Negotiating the Home Inspection Removal Minefield
I have had several calls recently from real estate agents having difficult home inspection removal negotiations that wound up putting the entire transaction at risk over "nice-to-have" items. It is very important that Real Estate agents understand the danger of trying to extract concessions from the Seller. The way the Home Inspection Contingency for northern Virginia is written, a negotiated item may not start out as a deal-breaker for you purchaser, but may wind up being a deal breaker after all when the Contract becomes void due to a failure of the Seller to continue negotiations.
The Home Inspection Contingency gives Purchasers of Real Estate three options following their Home Inspection:
1) They may elect to accept the property in its present physical condition, subject to the warranty provisions of the contract (Paragraph 7, Termite, Well & Septic etc.).
2) They may elect to deliver a copy of the entire report along with notice voiding the contract completely. No reason for voiding need be given.
3) Most Buyers, however, submit a copy of the inspection along with a list of items identified in the home inspector's report that they would like remedied (either by having the item repaired or replaced or by receiving a credit in lieu of repair).
The Seller then has some length of time (usually 3 days) to respond. If the Seller fails to respond or makes a counter offer, the Purchaser has 3 days to consider the Seller's response or lack of response and can still choose from any of the three original options (accept the property, void the contract, or submit a revised addendum).
If the Purchaser chooses to engage in further negotiation, they risk losing the house completely, or losing any concessions they may have won with their initial addendum.
Illustration:
Buyer conducts home inspection and requests roof replacement, carpet replacement credit, and stuck windows be made operational.
Seller counters that they will replace roof, credit $500 toward carpet replacement, and refuses to address stuck windows.
Buyer counters that they want $1000 for carpet replacement.
Seller does has not responded with fewer than 8 hours left in their response period.
Buyer now has only two choices -- if they drafted their contract using the most recent version of the Home Inspection and Radon Testing Addendum form.
1) They can do nothing and the contract becomes void at the end of the response period, and they lost the house over $500.00
2) They can remove the Home Inspection Contingency and take the property in its present physical condition, subject to paragraph 7, termite, etc. They have lost the concession for a roof replacement and $500 worth of carpet replacement in an effort to squeeze an extra $500.00 out of the Seller.
The scenario is worse if the Buyer used an old version of the Home Inspection addendum . . . arguably they can't save the transaction at all, and if the Seller is upset (or has received a back-up offer) they can wait out the clock and the contract will become void. I say arguably because some attorneys take the position that a contingency that exists solely for the benefit of the buyer can be removed by the buyer at any time before the contract becomes void . . . but who wants to litigate that issue?
What would the buyer like to be able and do? Go back in time and accept the Seller's last counter offer. How many of you keep a clean copy of every Seller counter offer just in case? I have no doubt that some Purchasers have successfully convinced their Seller to continue to closing after resubmitting a previously rejected counter-offer. The Seller is not obligated, however, by that delayed acceptance if it is received after the Purchaser's original deadline to respond.
Please feel free to comment or send me an e-mail if any of this confuses you.
Bottom line -- don't haggle over items that aren't deal-breakers for your buyer, because your deal just might break if you do.
---------------------------------------------------
Click Here To Receive Updates by E-mail
Disclaimer
The Home Inspection Contingency gives Purchasers of Real Estate three options following their Home Inspection:
1) They may elect to accept the property in its present physical condition, subject to the warranty provisions of the contract (Paragraph 7, Termite, Well & Septic etc.).
2) They may elect to deliver a copy of the entire report along with notice voiding the contract completely. No reason for voiding need be given.
3) Most Buyers, however, submit a copy of the inspection along with a list of items identified in the home inspector's report that they would like remedied (either by having the item repaired or replaced or by receiving a credit in lieu of repair).
The Seller then has some length of time (usually 3 days) to respond. If the Seller fails to respond or makes a counter offer, the Purchaser has 3 days to consider the Seller's response or lack of response and can still choose from any of the three original options (accept the property, void the contract, or submit a revised addendum).
If the Purchaser chooses to engage in further negotiation, they risk losing the house completely, or losing any concessions they may have won with their initial addendum.
Illustration:
Buyer conducts home inspection and requests roof replacement, carpet replacement credit, and stuck windows be made operational.
Seller counters that they will replace roof, credit $500 toward carpet replacement, and refuses to address stuck windows.
Buyer counters that they want $1000 for carpet replacement.
Seller does has not responded with fewer than 8 hours left in their response period.
Buyer now has only two choices -- if they drafted their contract using the most recent version of the Home Inspection and Radon Testing Addendum form.
1) They can do nothing and the contract becomes void at the end of the response period, and they lost the house over $500.00
2) They can remove the Home Inspection Contingency and take the property in its present physical condition, subject to paragraph 7, termite, etc. They have lost the concession for a roof replacement and $500 worth of carpet replacement in an effort to squeeze an extra $500.00 out of the Seller.
The scenario is worse if the Buyer used an old version of the Home Inspection addendum . . . arguably they can't save the transaction at all, and if the Seller is upset (or has received a back-up offer) they can wait out the clock and the contract will become void. I say arguably because some attorneys take the position that a contingency that exists solely for the benefit of the buyer can be removed by the buyer at any time before the contract becomes void . . . but who wants to litigate that issue?
What would the buyer like to be able and do? Go back in time and accept the Seller's last counter offer. How many of you keep a clean copy of every Seller counter offer just in case? I have no doubt that some Purchasers have successfully convinced their Seller to continue to closing after resubmitting a previously rejected counter-offer. The Seller is not obligated, however, by that delayed acceptance if it is received after the Purchaser's original deadline to respond.
Please feel free to comment or send me an e-mail if any of this confuses you.
Bottom line -- don't haggle over items that aren't deal-breakers for your buyer, because your deal just might break if you do.
---------------------------------------------------
Click Here To Receive Updates by E-mail
Disclaimer
posted by Marcus Simon at
8:19 AM
Sphere: Related Content
.jpg){kind=small}
5 Comments:
This is a great article, Marcus. It really highlights how buyers and sellers, always struggling with maintaining control, can find themselves with a mess on their hands with unreasonable expectations! Thanks for an insightful read!
Jennifer Klaussen
Keller Williams, McLean
I agree with Jennifer. Very well done!
If you are searching an home inspector then a simple guide should aid you in finding a well qualified, professional home inspector..for more information you can visit http://equityinspection.com// site!!
Great post. Thanks for sharing info from them. I'll look forward for more posts from you, especially about home inspection NJ
.
I must say that this is one great article. Home inspection NJ can do the home inspection that you want.
Post a Comment
Subscribe to Post Comments [Atom]
<< Home