Scary Home Inspection Report? It Doesn’t Have To Be A Deal Breaker

Shannon Yoffie and Jon Yoffie
Published on September 27, 2017

Scary Home Inspection Report? It Doesn’t Have To Be A Deal Breaker

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It’s 50/50 whether the appraisal or the home inspection report induces more butterflies. Homebuyers, sellers and the agents involved await the results of both with a mixture of anticipation and fear. Concern, at least statistically, is unfounded.

“Nationally, [only] 3.9 percent of sales failed in 2016,” according to Forbes staff writer Samantha Sharf.

She doesn’t mention the reason for the failures, although it’s a safe bet that most of them were not due to the home inspection report. There’s a very good liekelihood that your deal, regardless of the findings of the home inspection report, will close.

But, it may need your help and the help of an experienced real estate agent.

When faced with problems that the home inspection report turns up, you, as the buyer, have several options. A good agent will help you navigagte and negotiate through any findings on the report.

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First, Choose What is Most Important

There are some repairs, including electrical, roof, the HVAC system and plumbing, that you can reasonably expect the seller to make. That doesn’t mean they will agree the first time through. In all likelihood any issues with important home systems will be dealt with by the seller.

It’s possible that anything that presents a health and safety concern or that negatively impacts your use of the home is not only something that the lender may require, but that, should you walk away from the purchase, the next buyer will expect to be repaired, too.

It’s the little things, though, that can slow down your purchase, sometimes even bringing it to a halt. If you really want the home, ignore the small stuff and fight for what actually matters.

Items to ignore include anything of a cosmetic nature and problems that are inexpensive to remedy. Focus on any major repairs.

For instance,

Demand repairs to anything that presents a danger to health and safety, such as faulty wiring or mold.

You Have Options When Faced With An Ugly Home Inspection Report

1. Ask the seller to make the repairs

Home Inspection ReportWhen faced with major repair or replacement costs, many homebuyers ask the seller to make the repairs before the close of escrow. Often, sellers balk at the request, but once they’re reminded that the next potential buyer will most likely make the same request, they relent.

2. Ask the seller for a credit

Rather than ask the seller to make the repairs, ask that he or she credit you with the cost of the repairs at the close of escrow. This way, the seller avoids the hassle of having to hire a contractor and the inconvenience of home repair work happening while he’s trying to pack up for the move.

Note that FHA will only allow the seller to credit the buyer 6 percent of the sales price.

But, if the problem has to do with the roof and the required repairs are extensive, FHA may require that the work be done before the close of escrow.

3. Renegotiate the price

A third option, one we rarely suggest but sometimes works best, is to ask your agent to amend the purchase agreement with a reduced price, reflecting the deduction for the cost of the repairs. You’ll need to get bids from contractors to determine the cost of fixing or replacing whatever is at issue.

This option depends on your current cash flow. While it lowers the cost of the home, it does nothing to put money in your pocket. So, before exercising this option, make sure you have the money and time to do the work.

4. Switch your financing

If you’re using a FHA-backed loan, contact your lender to find out if you can switch to their 203k program. This loan rolls the cost of the repairs into the mortgage, so you’ll be financing the repairs over the course of the loan, makine one payment every month.

The 203k program is a bit complicated and the loan takes time. This will significantly slow down the purchase process so you’ll  likely need to ask the buyer for a later closing date.

A problem you may run up against with this option is that the seller is under no obligation to cooperate with your efforts to obtain financing that differs from that stated in the purchase agreement. There is a risk with this option that the seller could cancel the sale.

Whatever problems the home inspection report turned up are now disclosure items (the seller will have to inform any subsequent buyer about them), Because of this, many sellers will be amenable to the change in order to complete the transaction and avoid having to actively market the home for sale again.

It’s important to work closely with your real estate agent on home inspection report problems, requests and remedies.

What may look like an insurmountable problem when you first read the home inspection report usually turns out to be easily settled between the parties. Remember, almost no home will be in perfect condition. The seller wants to sell, and you, the buyer, want to purchase the home! Keep that in mind to keep your transaction on track to close!

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