I wish that I had a dollar for every transaction where the seller did not want to negotiate away the various home inspection items requested by the buyer.  I would have quite the sum by now. However, we need to take a step back from the deal and look at the money involved and how to make everyone a winner. 

In the typical real estate transaction in a hot seller’s market, there may be no home inspection done at all.  After all, it is likely that there were multiple contracts and the rival bidders eliminated as many of the contract contingencies they could to make their offers more competitive in the seller’s eyes.  If you were the buyer, it was not material to the deal if there were potential hidden repair costs since you were bidding $10,000 or more over the asking price anyway.  So what if there were a few thousand dollars more of miscellaneous costs? 

However, in a buyer’s market, no stone is left unturned in various property inspections.  Sellers are often asked to repair / replace structural, electrical, mechanical, and plumbing items.  Often the buyer really does not want the seller to make the repairs or to have the repairs done.  The buyer prefers to have his own repair contractors do the work to the buyer’s satisfaction.  So a dollar amount is proposed to the seller in lieu of the repair list being completed. 

This starts a second round of negotiating (sale price for the property was first).  The buyer wants $15,000 and the seller wants to give only $8,000.  There is a counter offer at $12,000 from the buyer.  The seller only wants to give $10,000 but may not want to lose the deal over the difference ($2,000).  

How could we help the seller analyze the deal to see if it is time to take the buyer’s offer and be sure the deal is completed?  One approach is to determine the net proceeds of sale and look at the difference in the buyer and seller’s position as a percentage of the proceeds.  For example if the seller is netting $400,000 from the sale, the argument over $2,000 represents one half of one percent of the proceeds.  If the smaller amount of proceeds of sale ($400,000) are invested in a CD yielding 3%, ($12,000 per year), the seller need only invest the proceeds for a few months to recapture the ‘lost’ proceeds ($2,000).  It is definitely time to take the deal and secure the $400,000. 

It is important to help the sellers rid themselves of the emotions of the transaction and concentrate on the net proceeds and potential opportunity costs of not completing the deal.   

If you have any concerns about your sales transaction, send me an e-mail or call me to have a frank discussion of the potential loss or gain from your property sale decisions.

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