Negotiating price for Repairs

[Chris Ehrhart]

Hello,

I’m trying my first house hack on a duplex. I’m under contract at market price. However, both units have electrical panels that won’t meet code and need to be replaced. Both have 13 year old HVACS. The roof needs replacing, and both require floor and appliance updating to get market rent. 

My question is, does anyone have a negotiation equation or strategy to get the price down, considering these costly repairs. I don’t want to offend or halt negotiations by asking for 100% of repair costs (obviously) and I know there are a lot of variables….just looking for a general starting point. 

For example, since we are at market value, should I ask for the seller to come down 50% of what the necessary repairs will cost; electrical, HVAC, roof?

Thank you for your time and advice,
Chris

[Diego A.]

Hi @Chris Ehrhart

There are two prices in a negotiation, one is the offer counting multiple factors, mainly Cap rate and visible repairs when is a investment property.

The other one is when you do an inspection.

You listed 5 items here so I'll comment on each one:

- Electric panels, this is likely to be found during inspection. The requirement to change them has to come up for any other requirements that you have in which you will need to modify the panel. Inspections will most likely tell you that panel is not in code if there are older that the 90s. That does not mean you or the seller have to replace them.

- HVAC, the rule is that if it is working you may not have to replace it but count as a capex in the coming years. If it is not working then you have a negotiation power, but they are not obligated to replace them.

- Roof, whether it was disclose by the seller or not. This is an item that is always a negotiation powerhouse.

- Flooring, this is cosmetics that you have already seen when walk-in so it has to be part of your original price.

- Appliances, same than flooring.

Remember that in real estate everything is negotiable, and during the option period you have the unrestricted right to exit the deal.