How Home Inspection Details Impact Negotiation and Pricing

Considering the era of fierce competition in the housing market, the outcome of a home inspection is often not a direct factor in lowering the home price. The question for buyers then becomes: “Do I still wish to own this house with these defects, hazards, and potential future expenses?” If the answer is yes, then the buyer should proceed with the agreed price. However, if the answer is no, buyers may opt to walk away from the deal.

In my state, the buyer has the right to request a home inspection and, within the first few days, back out of the agreement if they're not satisfied with the conditions of the house. The seller is under no obligation to lower the price or make repairs unless they choose to offer this service to maintain the transaction.

Real Estate Market Conditions and Negotiation

The ability to negotiate a price heavily relies on the local real estate market conditions and the willingness of the seller to negotiate. When the market is flat or slow, often referred to as a ‘buyer’s market’, or in economically depressed areas, numerous issues revealed during a home inspection can significantly impact property values.

Evidence of Infestations and Their Impact

For instance, findings of termites or other types of infestations will necessitate extensive extermination and control measures. The costs of these repairs are typically segmented into section 1 and section 2 repairs. Mortgage lenders will not consider financing a home unless these section repairs are completed.

Outdated Utilities and Major Repairs

Outdated utilities such as plumbing, electrical systems, and septic tanks, among others, often require significant and costly interventions. For instance, replacing or upgrading a home's plumbing and electrical systems can involve extensive accessibility to wall interiors. The replacement of a septic system, although located outside the home, can cost thousands of dollars in excavation, labor, and installation of new equipment such as a septic tank, sewer lines, and a drainage field. In urban areas, replacing the home's main sewer line to the public sewer system can be even more expensive.

Roof and Appliance Repairs

Roof replacement in older homes is a frequent issue, while outdated appliances can also factor into the purchase decision. Upgrading any appliance typically starts at around $800.00, and additional costs like delivery and set-up can vary depending on the retailer and promotions.

Strategies for Home Buyers

Given the potential for significant costs related to home repairs, buyers in a well-negotiated market may be able to substantially reduce the home's asking price. However, many potential home buyers are financially constrained by the time they complete the purchase, lacking the extra funds to address the issues highlighted in a property inspection report. As a result, new owners may choose to use their savings rather than waiting to accumulate more.

A seasoned real estate agent can provide valuable advice to their potential buyers regarding the cost-to-repair issues highlighted in the property inspection report. This knowledge can help in formulating a proper initial purchase offer. A solid offer greatly depends on the agent's and the buyer's understanding of the trade costs involved in repairs.