A buyer's offer on a home is generally contingent upon the completion of a successful home inspection. In general, buyers have the power to walk away from a deal if previously undisclosed issues are revealed during that inspection. Before it comes time to make that drastic decision though, the buyer will enter into negotiations with the seller. These negotiations are focused on determining who is responsible for covering the costs of each necessary repair - what the seller is willing to shoulder and what will become the buyer's responsibility.
As in any negotiation, there are important tactics that buyers should understand before sitting down with the seller:
1. Consider the state of the housing market
The seller knows you still have the power to walk away from this deal, but that thought will not be as worrisome if there is high demand for housing in the area. If the house received multiple offers before the seller chose yours, you may not be in a position to make as many demands as you'd like, as the seller may not care if the deal falls through.
Still, Charles Gate Realty Group, based in Boston, suggested reminding the seller that an issue that bothers you is likely to upset any other buyer who has the home inspected. The seller will probably end up covering at least some costs of the repair anyway, only he will have to go through another stressful round of contracts, inspections and negotiations.
Charles Gate added that if the home has had difficulty selling, a buyer has a lot more leverage and can often ask for more.
2. Ask for credits, not repairs
It may seem more convenient to ask the seller to make the repairs before you close, but doing so takes all of the decision-making power out of your hands. According to the Washington Post, if it is agreed upon that the seller will make the repairs, the seller can use a licensed contractor of his own choosing.
You are the one moving into the home, and you are the one who will have to live with the repairs. If you want to ensure high quality and the right look, it is best to make those repairs yourself. This means that during negotiations, you should ask for monetary credits greater than or equal to the cost of the repair. Sometimes, a seller will agree to account for the cost of repairs by reducing the asking price or closing costs.
According to Massachusetts based Re/Max Executive Realty, a seller will probably prefer to give you credits anyway, as they are probably eager to get the deal completed so they can move out. Sellers will be happy to not have to deal with time-consuming repairs that delay closing, so it's really a win-win.
When negotiating, Charles Gate suggested asking for more money than a repair is worth because a seller is going to try to negotiate down your requests. If you start with a higher number, you will probably end up with the amount you need to complete the repairs.
There are limitations with credits, though. "The contract states that the seller is only required to pay closing costs up to the actual closing cost, so if the credit is $9,000, but the actual closing costs are only $8,000, the seller is legally only required to pay $8,000," Steve Fox, vice president of First Savings Mortgage Corporation, told the Washington Post.
3. Be reasonable
Re/Max advised buyers not to get too hung up on small issues revealed during a home inspection. It is unrealistic for a home to have absolutely no problems. Unless your home inspection unearths something major, it will not reflect well on you to try to get more money out of the seller. In addition, it will be very difficult to get any credits for issues that were easy to spot before you made an offer. If you notice something wrong with your naked eye, address it before drawing up the contract. Sometimes a seller will provide a disclosure statement revealing any issues with the house before the buyer extends an offer. Don't wait to address these issues during post-inspection negotiations. Address them as soon as the issues are known.
Zillow said to consider your future renovation plans as well. It may not be necessary to fuss over who will pay for a repair in a room you are planning to completely renovate in two or three years. Nevertheless, if you think you can get some money for the issue, it might be good to try.
4. Use your real estate agent for help
You don't have to go through negotiations alone. You have a real estate agent for a reason, and part of his job is to help you through tough or confusing situations. Remember that your agent has far more experience in this realm than you do. Ask plenty of questions and seek help when devising a negotiation strategy. The Washington Post suggested sitting down with your agent after the home inspection is complete and examining the entire 20-30 page report together. From there, your agent can help you figure out the best next steps.
Your real estate agent should be someone you trust and who you know is always in your corner.
The key to successful negotiations is give and take. Don't expect the seller to give in to your every demand. Charles Gate suggested asking for more repairs than you want because they will likely be reduced during negotiations.