How is inspection report negotiated.

Question

From the standpoint of both the buyer and seller, how is the inspection report negotiated?   My uncle in Green Bay, WI is selling the home he purchased brand new in 1965 in selling it.  He maintained the home well, but it did not do too much in the way of renovating kitchens and bathrooms.  Electrical is essentially as when it is built.  Furnaces and water heaters were replaced and fairly new.  The buyer's inspection came back stating the main electrical box is insufficient in capacity (was good in 1965), and does not have proper clearance technically.  It has too few smoke detectors and some wiring in attic done in 1990 for rec room is not up to code.  Door into garage  in not fire-rated, a code issue.  If the seller comes back with demands, does the seller make the repairs, offer a credit, split the difference, or what?  Things like older finishes were obvious to the buyer and not contested, but things like electrical issues, which are not obvious to a typical buyer, as expected are contested.  How is the seller to respond to these requests?  On the other hand, is this something a buyer can use a tool to extract a lower price?

Kevin Sobilo · Answer

@Mike Nelson, when I act as a buyers agent I try to set a buyers expectation about inspections like this. I tell them they need to look at what is presented to them. If they are looking at older homes they need to have some expectation of the condition and know it won't be perfect and come to a price based on that. If after inspections you find things you did not expect then you can look to renegotiate based on what was found.

I think much of what was found would be typical of a house of that age/condition.

However, even given that I think it is reasonable for the buyer to ask for health/safety issues like smoke detectors and the fire door. In some places municipal occupancy inspections are done prior to a new owner moving in. These types of things may be required by the municipality before the buyer is allowed to live in the property. So, it makes sense that the buyer would ask for them to be fixed or compensated for having to fix them.

Jeff Cichocki · Answer

@Mike Nelson, if he's selling to an investor, lower the price to compensate. If he's selling to a homeowner, do the repairs. Most buyers will walk if it's not done for them. They think it'll cost them a ton of money and hassle if they get stuck with it. Sellers who take care of their buyers fair better at closing. Plus, if he fixes it himself, he gets to control the cost himself. While most Realtors demand that a licensed contractor do all the work, that's negotiable. Not everything needs a license. Some things can be handled either by himself, a friend or a handyman. Things like the electrical panel should be done by a licensed electrician. Doors are easily replaced by a handyman. Control who does the work and he will control the cost.

Hope that helps...

Jerry Lucker · Answer

@Mike Nelson

Reduce the price and let the buyer worry about all repairs. If seller agrees to fix anything the buyer can still walk away upon re-inspection.

Mike Higgins · Answer

@Mike Nelson first off i am an agent in Green bay and have good relationships with a lot of the agents in the area so if you have more conversational type questions and want to chat let me know and I will help best I can.

With regard to all of this stuff, I always tell my clients we are looking for "defects"  or "safety hazards in the property.  Other things like outlet covers and older furnaces etc, that can be seen from the showings and should not be an issue for the buyer.  The electrical could be a decent one because it would lead to the buyer not being able to insure the property and of course without insurance, they cant get financing.  So that one I can understand them asking for.  Same with the fire rated door.  Thats safety.

As the seller, your uncle can either offer to fix the things, or maybe there is a number that the buyer would be happy with lowering the price.  I would suggest that he ask how the buyer would like to  proceed.  Often times the buyers are not reasonable and think these fixes are far more expensive than they actually are, so he may be better off just fixing them.  Everything is negotiable at all times.

If he needs references for reliable contractors to fix some stuff, let me know and I can point him in the right direction

Mike McCarthy · Answer

It’s common these days for sellers to list EVERYTHING that is wrong with the house. A 1965 house that has obviously not been updated the seller shouldn’t be asking to fix things that are obviously original. Feel free to push back.

Things like an upgrade that doesn’t meet code, or maybe smoke detectors, or something that’s broken - sure. Usually the easiest is to just agree on a number and provide it as a credit to the buyer. The seller can also make the repairs, but then you have to deal with contractors, etc.

If it were me, I’d push back on the original electrical. The house is obviously 65 years old and was up to code at the time it was built. But anything that is actually broken or not working, you’ll have to fix that before selling it to anyone, so those things make sense.

Good luck!

Dan Maciejewski · Answer

It depends on the seller and the buyer and how much either party wants to continue.  It also depends on if the electric box is just low-rated for today, or if it's a Zinsco or Sylvania that insurers throw fits about.

If the buyer is now asking for the repairs, then the seller has some choices, depending on what the contract states.  In Florida we have 2 standard contracts.  In the "Standard FAR-BAR," the repair costs are negotiated up-front,.and as long as everything is in working condition as defined in the contract, the seller is under no obligation to fix anything above the agreed upon costs.  In the "As-Is" contract, there is an inspection period where the buyer can walk away with their deposit if their attempts at re-negotiating fail.  Determining how motivated the buyer is could impact what the seller does.

Assuming that the panel is one that will need to be replaced, no matter the buyer, I would most likely put a credit in escrow at close for the panel replacement per an electrician's actual quote (usually $1,300-1,500 around here), and for fixing the rec room wiring.  The smoke detectors are a non-issue.  They can either be thrown in or forgotten, they are like $15 for a 10-year one.  And the fire-rated door can be argued.  Personally, I'd offer (IF ASKED) the electric and line out the rest.  The electric will be an issue with another buyer, the rest may not be.

All this depends on the situations of both buyer and seller, of course.  And the sale price originally agreed upon.  Good luck!

*edited an extra sentence left in

Martin Vehlow · Answer

Hey @Mike Nelson, it is totally up to the buyer and seller to negotiate how to handle the issues found. Depending on the contract (and this is not legal advice, def talk to your attorney) is worded, if it's an AS IS sale no repairs need to be done. Otherwise, all repairs are up for negotiation.

Yes, the seller could ask for a price reduction or a credit at closing to address the issues. It sounds like some of these issues may have evolved due to change in code requirements over the years, which is inevitable with a house that age.

Frank Geiger · Answer

Anything is negotiable. The cosmetic condition in an older house is obvious and wouldn't really impact an inspection report. Electrical not up to code and smoke detectors (not a big deal w/ battery install) definitely warrant some negotiation as they aren't obvious to the typical home buyer. The seller can probably fix these issues for 1-2k. What's the impact that has on holding the property for another few months? Is it worth it? You might find another buyer that wants that same issue corrected.

It all really depends. Other properties that are built in the same year are probably selling in a similar condition.

Caleb Heimsoth · Answer

@Mike Nelson it’ll always result in a lower price if they negotiate.  It’s whatever the buyer and seller agree.  Usually best to offer seller credit than repair yourself

How is inspection report negotiated.

Most Popular Reply