Mary just had her home inspected by a first time buyer and she received the home inspection report with a contract addendum asking for all kinds of repairs and replacements.  A few of these requests, to her, were absurd.  So Mary called me for my opinion.

After I calmed her down, I pointed out that these were first time homebuyers.  Mary had already given them a seller credit so they had the funds necessary to complete settlement and to get into the property.  This told me that they were short on money for repairs.  So anything that came up in the inspection was likely to end up on Mary’s lap as a repair request.  Mary’s home also suffered a little from owner neglect. 

So Mary had a couple of options.  She could say no to a lot of the repairs and risk losing the deal.  This was a horrible idea, I thought, since she had already lost a buyer at settlement.  She could also provide a credit except I thought she would be over the lender limit for the size of credits on the buyer’s loan amount.  So a credit was not viable.  Therefore, we needed to look at the inspection list and separate it into repairs that met the contract terms (broken, damaged home items), and repairs that were really home improvement requests.  The latter would be something nice to have, but really not called for under the contract.  For example, the dishwasher did not work.  It needs to be repaired or replaced under the contract terms.  However, it would be nice to have new windows, but the home did not have new windows when it was placed on the market and seen by the buyer.  This is an improvement not required by the contract.  Mary could say no to new windows and still not breach her contract.

The trick to sorting all this out is getting the buyer to understand the difference and not have these be items so important to the buyer that they decide to continue looking for another home.  In a buyers market, it is best to do all or nearly all of these requests – even if they are improvements.  If the seller is going to make $225,000 on the sale in net profit, it is not as important to debate the replacement of a light fixture, or whatever.  Everything the buyer wants has to be put in the context of the seller’s desire to sell and the net result of the sale to the seller’s capital.  On the other hand, if the seller is going to net $2,000 from the sale of the property, it is unlikely Mary will be amenable to much in the way of home improvements.  So Mary took another look at the list and went along with most of the items.

If you need help figuring out the tradeoffs in your home inspection list, contact me.

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