Agent2Agent in Massachusetts>Question Details

Judy Boyle, Real Estate Pro in Northborough, MA

Has anyone ever negotiated a sale price AFTER the home inspection?

Asked by Judy Boyle, Northborough, MA Sun Dec 7, 2008

Today my seller suggested offering this scenario to attract prospective buyers: With an acceptable earnest deposit, he will take his house off the market for one week so the prospective buyer can conduct any and all inspections. After the inspections have been completed, THEN the prospective buyer and seller will negotiate a sale price. This is not a bank owned property.

My seller argues that this will eliminate the prospective buyers' attempt to renegotiate after the inspections...assuming the inspectors discover any issues.

For obvious reasons, I advised my seller that this strategy will be of no benefit to him...not to mention a buyer may not be amenable to incurring the expense of a home inspection without an accepted offer. We had a very positive discussion about this strategy but nothing was decided.

The way we left it, I would ask around and see what other agents thought of this unconventional strategy. Any thoughts and comments will be appreciated! Thank you!

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17
Judy, as everyone (to a man) has stated prior, your seller is making the process more complicated than necessary, and thereby accomplishing the opposite of what he set out to do.

He wants to make his home more attractive to buyers, and this will make it LESS attractive.

As a buyer's agent, I could not, in good conscience, recommend to my buyer that they spend the money on an inspection, not knowing if we could even reach an agreement on price. Your seller needs to understand that the purchase contract agreement of price, basically tells him, that "yes, we are willing to pay this amount... presuming that we don't find anything major in the inspection".

And then he can chose to be as stubborn as he wants regarding stonewalling renegotiations depending on what the buyer might ask for. And the pre-inspection might be a great idea for this particular seller, to let him know what he might anticipate them asking for.
1 vote Thank Flag Link Fri Dec 12, 2008
Alan May, Real Estate Pro in 60201
MVP'08
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Judy,

I do not think it is necessary to make the transaction more complicated & you will the risk of scaring off what few potential Buyers there are in the market. (ask your Seller to put on their "buyer hat")

I have had good luck with my Sellers performing their own home inspection (by a reputable home inspector) We make the results available to any prospective Buyer. Leaving the report out in full view with extra copies. Also, we indicated what repairs have been corrected (with receipts for the work).
Yes it does cost the Seller a few hundred dollars + the repairs upfront, and these are most likely repairs the seller is going to have to make anyhow. (pay now or pay later)

The advantages are:
It says to the Buyer, "I'm being honest & upfront with you...." and people tend to respond that kind of openess.
This is also one of the few homes that has been inspected, making it stand out in the Buyers mind.
Eliminates greedy Buyers asking for alot of $$$$ to fix minor repairs.

So far, I have not had a deal fall apart, or the Buyer ask for credits after they have performed their own inspection. In the long run, my Sellers have saved money on the repairs, because it allowed them time to shop around & we do not incurr the additional cost of having the repairs done on a short schedule.


Best of luck,
Bill
Web Reference: http://www.century21.com
1 vote Thank Flag Link Mon Dec 8, 2008
Judy,

I'll keep this short. I would recommend that the seller address any issues that could come up on a home inspection prior to negotiating a sale price. He may want to get a pre-listing inspection for his own benefit and not that of any prospective purchaser.
0 votes Thank Flag Link Mon Dec 29, 2008
This is in response to Glen's answer. Your the first home inspector to caution against a pre-sale home inspection I've met. The way I've been told (even by sellers attorney's) is to do the pre-sale home inspection and use it as a disclosure source rather than the Property Disclosure form. This is in addition to the buyer doing their own inspection. This is a more authoritative disclosure than the average lay person is capable of. All known defects are disclosed but the caveat that any buyer should still do their own inspection or sign an acknowledgment that they waived it knowingly.
Web Reference: http://www.MedfordHouse.com
0 votes Thank Flag Link Mon Dec 22, 2008
Hi Judy... I don't know of anyone that would pay for an inspection before they have nailed down the purchase price (including me).

There really are buyers that use the option period to renegotiate the price and all terms of the contract REGARDLESS of the inspection outcome. It's not right but it happens...Nothing you can do about it other than handle the situation as it comes. Handle it with care (aka: "finesse") and everyone comes together and it all works out...

Having your seller do an inspection on his own: Would this put your client in a situation of liability should the inspector "miss something"? Could work to his benifit or put him in the line of fire.

Judy....Seems like the real question on the table is whether or not you should be working for this client.

Which of you is the expert on sales and negotiation?
Is your client not confident with your level of expertise... or is he not comfortable in the passengers seat?
(... or perhaps there is something about the home the seller is not disclosing to you ...that he's praying will not be caught during inspection....but counting on having to take a hit if it is.... )

Best of luck, LD Menkemeller, Dallas TX
0 votes Thank Flag Link Sat Dec 20, 2008
Judy and all,

I know this answer is a bit late but I thought this may help as food for thought. I'm a Veteran Home Inspector in NY and would caution Real Estate Agents suggesting Pre-Listing/Sale inspections for Sellers in order to display their report to Buyers. You may be opening yourselves up to lawsuits and should consult with a Real Estate Attorney.

If a Seller uses a Pre-Listing inspection report to fix everything and keeps the report private then it shouldn't cause any problems. HomeBuyer's should still get their own inspection performed to limit your liability.

Let's look at this example: A Seller has a Pre-listing Inspection and doesn't want to fix everything but just disclose what's wrong and let's say the Inspector misses something significant (I follow-up many times where prior inspectors have missed critical defects), now the Buyer who relies on that report, discovers the missed defect after closing - it could lead to a potential lawsuit claiming foul play. You know an Attorney will name you, the Inspector and the Seller in the lawsuit. The Seller will say you told them to get the inspection and show prospective Buyer's the report. Try proving your way out of that and about $3000.00 in defense costs later. Can you afford it in times like this?

IMHO - Encourage only Buyers to do the inspections unless you know a Seller will keep it private as an informational report or to make some 'true' repairs based on the findings and not just to take cost-conscious 'swept dust under the rug' measures.

Pre-listing inspections are just potential trouble! As a Home Inspector, I will not perform them for Sellers.

Be careful, times are tough now and disgruntled Buyers will be looking for someone to pay for something.


http://www.licensednyhomeinspector.com
0 votes Thank Flag Link Sat Dec 20, 2008
I agree with several Realtors here: A pre-listing inspection would avoid this situation. Of course after every inspection hidden flaws are brought to light and the wheeling and dealing begins. Your buyer is always free to walk away within the option period.

Perhaps this buyer is unfamiliar with the standard process? You could simply educate him on the way deals traditionally work. Most often these unusual scenarios are due to lack of RE education. Buyers may not realize they have rights and the option to walk away from the Termite infested house built on a sewer main. Once you explain things to them I am sure they will be more comfortable. Good Luck!
Betina
0 votes Thank Flag Link Sat Dec 20, 2008
Hi Judy- Instead of this method, your seller should consider paying for a pre-listing (though it is too late for that wording) home inspection, and provide that with all your other listing docs for prospective buyers. This way, it will alleviate most, if not all, of the haggling that is often done after the buyer's home inspection.
The buyer may also save the $300 if he decides he does not need his own inspection.
Of course, there may be issues with FHA and termite inspections, etc depending on the loan program.
Just an idea. Thanks, and Good luck,

Ken L.
0 votes Thank Flag Link Fri Dec 12, 2008
Thank you everyone for taking the time to help me and my sellers work through this scenario! Each and every one of you is an asset to Trulia and I look forward to reading more of your answers for years to come!

Happy Holidays!

Judy
0 votes Thank Flag Link Thu Dec 11, 2008
I would think this would confuse most buyers off the top and most agents to be honest with you. I would encourage your guy to go ahead and get an inspection and then fix the major things that need to be done so that way there is nothing left to negotiate after the price is agreed upon by both parties. This also gives your more ammunition to market the home with and eliminates buyer objections right from the start.

Hope this helps and happy holidays,
Randall Sandin, rsandin@carolinaone.com
Charleston Pier Partners - Carolina One Real Estate
843-209-9667 (Direct) 843-202-8928 (Fax)
0 votes Thank Flag Link Wed Dec 10, 2008
I agree with you and everyone else thus far...this strategy complicates things, takes the home off the market without an offer in place, and asks the buyer to pay up front for inspections without even an inkling as to where things will end up in negotiations. None of these things are good for any party.

If I had a buyer (sung to "If I Had a Hammer") I'd have them make an offer on their own terms ignoring your seller's preference and let the seller respond from there.

I usually counsel my buyers to make their offer with the assumption that everything is in working order as it should be. Then if the inspection finds anything wrong, the credits/renegotiations are justified and the deal usually goes smoothly from there.

Given the situation (and the seller wanting (potentially) multiple buyers to pay for inspections prior to negotiations...) I'd also recommend that the seller get their own inspection and provide it to the prospective buyers before negotiations start.

It could actually come across as though your seller is looking to get a free inspection report from a buyer he assumes will be disgruntled after seeing it...(if there's nothing wrong, there's nothing to re-negotiate, right?)

Best of Luck!

-Josh
0 votes Thank Flag Link Mon Dec 8, 2008
It depends on the agent's negotiation skills and willingness to go to an extra mile. I have done renegotiation
on Bank Owned AS-IS nice properties after acceptance. The Bank reluctantly signed off and compensated the buyer several medium and minor repairs. Conventional wisdom says no. The reality is you have all the facts and the seller will consider it and weight their choices. In this case, Bank does not have a lot of time left going through another candidate. Bank got rid of the property and the buyer got additional monentarily incentive. A Win -win.
0 votes Thank Flag Link Mon Dec 8, 2008
Hi Judy,

While it's true no seller wants to renegotiate the deal after a home inspection, it happens all the time. One way around that issue is to do a pre-sale inspection. Paid by the seller and then supply a copy of the inspection with whatever concessions or repairs the seller is willing to do as a part of the selling package.

When the "real estate bubble" was still inflating, many sellers offered their homes as is, with inspections for the buyers information only. It would seem to me that if your seller had an acceptable inspection to show a prospective buyer, the negotiations would pretty much not be subject to additional discussion based on undisclosed or unknown property condition.

Just a thought--good luck.

Dane Hahn
0 votes Thank Flag Link Mon Dec 8, 2008
I agree with you. The sellers strategy is not sound.Mainly for the reason stated. Unless the seller is willing to pay for the inspection, or has done a recent inspection and everything is documented, I don't think that it would work. If I were the buyers agent, I would have a problem with the way they seller wants to proceed. This is why sellers need realtors. They are looking at the home selling process from an emotional point of view.
0 votes Thank Flag Link Mon Dec 8, 2008
Hi Judy

An interesting proposition, but not one that I would advise my buyer clients to pursue, having them incur inspection costs without an accepted offer, given the available inventory. I would recommend the seller do their own pre-inspection instead, disclose what needs to be disclosed, and price the home accordingly.
Web Reference: http://DavidBarnas.com
0 votes Thank Flag Link Mon Dec 8, 2008
Sounds like a pre-inspection with a little more protection for the seller.Your clients idea is an interesting proposition, however it doesn't seem like there is enough value for the buyers since they have to put a deposit down on top of paying for the inspection with no signed offer.

Perhaps you could meet in the middle with one of these:

Disclose on listing sheet something like "seller prefers buyers to do their due diligence on property prior to making an offer" - referring to a pre-inspection. That way your client won't have to take the property off the market.

Another idea would be for your client to conduct their own inspection now so they know everything there is to know about the properties condition, you can price it competitively based on the findings and sell it "as is." Might be money well spent: no surprises for the seller and could potentially give the seller the edge in the negotiation since you are priced better and organized to move quickly.

Just a few thoughts. Hope that helps.
0 votes Thank Flag Link Sun Dec 7, 2008
I don't know the legalities, but there would have to be some sort of memo of agreement prior to the escrow of funds. I don't know what the upside would be for any buyer to accept this type of arrangement. Unless the property were being sold at a significant discount. Why not simply have the seller conduct his own pre-sale home inspection and price the home accordingly? As a buyers agent I'd be highly suspicious of an offer like this, why the need to bind a buyer in such a way? I also couldn't advise my client to proceed with such an agreement without an attorney reviewing any type of memo of agreement. It would really depend on the value of the property being negotiated,
0 votes Thank Flag Link Sun Dec 7, 2008
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