How do you react to “Reply to Inspections” on flips

Question

I’m flipping two houses right now. The first one had a higher price point and I had to wait about 6 weeks until I had an offer which I accepted. That buyer had an inspection and asked for every little thing (I think it was 12 different items, totaling $1200) to be repaired, would not accept a credit. I performed those repairs because I felt I had little choice with them being my only offer. That buyer ended up backing out at the last minute, but that is a different story entirely.

When I listed my second flip, it was completely different. There were three competing offers with escalation clauses and I ended up getting it under contract for well over list price. The buyer got an inspection, and asked for about 15 things (some minor, but some more substantial) to be fixed. Radon mitigation was one, install bathroom fan, re-grade around house, repair cracks in driveway, etc.

I feel like since there was so much competition for this one I have a significant amount more leverage. I personally hate being at buyers beck and call on these insignificant inspection repairs and feel like they should fix it themselves after they buy it. I’d rather just give them a $2000 credit and move on. Does anybody have a policy or preferred method for this? Since there was so much competition I feel like I could offer a credit and imply that if they don’t like it I’ll just find another buyer.

Russell Brazil · Answer

When you are selling a flip, you are selling a premium product.  You are selling a BMW, a Mercedes....you are not selling a Toyota Corolla with 75,000 miles on it.  When you sell a premium product, people have higher expectations of that product.  Every flipper should be prepared to send their contractor back in with a punch list of items to fix after a home inspection.

Theresa Harris · Answer

@Kyle M.  If the buyer was smart, they'd take the credit and get it done themselves to have control over the quality.  I'd offer them the credit and remind them that you have two other offers.

Mike Dymski · Answer

Fix the necessities (and maybe the easy stuff) and decline to repair the insignificant items that are more costly.

James Mc Ree · Answer

I agree with @Russell Brazil.  When the adds says something like, "fully renovated", "like new", etc - buyer's don't expect to have to fix things.  The seller should just fix them if they truly are insignificant.  Something like a bathroom fan, for example, is required by our building code if there is no window in the bathroom.  It must be done to get a permanent U&O inspection in PA.  Grading can be a problem if it is grading stormwater into the house.  I would say, "Fix it." too.

The problem with the credit approach is it forces the buyer that have additional cash to afford the property and incur the construction work while they are trying to arrange a move and maybe sell their current home.  Buyers often stretch to afford the down payment and closing expenses.  Adding a couple thousand more might not seem like much from the seller's viewpoint, but can be significant to the buyer.  If I were the buyer, I would take a $3,000 credit for estimated $2,000 work and call the difference my time and experience to fix the seller's property defects.

James Wise · Answer

It's all about leverage my man. Sometimes you are in a spot where it's in your best interest to happily fix everything. Other times you can simply tell them to get bent. Supply and demand is the determining factor in how you should go about all of your negotiations.

Bill Quigley · Answer

In my last flip I had a buyer request a lot of changes too. But like @Mike Dymski stated we only did the necessary fixes. The buyer did not push back and took the offer. We did the fixes ourselves since I felt we can do it cheaper than an acceptable credit, which helped my bottom line.

Kyle McCorkel · Answer

Thanks everyone for the responses. I decided to take a stance that I will fix anything that was newly installed by my contractors that was not done correctly, and offer a credit for everything else.

So for this one, there was a loose deck railing and loose toilet that I said my guys would fix. Everything else I offered a $2000 credit. We will see what happens; if they back out I’m just going to make the same exact offer to the next buyer (at same purchase price).

Brian Pulaski · Answer

I would start at credit (whatever amount you are ok with). If they balk agree to do only a few things that seem reasonable. If they balk again possibly time to move to the next buyer. In the past I have almost 100% agreed to fix everything the buyer has asked for. With that said, if the list was long and petty, I most likely wouldn't agree and negotiation from there.

Michael Noto · Answer

@Kyle M. Try the credit route first and if they deny then take it from there. If all is equal I would much rather do the credit than the actual repairs and if I was the buyer I’d want it that way too.

How do you react to “Reply to Inspections” on flips

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