The Home Buyer's Korner

Information presented should be used for educational purposes only.

September 13th, 2015

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THE GREATER MEMPHIS, TENNESSEE AREA

The Home Buyer’s Korner

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After The Home Inspection

Home Inspection

Get Pre-Approved for a Home Loan

First, off the top let me get this out. A home buyer that expects a used home to be delivered like it’s new construction would do better working with a builder and for some home buyers it’s the better choice. Existing homes have issues, some are minor and some major. The purpose of a home inspection is to find major defects that would cause the home buyer not to want to move forward with the transaction or at the very least have unknown needed repairs completed by the seller. A home inspection should never be held out as a negotiation tool, when it’s clear the issue is minor or indicates it could of very well gone unnoticed by the seller.

A home buyer who is under the false pretense that a home inspection is for the purpose of creating a “fix it list” is setting themselves up more than they may think. Most sellers are smart enough and rightly feel a home inspection is not the home buyers opportunity to change the agreed upon contract terms and both the buyer and seller should have approached the original negotiation process in good faith. Trust me, when I tell you when either party doesn’t, it has a way of surfacing.

If major problems are discovered that should be fixed, then that is a different story and the real purpose of a home inspection. There is a second aspect to a home inspection when you are purchasing a home FHA, VA or USDA financing. These agencies are also concerned about health or safety issues and require the most minor safety issue be corrected before allowing the home buyer to close on the home purchase with government insured financing. For example a cracked window pane or missing screen isn’t a make or break issue, but all three agencies consider them both a safety concern requires them to be repaired or replaced.

When home buyers start to overstep their bounds, that’s when real estate transactions often go sour. Buying and selling a home is all about being reasonable. It’s very important that a home buyer takes the time to complete their own personal home inspection before making an offer and include any repairs noticed in their offer to purchase. An example would be seeing missing tile or if the seller pointed out in a disclosure statement a particular issue. For goodness sake, don’t ask the seller to fix an issue that was disclosed and you were aware of just because the home inspection pointed it out, unless the lender requires it. Most real estate agents have these lender issues covered and including a dollar amount the seller is willing to pay for required lender repairs. So remember, it’s all about being reasonable and well informed for a great closing to occur for both the home buyer and seller.

If you are selling your home and a repair issue comes up, and you know neither you or the home buyer could possibly of known about it, offer to repair it or a closing cost credit; or even a price reduction whenever possible. Negotiating home inspection issues are not an easy item to deal with. They are unexpected, but do happen and what you should be shooting for as a seller is to close on schedule.

There is simply too much stress and uncertainty in putting yourself on the line for repair work if you can avoid it, but remember it might be a lender issue and the only solution is to fix it or cancel the contract. Lenders can’t negotiate what Congress has mandated and FHA, USDA or VA loans are designed by congressional acts! That said, if it isn’t a needed repair, human nature comes into play and your home buyer is likely to be extremely picky about the quality of the work. You could wind up being asked for even more work if he or she is unhappy and seller credit or a price reduction allows you to sell, while avoiding that headache.

It is easy to see how you would be opening yourself up to a lot of stress here. Let’s say the roof has wind damage that the home buyer demands it be fixed. You agree that repairs need to be made and offer to have them done before the closing takes place. Two things can happen:

  1. The repairs take longer than expected and delays the closing if the home buyer or possibly the lender will not agree to an escrow hold back, or
  2. The shingles are newer and the home buyer doesn’t like the way the new shingle stand out. God forbid they now want the whole roof replaced. I can assure you some home buyer don’t mean to be picky, but it happens and aren’t aware they are asking for a $10,000 cosmetic repair. You know what they say, Sh#t happens, so avoid them with a credit when you can.

Most states have provisions in their state approved purchase agreements where the seller isn’t liable for any further costs in a situation like this, but you also just put yourself through a lot of unnecessary anxiety. Avoid the anxiety by providing an estimated cost of repairs by a licensed professional and offer a credit on the sale, unless your home buyer is using FHA, USDA or VA financing, in which you’ll have to complete the repairs before closing or get the lender to accept an escrow hold-back. The latter being the better choice. This way the home buyer selects their contractor and deals with the consequences, while you can move on with your life.

In many states a seller is not obligated to repair their home’s defects, as long as they are disclosed upfront and honest through the course of the sale. However, you also want to sell the house to a home buyer that is willing to pay what you want. Seller need to be negotiable in most any type of markets and repairs are one area where this is a must. I can’t stress this enough, discuss any and all know issues you are aware of about your home with your real estate agent before you agree to listing it. They’re professionals and know about any issue you could possibly have and there to represent your best interest and they do! Accepting their advice is the least fool heart thing you can do.

All this being said, just because you must negotiate and spend a little money to sell, no one should be expect you to give in to every single demand. Haggling is an art not everyone is effective at and you need a real estate agent that knows how to represent you in this all too often difficult process. When you hire a real estate agent they know the value of what you are trading and are looking out for your bottom line. This is another one of those times where having an exceptional real estate agent in your corner really comes in handy.

In practical terms, this means focusing on what is best for you. There can be countless things that possibly needs repairing; some big, some small. You shouldn’t be expected to take care of them all, but you may need to take care of some.

If a home buyer approaches you with a list of issues, hopefully it’s reasonable and probably is, but it could be something like cracked tile in the kitchen and obvious when they viewed your home. Hopefully you didn’t cover it with a rug. As long as the lender isn’t requiring it to be repaired, it’s an item that any reasonable person would assume was already negotiated in the original sales price and not subject to repair. Leaking pipes in a basement, however, is an altogether other issue and you probably need to address it by getting it fixed or offering the best of solutions with a closing credit.

Most small problems can be addressed by a contractor for a reasonable cost and this is where you have to decide your strategy. Which will cost you less? Which things are you willing to do? Will a particular situation be costly, like replacing heating and air conditioning unit? You may really want to avoid replacing the system, since it’s going to be expensive and the unit still has a few more years left in it. And you do not really feel like you should be responsible for it. If this is the case, offer to do all the other smaller repairs on the list. You can even explain that the old unit is the result of buying an older home and you are selling at a price that reflects this, but if you’re trying to use this excuse and it’s not reasonable it probably going to show up in the appraised and now you have a new issue to deal with. Again, things have a way of coming to light when you aren’t being up front. Make it understood that you are willing to do a lot, but there is only so much you can reasonably be asked to do.

For the sellers reading this post, let me end with a few items to remember.

  1. Over the years you probably have become so comfortable with your nest you never stop to take a hard look around to see if it has some twigs that need fixing. Doing a once over of your home before putting it on the market really makes a difference!
  2. Navigating your way through the home inspection process is important. Don’t become stubborn! Take care of issues that are sure to come up again with a different set of home buyers and don’t try to negotiate with a lender requiring repairs; it simply isn’t going to happen unless you can set up a congressional hearing.
  3. It’s important to recognize problems that will be issues with anyone and deal with them. Unless it is an incredibly strong sellers’ market, where you can get away with telling a buyer they need to take the home “as is” and have cash in hand make sure you are reasonable. Doing so leads to happy days ahead and it begins with shaking hands with your home buyer at the closing table.

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TENNESSEE HOME OWNERSHIP TOOLS

Your Home Purchasing or Refinancing & Renovation Tools,

Home Improvements, Home Renovations,

Mortgage Loan Officers, Real Estate Agents & General Contractors

are ready to assist you with your home purchase.

Here are just a few of the home improvements

you might consider with any Home Renovation loan

Repair or replace a roof

Install, replace or repair gutters and downspouts

Replace, repair or upgrade your HVAC system

Repair or replace plumbing

Install, repair or replace electrical systems

Kitchen remodeling (including the purchase and installation of appliances)

Bathroom remodeling, Full interior painting, Total exterior painting

Repair or replace a septic system and/or well

Disability access (wheelchair ramp, elevator, widen doorways)

Build, repair or replace deck, patio or porch

Basement waterproofing and finishing

Abatement/Stabilization of lead-based paint hazards

Replace old windows, Room additions, Finish an attic

Add a second story to your home

Replace a termite damaged sill plate (a water-damaged sill plate also)

Possible landscaping items such as correction of grading & drainage problems,

tree removal, repair a driveway and sidewalks

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A SIMPLE HOME SHOPPING INSPECTION TOOL

Organizing your home shopping experience affords a wise decision-making process.

This simple home inspection tool makes your ultimate buying decision a smart one.

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