If a home inspection gets out of control, it can derail your entire real estate deal. I’ll explain how to avoid this today.
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How do home inspections get out of control? I’ll examine this question from both the buyer’s and seller’s perspective.
First, an inspection is done after a contract has been accepted and agreed upon by both parties. The inspection usually occurs within the first five to seven business days. The inspection is there to see if there are any major issues with the house.
This is where a lot of people get hung up. A major issue would be something like water in the basement, a leaky roof, or mold in the attic. Major issues do not include things like a drawer that doesn’t shut. If a handyman can fix it, it’s probably not a major issue. Keep that in mind when you are negotiating inspection items.
When a buyer signs a contract, the contract states:
“Buyer agrees that minor repairs and routine maintenance items of the real estate do not constitute defects and are not a part of this contingency. The fact that a functioning major component may be at the end of its useful life shall not render such component defective for the purposes of this paragraph.”
If you’ve signed this contract before, you might not have noticed that bolded section. Basically, that means if the property has a 20-year old furnace, you cannot ask for a new furnace. If the roof is at the end of its life but not leaking, you cannot ask for a new roof. It’s really important that you keep that in mind. You’ll want to know how old the mechanicals are when you write the offer.
If you’re a seller and you know that your roof is at the end of its life, you may want to be proactive and get some estimates. That way, you’ll know what the cost might actually be if you were to replace the roof.
Sometimes the buyer comes back with a laundry list of items that they want repaired. That list can turn a $500,000 deal into a disaster, and they may even end up canceling the deal because both parties get upset.
So, how can you prevent these issues from happening?
First, make sure you hire a real estate attorney. Not a corporate attorney or other kind of attorney—a real estate attorney. They are most familiar with the contracts that real estate agents use.
Next, have your expectations set by your Realtor. If you are the seller, make sure that everything is already out there. Notify the buyers that the roof is old before they write their offer. You don’t want them to be surprised by the inspection. If they know that the roof is 20 years old and they’ll have to spend $10,000 to replace it in the next two years, that can really affect their purchase price or even their ability to buy the home.
You also need to look at the big picture. Are you ready to get this deal done? Is it important for you to secure this deal and not have to go back on the market? If you go back on the market after an inspection, you will have to disclose those items, which can make it more difficult to sell. It’s probably best to try and work with the buyer or seller to finish the deal.
If you are buying or selling a home, it’s really important for you to think about the inspection beforehand. Talk it out with your Realtor and figure out what to expect. If you are a buyer, don’t ask for a laundry list of repairs. Pick the main safety or health issues; those are the most important. If you are a seller, it’s important to realize that you can say no to what the buyer asks for. This is just another negotiation to work through.
If you have any other questions about buying or selling a home, just give me a call or send me an email. I would be happy to help you!