Strategies after Inspection Findings

[Thomas Stanley]

Hi Everyone - a question here.  I had an offer accepted on a first income property and just left the inspection/got the report.  Needless to say (as I wouldn't be writing this if there were no issues) there were many things found.  Some really big and some just minor and cosmetic.  Two part question:

1) Is this normal?  Do your inspections normally turn up a seemingly huge laundry list of issues - big, small, cosmetic, safety hazards, etc.?

2) What are your strategies for negotiating based on the findings?  Price reduction, seller to complete work, etc.  One concern on my mind is cash out of pocket.  For example, a $15k price drop because the property needs $15k worth of sounds great - but the translation there is that I need to also come up with $15k to have the work done - more $ out of pocket. 

Thanks for any and all input, suggestions, negotiation outcomes I may not be aware of, etc.

Tom

[Greg Scott]

Tom:

In this day and age many inspectors get sued for every little thing they don't find.  As a result, the inspection reports seem to get longer every year and include a lot more "maybes" and insignificant cosmetic items.  You have to separate the wheat from the chaff.

Personally, I would reshuffle the list into items like this:

• Critical (e.g. roof leaks)  These will be items of immediate importance to protecting the property or are safety-related
• Important (e.g. Furnace looks old) Pay most attention to expensive items.  Obviously it would be important if the front door lock is falling apart, but that is not terribly expensive to fix.
• Cosmetic (e.g. scuffed paint)
• Other

I'd pay most attention to the top two categories.  Nobody is going to give you another $1K off the price because the paver patio has some uneven bricks, but they might have to cut you a discount if it needs a new roof.  If you have concerns on mechanicals dying shortly after purchase, have them get a home warranty.  That way if the hot water tank goes, your out-of-pocket is minimal.

Start working on a capital improvement budget to address the other items when they come up.

Good luck