Derry's Condo Headshot

Derry's Condo Headshot

Wednesday, June 29, 2022

Inspections-the biggest variable during a transaction

 You've lived in your home for 15 years and you think you do a reasonable job of maintaining it. Now the kids are gone and you're ready to downsize, or your family is growing and you need more space so it's time to sell your home. You list your home, find a buyer, come to an agreement and open escrow. You tell the buyer everything you've done to the home and anything you know about the home. Now comes time for the inspection. Someone comes through spending hours in your home going over every square inch of things. A few days later, your buyer turns in the report and a list of repairs they would like to be made prior to closing escrow or some sort of financial credit. The list seems astronomical and you might not know any sub contractors who could do the work. Also, you worked so hard to maintain your home and get top dollar for your home and your buyer has decided that this laundry list of work is going to cost so much more than you would expect. What do you do and how do you not get furious about the situation?

I grew up with the idea that you always throw money at the problem. In this scenario, it's coming up with a number to give to the buyer and saying that you're done. This can be a little problematic when the seller has several very reasonable handymen and the number is based on that rate as opposed to someone else that might be more. It's delicate line to walk.

Also, how do you decide to come up with a number in the first place? It's not necessarily just turning in the entire request list, presenting it to your handyman and coming up with a number. Most inspection reports will highlight safety concerns, operation, absences and in some cases whether or not it is to code. If the home is new or newer construction, everything ought to be to code, functioning and safe. If the home is not new construction it's realistic to expect certain items to reflect the age of the home. Items that are typical to reflect the age of a home are the roof, maybe the rate of termites, electrical panels, water heaters, sewer lines, windows and more. If a buyer has presented requests including a new roof, or tenting for termites, etc. I'm less inclined to encourage sellers to acquiesce to those concerns because those are typically classified as upgrades or remodels. However, if we marketed the property as a remodeled or upgraded property, there might be some room for negotiation and there in lies the gray area where buyers and sellers come to an agreement. As a whole, I generally recommend making an effort to make the property safe. I still like the idea of throwing money at the problem, but enough to make it safe. It's generally an easy idea to rationalize that you don't want to be responsible for selling an unsafe home.

Now, the other option: doing the work. I'm going to bring it back to the gap between having your more reasonable handymen do the work versus the buyer doing the work. If you and the buyer cannot come to a financial agreement because of the gap, you put the buyer in the position to take it or leave it. If they choose to leave it, you fall out of escrow and go back to the open market to try this whole process again. Not only that, but you are also obligated to present all inspections and reports to your next buyer. In this case, it might be best to have your handymen or sub contractors handle the work. The downside about choosing this is that you as the seller are responsible for completing the work. One of the first properties I ever sold, the buyer had requested that the gas fireplaces function. My seller agreed. Of course, on the day of the final walk through, the fireplace didn't work. The buyer had to make a note that my seller didn't sufficiently resolve the problem with the fireplace. My seller had paid for a contractor to resolve the problem, but it didn't work on the day of the walk through. What a drag and that seller might be in need of a new sub contractor. 

It's a tricky step in any transaction, but there is always a way to navigate through it. 

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