Negotiating Defect Issues with the Seller

Well, now you have in your hands an inspection report listing material defects, maintenance recommendations and reams of information items. As a buyer, what is your next step? If your inspector was worth their salt, you will understand the issues clearly after reading the report. If not, you probably called your real estate agent to interpret the report for you, and he or she may be equally confused. Remember, it is not the agent's responsibility to decide for you what inspection items are important, however they can be a real help in knowing the mindset of the particular seller and what they are likely to do. So, if you have any questions, the first step should be to call your home inspector after reviewing the report, and ask for their opinion of which defect items are the most concern. Paramount in my mind is correcting safety issues, fixing items where there is uncertainty as to the extent of the problem or the potential cost to repair, as well as items that adversely affect the value of the home, and items that if left uncorrected will cost more to fix later such as roof leaks.


Now its time to get back to the seller with your feedback. You have choices:

1. You knew about the reported defect already, and factored it into your negotiated price for the home. Asking the seller to fix it at this point would label you as a "double-dipper" and is a legitimate point of contention for the seller. Fair is fair! Let it go.


2. The item is minor and you can ignore it, like a door that won't latch when closed, and don't bother the seller with fixing it. Save your seller repair requests for things that matter.
   
3. The item is something relating to safety or adversely affects the value of the home, that you were unaware of during the honeymoon stage of your home search and contract negotiation. An example is a loose deck handrail, structural damage to wood framing in the crawlspace, or a non-functional ground fault-protected outlet. These are the things that I recommend that my clients consider pursuing with the seller.

OK, you now know what feedback to give the seller. You took the "laundry list" of defects from your inspector and narrowed it down to a list of things you want the seller to care for. As with any negotiation, do not expect that the seller will embrace the list eagerly. While some sellers do this and are to be commended - some even fix reported defects that you do not ask for them to do - more than likely there will be some push-back. After all, they may:

1. Believe their home is in perfect condition and are upset that someone thinks it's not.


2. Owe more to the bank on the home than they stand to get from the sale at settlement, and any repairs will be out of their pocket (this situation is very prevalent now with lower home values).


3. Still be battered from having succumbed to your superior negotiation skills when you were working them over during the contract negotiations, or


4. Have believed when they told you that the home was being sold "as-is", that you understood what they meant by the term "as-is". (The fact is that if you have an inspection clause, you have an "out" and they would be foolish not to concede certain things regardless of their "as-is" mindset).

At this point when you have decided what things to ask for, your agent will then likely put together a cover letter attaching a copy of your home inspection report, and providing a sub-list identifying which items on the list you are asking to be fixed. The seller then has some options:

1. Agree to repair everything (party time!)


2. Agree to repair some things and respectfully decline others (usually the expected outcome)


3. Refuse to fix any and all things you asked for (warm up the car, honey!)

Assuming they agree to work with you (#2 above), then depending on the circumstances, they may give you some options back. These are:

1. Seller agrees to fix the items using licensed contractors (ideal case, you will have documentation and maybe a warranty on the work)


2. Seller agrees to fix the items themselves (may be fine for door stops, but not for structural repairs)


3. Seller concedes to you part or all of the estimated cost of requested repairs at settlement (a nice trustworthy gesture by the seller that you will actually fix the defect you pounded them on)


4. Seller offer to have funds escrowed at settlement, so that you can get your own contractor to do the work later. (This assures that you don't pocket the concession money described in the above item #3, because after a prescribed period, unused escrow funds are returned to the seller)

Sometimes the timing of the settlement makes it necessary to use Options #3 or #4, as some repairs take time to schedule or obtain multiple bids, and this can't be completed by the scheduled settlement date. In any event, my recommendation is to be fair and consider how the seller treated you during the contract negotiation process. If you got an admittedly good deal, don't beat the poor seller up any more, take the high road. If they are "underwater" on their loan, consider that you are taking food out of their children's mouths to make them hire a licensed remodeling contractor to fix that door stop. If the seller treated you with disrespect, then in my opinion all bets are off with your negotiating on defect resolution, but be prepared to walk away if they won't play ball.