Inspection Report - How would this inspection report affect your offer?

[James Mays]

Hello BP Team!

I recently went under contract for a 4/2 LTR/Section 8 house with current tenet in place in Jackson, MS. Inspection report came through today. First time out of state investor. Currently have a local LTR Condo in CA and Primary SFH in CA.

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How should I think about my counter offer/credits/repairs off of the inspection results?

I typed up the below and sent back to my realtor to start the conversation but wanted to get BPs thoughts as well. 

-Should I ask for credits to repair? 

-Should I reduce my price offering? 

-Or is this normal and I eat the repair costs? 

My message back to the realtor:

After reviewing the inspection report, here are my thoughts. I would like to have some of the results looked into further, repaired, or credits issued so that we can repair.

The below list is what I would like to be repaired or priced out to have credits issued.

Let me know what you think, thanks!

Further Evaluation (Professional based)

• Comment 2: Yard wet
• Comment 23/24/25/26/27: Electrical Work
• Comment 4/5/6/7/40: Glass repairs/sealed
• Comment 28/29/30: Hvac repairs
• Comment 49: Chimney inspected/cleaned

Repair (Handyman based)

• Comment 3: Vegetation removal
• Comment 12: Leaking hose bib
• Comment 13: Sewer cap replaced
• Comment 19: Door knob replaced
• Comment 22: Replace all batteries in smoke detectors
• Comment 38: Replace clamp in sink
• Comment 39: Replace dishwasher
• Comment 41/48: Dry wall prepare
• Comment 44/47: Door repair

[Nicholas L.]

@James Mays

have you seen this property yourself?

[James Mays]

I have not besides walkthrough videos taken by the realtor. 

[Bill B.]

1) I’d remove all items under $100 and the landscaping/vegetation items. These a things you could walk through your own home and find. It makes you look like you’re asking for a new build, not an existing home. 

2) Anytime you mention big items like HVAC/roof. If you’re asking for replacement figure out how much more the home would be with that being replaced and temper your request. (If you made an offer on a 20 year old home with a 20 year old HVaC and the inspector says it only has 5 years left. You knew that before you made your offer, it’s not a surprise. And if it had a new HVAC system they might be asking $5k more. 

If you don’t want the property use this as your reason to walk away. If you do, figure how many of these things you’d really fix, what that would cost, and how much of that you’re willing to cover. (Imagine if they had countered your offer at $500 higher, would you have accepted it? Most likely yes.)

As a buyer I might say something like these 4 major items add up to $3,500. I understand it’s an existing home, or older home, so I’d like to ask you to kick in $2,000 toward repairs I feel are necessary.). 

Of course as a seller I might counter with, No, please send your cancellation of sale paperwork and I'll refund your EMD. Then what's your play?

Ps. I have a buyer’s inspection of a home I’m selling on Saturday. And that’s pretty close to the response I have planned for anything that was obvious, in plain sight, or as minor as some of the things you listed. If they find something I didn’t know about and they couldn’t have, or safety related then I’ll consider/cover some of it. As obviously it needs to be fixed. 

[JD Martin]

No idea because I don't know how much you're under contract for and what the market is in that area. If you are purchasing at a realistic 60-70% LTV, i.e. your offer is 70k and the appraised value is/should be 100k, I'd just absorb it as a cost of doing business. If you are already paying high value, I'd renegotiate or walk. There wasn't anything on there that would make me not buy a house, but as far as money there's no good way to answer because we don't know too many things to make an informed reply.

[Matthew Paul]

You are not buying a brand new house . Without knowing the numbers or area its hard to say if its a deal or not . But the things mentioned in the report are all minor .  

I recently sold a house and they had a home inspection and they came back with a list and I simply told the buyers , No to any price reduction or the "repairs" . They wanted upgrades to electrical panel that was upgraded in 2009 to current code  (arc fault breakers) they said they would walk , I said good bye .  They still bought the house 

[Alecia Loveless]

@James Mays In my market there’s usually little to no negotiation on repairs found in the inspection.

I just walked away from a deal where a duplex had 3 electrical panels and one had a giant fuse in it. My insurance company said they wouldn’t cover the policy with the fuse.

I requested the seller upgrade the electric panel. He refused. The property sat on the market another 3 months and eventually sold for $25,000 less than I was under contract for.

My realtor and my contractor both felt that if he was refusing to upgrade the panel it was likely an indication that he had done shoddy work on the rehab or had something to hide.

I could have bought it and arranged to upgrade the panel on Day 1 after we closed but I didn’t feel good enough about taking the risk on a $280,000 deal in the event there was a problem and I had to try to make a claim prior to the repair.

Most of the repairs on your inspection report wouldn’t even phase me as I have a team in place that goes in and repairs everything following closing.

No house is perfect. There will always be things that turn up.

[Steve K.]

Have you ever been there? There are some active Jackson locals on here, I'd connect with them and ask them about this property. 

[Mike Paolucci]

Quote from @James Mays:

Hello BP Team!

I recently went under contract for a 4/2 LTR/Section 8 house with current tenet in place in Jackson, MS. Inspection report came through today. First time out of state investor. Currently have a local LTR Condo in CA and Primary SFH in CA.

________________________________________________________________________________________________________________________________________

How should I think about my counter offer/credits/repairs off of the inspection results?

I typed up the below and sent back to my realtor to start the conversation but wanted to get BPs thoughts as well. 

-Should I ask for credits to repair? 

-Should I reduce my price offering? 

-Or is this normal and I eat the repair costs? 

My message back to the realtor:

After reviewing the inspection report, here are my thoughts. I would like to have some of the results looked into further, repaired, or credits issued so that we can repair.

The below list is what I would like to be repaired or priced out to have credits issued.

Let me know what you think, thanks!

Further Evaluation (Professional based)

• Comment 2: Yard wet
• Comment 23/24/25/26/27: Electrical Work
• Comment 4/5/6/7/40: Glass repairs/sealed
• Comment 28/29/30: Hvac repairs
• Comment 49: Chimney inspected/cleaned

Repair (Handyman based)

• Comment 3: Vegetation removal
• Comment 12: Leaking hose bib
• Comment 13: Sewer cap replaced
• Comment 19: Door knob replaced
• Comment 22: Replace all batteries in smoke detectors
• Comment 38: Replace clamp in sink
• Comment 39: Replace dishwasher
• Comment 41/48: Dry wall prepare
• Comment 44/47: Door repair

Have you decided on a property manager yet? If so, then I'd send them the inspection report + the list of items you want repaired / estimated costs for and then use those to either negotiate the price down a bit / request seller credit for repair OR a combo of the two. 

I would also only use the legitimate issues as a way to negotiate (Electrical / HVAC / Dishwasher). Lots of the items you listed are small ticket items that are a cost of doing business and owning rentals. Using ticky tack items to negotiate is a great way to get a seller to dig their heels in and not budge at all. 

I also wouldn't recommend trusting a seller to do any long term fixes. They'll likely take the easiest / cheapest way out and just do the bare minimum and slap lipstick on a pig to get the deal done. Better to have your own property manager use trusted handymen to take care of the issues for long term/quality fixes.