Can You Negotiate Home Price After The Inspection?

Posted by Joe Boylan on January 10th, 2021

The “Home Inspection” is a part of the home buyer’s due diligence process. It is a contract clause that is afforded to the buyer to ensure they have an opportunity to learn about the true property condition.

This clause intends to give the buyer a chance to discover any problems that may exist with the property and a chance to negotiate an acceptable resolution. It also allows the seller to make right anything the buyer finds unsatisfactory.

Negotiating after the home inspection generally happens in the form of repairs or replacement of the issues by a licensed professional. The buyer puts together a list of items and asks the seller to complete repairs before closing.

If the seller agrees, the transaction proceeds. If the seller rejects or proposes an alternative resolution, the buyer can accept these new terms or reject them and terminate the deal.

These items don’t necessarily need to be repaired or replaced; repairs can come in the form of credits, compensation, or a reduction of price. In some cases, it’s more appropriate to look at monetary alternatives instead of actual repairs.

Re-Negotiating Home Price After The Inspection

Depending on a buyer’s plans for the property, repairs may be pointless. For example, the buyer may be planning to completely renovate the property or even tear it down altogether after closing.

In many cases, the buyer might want to upgrade the items in question. We often see this with roof problems. If the roof requires replacement, the seller would most likely choose the most affordable option. In many cases, the buyer may want to upgrade the roofing material. Proceeding with the affordable option locks the buyer into living with an inferior roof.

There are many instances when a reduction of price or dollar credit at closing makes more sense than proceeding with repairs just for the sake of getting through the inspection. We find that in most of these cases, the buyer ends up very disappointed with the results.

Another case when a price reduction is appropriate is when a property is marketed at or above market value. Still, the inspection finds issues that dramatically change the value of the property.

For example, the inspection reveals expensive foundation problems that the seller was not aware of or has failed to disclose. These repairs can run into the tens of thousands of dollars. If the property was priced without considering those repairs, the value of the property is reduced. If the comparable sales used to calculate the listing price had good foundations with no problems, this would certainly make the property's value lower and merit an adjustment.

In cases like these, the buyer should get a bid from a licensed professional and use the bid as a baseline for the discounted price. If the seller rejects this alternative, the buyer is free to terminate the contract without the risk of losing their earnest money.

Sellers Strategy

Many home sellers feel like the inspection clause is a buyer’s chance to renegotiate the contract terms. This can be true, but if the seller has received good advice on pricing before putting the home on the market, any repairs or problems should be priced.

The only responsibility the Seller has is to disclose any adverse material facts they are aware of. One major misconception is that the seller must make right any problems found during the inspection; this is not the case.

One smart strategy for the home seller is to have a pre-listing inspection. This way, they stand a good chance of knowing in advance what buyers will find out on their inspection. Once the seller has this knowledge, they can price the property accordingly, fully disclose the inspection findings, and price any inspection findings into the listing price. When buyers look to renegotiate, the seller stands a better chance of holding their ground on making any additional concessions.

In most cases, it’s wise to keep deals alive and headed towards closing. Termination may seem like the easy way out but remember, if there were issues on the inspection, once you are made aware of them, the seller has a duty to disclose those issues. Additionally, starting over again can set you back by weeks. All of this can cost both time and money, which is why it’s so important to work with the buyer you have to get the transaction closed.

The flip side to this is that there are just some homebuyers that won’t stop until they get everything they want and a little more. These buyers will push, whine, and negotiate until the bitter end. If you think you truly have this type of buyer, it is best to terminate quickly and move on.

In Conclusion

Most real estate transactions that end up falling apart do so because of the inspection. In many of these cases, the transactions didn’t need to fall apart, a little planning before the home goes on the market can prevent this. It’s the seller’s responsibility to disclose, not repair any known material facts about the property. Knowing the property's true condition and pricing the home based on that condition is a great way to make sure you don’t end up renegotiating the transaction to get the deal closed.