Real estate deals often derail after home inspections. Even though all residential real estate is sold today “as is,” and sellers are obligated to disclose all known defects, both buyers and sellers often have unrealistic expectations regarding the process that begins once an offer is made and accepted.
Before there is momentum to a transaction, and escrow imposes a specific time frame, both sides should be aware of what these negotiations may involve before they commence. Should a buyer assume the sale price will be automatically reduced if defects are found? What repairs are the seller’s responsibility? And essentially, what is the home inspection supposed to accomplish?
A recent conversation with real estate agents Judy Oroshnik and Dean Decent, of Prudential California Realty, outlined the basic issues surrounding the home inspection process and some of the pitfalls.
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Make a realistic assessment
There are many steps to preparing a home for market. ; and these days many homeowners consider a pre-sale home inspection by a certified home inspector.
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From a seller’s standpoint, it is to their advantage to disclose any issues up front, because in the long run, it could save a seller money. It also builds good faith and confidence in a transaction. Oroshnik point outs that exposing any issues, “steals a bit of thunder from the buyer if disclosed later.”
Sellers need to realize that in all deals, “Every single buyer asks for money back,” says Decent. “Even if there is nothing wrong, buyers always ask for credit for something,” he finds.
A home inspection gives the buyer a full picture
As part of the negotiating process, a real estate agent should help their client determine what they can ask for in credit and remediation after the inspection. Dean Decent finds that the "biggest misconception buyers have is that sellers should give them upgrades.” Also buyers should realize that repair credits are not always dollar per dollar.
For instance, if there is an issue with the sewer line (a common problem in Echo Park homes that are 80-years old or older), while a seller may give some credit for the cost a new line, it is not common for them to pay the entire amount for a brand new line, which will last decades.
Deal breakers
“In this economy,” Oroshnik advises, ”buyers are inspecting to death.” In Echo Park, she sees four main deal breakers, all big ticket items: Foundation, sewer line, chimney and retaining walls. Infrastructure defects can sink a deal, particularly retaining walls because they can be difficult to fix and estimates to repair them can vary wildly. All brick foundations that have not been retrofitted, typically cause concerns too.
However, defects should be seen in context of the age of the house. “You want the inspector to be balanced,” contends Oroshnik. Ideally, major issues and red flags should be raised before a buyer makes an offer. And both agents try to steer their clients away from problem-plagued properties. If a deal does fall through, the seller is obligated to give the next interested buyer a copy of any previous inspection reports.
"By advising what is wrong with a property up front, builds good faith and confidence in the transaction," finds Oroshnik. She also notes, "If you have a good property, it's prepared for market and priced right, you will get top dollar."
