Using Inspection results to negotiate repairs/price reduction

Buying & Selling Real Estate
7yFollow

Using Inspection results to negotiate repairs/price reduction

Jesse Lynch
Real Estate Agent · Minneapolis, MN · Member since 2015 · 59 posts · 43 votes

Hi BP!

I just got my first rental property (triplex) under contract in Red Wing, MN! It’s not beautiful at the moment, but certainly is livable, and I have flipped a couple houses and I build sets for commercial photo shoots so the rehab side doesn’t scare me.

I am using an FHA loan to buy it, and I understand that there will probably be some issues with the property that will be flagged by an FHA inspection, and I am about to get an inspection of my own done tomorrow.

I’m curious if there are any tactics or strategies to consider when negotiating work done or price changes based on issues that come up during inspection. The agreed price is already $8500 under their current asking price, but it has been on the market for a couple months, and the seller is moving out of state and wants to be free of it.

I would love to have work done on their dime or even better a lower purchase price, but would also hate to lose the deal over some repairs.

Any advice?

Thanks!

Jesse

1Reply
77 views

Most Popular Reply

Bevla Reeves
Real Estate Agent · Scottsdale, AZ · Member since 2011 · 471 posts · 296 votes
7y

@Jesse Lynch  My advice is to just be honest, ethical and fair.  

If there are needed significant repairs, then ask the seller to make them.  But if the repairs aren't that big of a deal, don't be petty!

Apply the Golden Rule! ;)

Good luck!!

2Reply
See this reply in the discussion

6 Replies

Jump to latestLatest
  • Bevla Reeves
    Real Estate Agent · Scottsdale, AZ · Member since 2011 · 471 posts · 296 votes
    7y

    @Jesse Lynch  My advice is to just be honest, ethical and fair.  

    If there are needed significant repairs, then ask the seller to make them.  But if the repairs aren't that big of a deal, don't be petty!

    Apply the Golden Rule! ;)

    Good luck!!

    2Reply
  • Jordan MoorheadBusiness Member
    Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
    7y

    Agree with @Bevla Reeves. If you find actual issues ask the seller to correct them or pay for closing costs/price reduction. Don't go nuts and ask them to fix everything the inspector finds. Your realtor should be able to help you figure out what is actually an issue.

    [email protected]512-888-9122
    The Moorhead Team5140 Reviews
    WebsiteView Page
    2Reply
  • Jonathan BombaciBusiness Member
    Real Estate Agent · Lowell, MA · Member since 2019 · 1k+ posts · 1k+ votes
    7y

    To echo the other respondents, be fair and ethical and everything will be easy. If you find out things about the property that you didn't know or expect then get estimates for repairs and use those to renegotiate your deal. It isn't unreasonable to ask for closing credits or $$ off the price if there are real quantifiable issues with the properties. 

    The last property we bought we knew there were issues so we negotiated the property hard and waived $20,000 worth of inspection items as part of the contract. During the inspection we found out the electrical was not to code and all the panels needed to be replaced, along with new meters, and lots of wires. We got a written estimate from a respectable electrician in town of $30,000 - $35,000 worth of work that we were not anticipating. The other larger repair Items (plumbing, furnace, fire escape), stuff we were expecting, more than covered the $20,000 that we waived during negotiation, so we ended up renegotiating for a $30,000 price reduction. Having the repair estimate in hand from a licensed professional makes it difficult to argue and at the end of the day they would encounter the same issue with ANY buyer. 

    If you find large inspection Items and can get reasonable repair estimates then it's easy to renegotiate after the inspection. If you try to nickel and dime your way to a "discount" then the seller, and their agent, will see through it and respond accordingly.

    Congrats on getting the house under contract. Now the real fun begins!

    [email protected]978-710-8611
    Candor Realty4.760 Reviews
    WebsiteView Page
    1Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    7y

    Some things will likely have to be repaired Before closing, to meet fha guidelines.  As a rule, you should only be asking for additional price reductions/repairs for things that were Not reasonably seen on a walk through.

    0Reply
  • John Warren
    Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
    7y

    @Jesse Lynch this is incredibly market specific. Your realtor will probably have the best insight into this question, but in today's market a lot of my buyers end up having to do a few annoying little project before they own the home in order to use the FHA loan. I recently had a buyer in La Grange, IL who had to scrape and paint some window frames in order to qualify. I even had one buyer who had to scrape and paint part of a garage in Cicero, IL, and in his building the FHA appraiser had missed that the plumbing wasn't hooked up!

    Keep in mind that as a house hacker, you are really using a loan intended for the single family world. "There are some absurd things we have to do to use the loan sometimes, but the leverage it provides is out of this world. 

    0Reply
  • Casey WalkerPro Member
    Contractor · Member since 2019 · 51 posts · 21 votes
    7y

    Read the book "never split the difference " by chris voss.  Its all about how to negotiate.  

    Have your agent look over the report and ask them what parts the seller should fix .

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free