What a Difference a Box Makes

Alright.  Here is how most negotiations go between a buyer and a seller.  Buyer makes an offer.  There is usually at least one round of countering, then the seller thinks “Oh, I better not go to my lowest number since I don’t know how hard they’ll hit me with repairs after the home inspection.”

Assuming a deal is struck, we wait for the home inspection.  Most of the time the repair list is stuff like a window that needs caulk, or a deck that doesn’t have metal joist hangers,  maybe a double tapped breaker, and my personal favorite:  The furnace needs checked out by a licensed HVAC technician.  That one always cracks me up because the buyer’s home inspector suggested another inspection, which they ask for on a repair list……so, the buyer is asking the seller to do an inspection, which the contract says is the buyer’s responsibility to do.  To make matters even more comical, most agents write it just like I said, meaning the seller can agree to have it inspected, but the buyer has no recourse if there is a problem because the buyer’s agent DIDN’T ask the seller to fix any problems, merely have it inspected.  I’ve always been tempted to give a buyer’s agent a receipt from the HVAC company that says “THIS FURNACE SUCKS AND NEEDED REPLACED YEARS AGO!” then remind the agent that all the buyer and seller agreed to was having an inspection.  I’ve always played nice though, since you have to dance with the buyer and their agent until the music stops at the closing.

Sorry for the tangent there.  Back to my topic.  So, the seller has budgeted some money in the counter offer for any repairs.  That means that the buyer is really paying for the repairs.  If the seller would have come down another $1000, but didn’t, the buyer is paying $1000 more for the house than they could have and are paying for the repairs within the higher contract price.

Which leads me to my point.  Sellers usually over-estimate the cost of repairs.  I just had a deal where we needed plumbing, electrical and window work.  Doesn’t that sound expensive?  All in all, it was less than $300.  Hardly worth getting worked up over.

Here is what I like to do when my buyer’s will let me.  On our contracts, we have 3 options for dealing with inspections.  If you check box 1, you are saying I’m taking this house period, see you at the closing!  Box 3 is what most people do.  That is the one where you have the house inspected, write a repair list and end up fighting over caulking a threshold or a leaking faucet.  A smart seller will know that a buyer isn’t going to walk away over such small things.  A smart buyer knows a seller isn’t going to walk away over such small things.  Depending on the temperament of either party or their agents, you can quickly turn a real estate transaction into a Real Housewives of New Jersey cat fight.  A seller always feels like they are practically giving their house away and now the buyer wants to pistol whip them with repairs.  A buyer always feels like they have paid too much and the seller is being unreasonable not to do these little repairs.  And, because feelings are involved, people don’t always act rationally……SO what about Box 2??

Box 2 is my favorite.  It gives the buyer a chance to have the house inspected.  The buyer can walk away from the deal if there is something that freaks them out too bad.  There is no repair list to fight over.  You just tell the seller whether you are in or out.  What I like about this for the buyer is that they are protected by a home inspection and can walk away.  They also usually can get the best price possible because the seller hasn’t padded their price (Remember  sellers always budget too much!)  I tell my buyers that any repairs you have the seller do, you really have no control over.  Wouldn’t it be better to have the repairs done yourself and have control over the quality of the repair.  Keep in mind that any repair is just something a seller has to get off their checklist in between packing up their stuff to move.

So, think about Box 2 if your buying.  If the house is a hot mess, walk away.  If all it needs is a few minor repairs, pay to have them done after you close rather than paying the seller too much to do it for you…..Plus, if you are in multiple offers, you might be at an advantage since other offerors will likely check Box 3.

 

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