I look at concession items is I'm not getting the house I bid on in the condition I thought it was in.
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Colleen F.Pro Member
Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
9y
People can ask for anything but this has gotten more and more common. It really should be for things you wouldn't couldn't have known. Your original offer should have considered the obvious and it is annoying when people don't do this. People may say I am not an inspector but you can see. For example if a house needs paint I would expect that to be consider in the original offer, a recalled breaker box no way you would know. The other justification to ask for credits is if it costs considerably more then expected for some reason. You should ask but it is about the unexpected and significant and put contractor prices on those fixes. Remember you want the credit so present the most reasonable argument to get it.
The thing I find interesting in my experience is the real estate commission was off the offer price not the paid price after credits. This makes the post inspection negotiation best for a real estate agent. They get their client in and in the end the offer may be no better then the next offer on the table and they get paid off the original offer.
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Malcolm Boston
Titusville, FL · Member since 2016 · 55 posts · 40 votes
9y
Absolutely. You are entitled to a contingency period to allow for inspection of the property. I withdrew an offer (painfully) after an inspection revealed extensive termite infestation in the roof structure.
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Eduardo Zepeda
Real Estate Broker · San Francisco, CA · Member since 2016 · 76 posts · 50 votes
9y
My client uses this strategy often. He usually asks for a price reduction notes by defects found during the inspection; defects that the seller would now have to disclose to another buyer anyway, so it affords you a pretty good amount of leverage.
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Account Closed
Johnson City, TN · Member since 2014 · 586 posts · 705 votes
9y
If a buyer finds a condition during inspection that is significant and not obvious upon initial inspection I will most certainly correct the situation. On the other hand, if they find a bunch of picky items that don't involve safety or the proper use of the house I will also agree to fix them. The difference is that I turn the table on them and up the price of the house!
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Alexander Zurn
Lender · PA · Member since 2016 · 214 posts · 140 votes
9y
@Darsh Patel to your immediate question, yes this is common. However, is 1K really what you want? If so, I'd suggest taking 2k off or 1.5k hoping to end at 1k off.
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Troy Fisher
Specialist · Kirkland, WA · Member since 2013 · 1k+ posts · 817 votes
9y
Originally posted by @Arnie Guida:

No, I haven't been burned.
I hadn't bought a property in years, and bought a 4plex in Sep of '14.
The realtor seemed complicit in this scam..."oh, I've got a good guy for the home inspection"...implying he'd find plenty wrong to get the price down...call me cynical. I thought it was unfair to the buyer, and just seemed like another industry trying to get another slice of the real estate pie.
Home inspector? Do you know how little it takes to get that designation? And do you really think that guy is going to know more than an HVAC guy who does it for a living? An electrician who does it for a living? A plumber who does it for a living? Etc, etc, etc...
Home inspector...that's funny...
Home inspector? Do you know how little it takes to get that designation?
It depends on your state what the requirements are. But I do know it takes more to become an Inspector than it does an agent, or an investor.
And do you really think that guy is going to know more than an HVAC guy who does it for a living? That may be true, but when was the last time the HVAC guy was out there? And did he inspect the ductwork or just do some wiring?
An electrician who does it for a living?
Fortunately, code changes, practices become modernized, and not all electrical work is actually done by an electrician. A Stab-Lok panel installed in the 60's does not handle the electrical requirements of modern homes. And could be dangerous.
Most retail buyers will not purchase more than 3 or 4 homes in their lifetimes. Knowing what needs to be done to make a home safe is a great investment.
My inspections for Investors tends to focus on what the buyer will need to rehab to bring it up to proper living conditions for their goal, and to also bring sellers back down to earth about the condition of their home. The likelihood of the seller knowing that they have rusting galvanized pipes in their crawlspace is low. Or that their insulation hasn't been upgraded in 20 years and the kitchen vent is venting moisture into the attic causing higher electrical bills...
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Darsh PatelPro Member
OP
Boston, MA · Member since 2016 · 60 posts · 15 votes
9y
Just wanted to update everyone on this... I initially asked for $1500 and both me and the seller agreed on her giving $1250 for the repairs. Closing is happening March 1st! I went with what most of you had discussed (asking for repairs for things that you wouldn't know about from walking through the property). Specifically, I asked for the money to repair a few of the pipes running from the water heaters - they were too rusted and affecting water pressure.
Thanks for all of your help and a very interesting discussion!
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Vinay H.
Cambridge, MA · Member since 2017 · 268 posts · 247 votes
9y
Congrats. So now that you navigated the choppy waters of buying, how is the rental portion of it going?
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Darsh PatelPro Member
OP
Boston, MA · Member since 2016 · 60 posts · 15 votes
9y
Thanks! @Vinay H. Rental portion is going great so far. One of the other real estate agents that works at the same broker as my agent runs a small property management business so I hired her on to manage the property and she's been a huge help since it is an out of state rental. We've had to bring on 3 new tenants and had to do some minor repair work which she has managed and has kept me in the loop with consistent updates/videos.
Also, since this deal, I closed on a duplex in the same neighborhood and have an accepted offer on another duplex which will likely close next month. So, the portfolio is slowly growing. I've heard it a lot on the podcasts from @Brandon Turner "You just have to jump in" and that's what I've been doing and it's worked out great so far. I'm glad I took the real estate plunge.
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