It’s a toss-up whether the home inspection or the appraisal induces more nail-biting. Homebuyers, sellers and the agents involved await the results of both with a mixture of anticipation and fear. The latter, 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 not all of them were due to a nasty home inspection report. So, the chances are in your favor that your deal, regardless of the findings of the inspector, will sail through to closing.
But, it may need your help.
When faced with problems that the home inspector turns up, you, as the buyer, have several options.
First, Choose Your Battles
Understand that there are some repairs, such as electrical, roof, the HVAC system and plumbing, that you can reasonably expect the seller to make.
In fact, 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 as well.
It’s the little things, though, that bog down transactions, sometimes bringing them 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. Save your big guns for the 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
Ask the seller to make the repairs
When 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.
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.
Renegotiate the price
A third option 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, determine if you have the funds to do the work.
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. Because this loan rolls the cost of the repairs into the mortgage, you’ll, in essence, be financing the repairs but only make one payment every month.
The 203k program is a bit complicated and the loan takes time. It will significantly slow down the purchase process so you’ll also need to ask the buyer for a later closing date.
One 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 that the seller may cancel the sale.
But, since whatever problems the inspection turned up are now disclosure items (the seller will have to inform any subsequent buyer about them), many sellers will be amenable to the change.
It’s important to work closely with your real estate agent on inspection problems, requests and remedies.
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