As a manager, I have seen too many deals fall through because of home inspections. When I dug deeper into the story, I found that it was not because of the home inspection itself but because of how the results of the inspection were handled by the buyer agent.
For example: The buyer agent at the request of the buyer submits an amendment to the Agreement of Purchase and Sale to delete the condition on inspection but inserts a long list of things for the seller to fix. Many times that caused the offer to die because the condition on inspection was not waived, or the purchase failed on closing because the buyer argued the quality of the repairs done by the seller was not satisfactory.
I always prefer to negotiate a lower price and have the buyer do the repairs once the house is theirs, rather than have the seller do the repairs before closing.
Here is how home inspection conditions should be handled. Do not misunderstand what I am about to say – there are circumstances where the buyer should not go ahead with the purchase (when the deficiencies are severe). But generally, use the following technique:
1. Prepare the buyer before the inspection starts by making sure they understand that the inspector checks everything. That is their job. The inspector may be liable for issues that were not pointed out to the client, the buyer.
2. Explain that the inspector will put a price for repairs on everything. (Changing a malfunctioning door handle, leak under the faucet, electrical outlet that does not function, etc.).
3. Distinguish between:
- Critical – must fix right now.
- Good – if fixed later.
- Optional (do it if you want to) – such as change a hinge, handle, small faucet leak or cosmetic issues.
4. Explain that $5,000 to $10,000 in non-critical repairs is normal for a resale house.
5. Now, have the inspector do their job.
Imagine a buyer who stretched the limit of their financial ability and bought the house, perhaps for more than they expected, and now – surprise – the inspector says there is $4,000 worth of repairs. This could be such a shock that it will be relatively easy for them to back out of the deal.
Now, imagine preparing that same buyer by telling them $10,000 worth of non-critical repairs is normal in every resale house. The inspector then does his job and finds only $4,000 worth of non-critical repairs. Isn’t it a reason for the buyer to be happy? What is their choice? Put an offer on another house, pay again for another inspection and find that the second house, too, has thousands of dollars worth of repairs (because you said, “Every house will have an average …”).
I found that closing the deal often depended on this one sentence told to the buyers before the home inspection.
Michel Friedman has been a real estate broker since 1990. He is the author of STAR AGENT, the path to 50+ real estate transactions per year, available on Amazon, and was rated as #1 in hot new releases in the real estate profession category when it came out. Michel is currently senior manager at Re/Max Premier Inc. in Vaughan.
