Negotiation Tips for Buying a Home After a Home Inspection
Chances are that you have stumbled across this article because you are looking for negotiation tips for buying a home and you are in the process of doing so. Buying a home can be an incredibly exciting yet scary time and negotiating with the seller can seem nerve-wracking and feel intimidating. However, this guide is meant to help demystify the process of negotiating with the seller when you are looking to buy a home after you receive the report from a home inspector.
For the purpose of this article, we will be using the American Society of Home Inspector’s definition of a home inspection. The American Society of Home Inspectors defines a general home inspection as “an objective visual examination of the physical structure and systems of a house, from the roof to the foundation.” It is important to note that when a home inspector is performing an inspection, they are not giving any home they are inspecting a pass or fail grade.
Home inspectors are charged with describing the home’s present physical condition and indicating in their report which components, parts, and systems might require major repairs or need to be replaced altogether. No matter what an inspector discovers during a home inspection, a home cannot technically pass or fail an inspection.
To learn more about home inspections and what home inspectors are looking for you can read this guide which provides an in-depth outline and checklist of items that home inspectors are looking for [Inspection Checklist when buying a home in Toronto].
We would be remiss if we did not explain how a home inspection differs from a city or municipal inspection since these inspections are meant to help determine whether or not a home is in compliance with local housing and building codes. Additionally, a home inspection is distinct from an appraisal, because an appraisal is meant to determine a home’s fair market value [Differences Between a Home Appraisal and a Current Market Assessment in Ontario].
Read more about the importance of home inspections here [What is the difference between a home inspection and a property inspection?].
Common Issues Uncovered with Home Inspections
The following are issues that frequently show up during home inspections so do not be surprised if you see them listed in the report you receive from your home inspector.
Issues with the Heating Ventilation Air Conditioning (HVAC) System
Common HVAC problems might be related to maintenance, outdated or incorrectly sized systems. Your general home inspector should be able to give you an idea about the age of the existing HVAC system.
But if you are looking to learn more about the HVAC system, the condition it’s in, whether or not it has any issues, how much it might cost to replace, and how much longer it might last, you would need to hire an HVAC specialist to inspect your HVAC system and do a separate HVAC inspection.
It is important to remember that installing a new HVAC system can be expensive so it is highly unlikely that the seller would volunteer to replace an existing functioning HVAC system.
Plumbing issues are common in many homes, especially in older homes. If your inspector finds evidence of leaks, corroded pipes, and/or problems with water pressure levels they will alert you to these issues.
During your home inspection, you or your inspector should be testing all of the faucets and toilets, the dishwasher and if there is an icemaker in the freezer that is part of a refrigerator’s in-door water and ice dispenser. Given that an inspector is not allowed to damage any property when performing an inspection, the only way you will be able to learn about the main drain and sewer lines would be if your inspector has a camera, they can use to do a sewage line inspection. If you are concerned about this, you might need to hire a special inspector who can do a more detailed plumbing inspection.
If you are buying a home that uses a septic system, you should be requesting as much information as possible from the seller because at the very least they should be able to tell you when the system was last serviced. While your general home inspector might be able to do a test to see if the septic system is functioning properly, you might consider bringing in a separate specialist to test this.
Toxic or Dangerous Materials
Things such as the presence of mould and/or asbestos can cause major health problems such as asthma attacks, skin irritation, allergies, cancer, and more. Mould is generally found in poorly ventilated areas such as bathrooms and basements. Asbestos tends to be found in less obvious places such as flooring, pipe insulation, insulation, and exterior cladding.
Your home inspector might be able to perform a mould test to see if there is any mould in the home. If you are worried about the presence of asbestos, follow your inspector’s advice about what to do in this situation, i.e. whether or not you need to hire a specialized contractor to remove it or it can stay in place.
Another thing to consider is many homes built before 1978 might have lead paint, it is not easy to remove lead paint. The removal of lead paint can lead to a lot of toxic particulate matter being stirred up. In some cases, you might be safer knowing where the lead paint is but leaving it alone.
It is common for inspectors to discover evidence of destructive pests such as rodents and termites during a home inspection. If an inspector finds evidence of pest damage, they will make a note of this and recommend a plan of action for getting rid of the pests or repairing the damage.
Issues with the Attic and/or the Roof
When an inspector is inspecting the inside of a home, they will be looking around the attic to see whether or not there is evidence of the house experiencing roof leaks, pest damage, or any other problems related to insufficient insulation in the attic.
When your home inspector is examining the exterior of your home, they might or might not get up onto your room. But they will probably be standing on a ladder to get a closer view of the shingles so they can better judge your roof’s overall condition. If the room is more than a couple of decades old, an inspector might be able to give you an estimate of when you might need to replace it.
Do not be surprised if an inspector indicates that your room has missing shingles, there are areas of rot in the fascia board, insufficient roof ventilation, and/or inadequate attic insulation since these are all common problems that home inspectors encounter for houses of any age. These issues might not necessarily be deal-breakers. However, be sure to have your inspector explain the severity of the problem(s).
Home inspectors also need to ensure that a home is safe and structurally sound. While cracks in the foundation, a deck that is not up to code and damaged concrete floors might seem like small problems, they potentially could have huge consequences.
Structural problems can be expensive to fix but if you love the house, you might be able to negotiate with the seller about finding a solution to fix them. Given that home inspectors usually are not going to miss any major issues, if you are backing out of the transaction because the home has foundation problems, it is likely that potential future buyers will likely do the same. In other words, if the seller is serious about selling the home, they will have to pay for structural repairs.
Issues with Electrical Wiring
Faulty electrical wiring can be an expensive and dangerous problem. When performing an inspection your inspector will be examining the home’s main electrical panel to ensure that it is correctly installed and grounded and that the panel is sufficient for the home.
It is important to remember that inspectors are not able to open walls or see inside the walls, so if they notice a problem like a non-functioning outlet or evidence of outdated wiring, you might need to bring in a licensed electrician to do an additional inspection to learn more about the problem.
Issues with Windows and Doors
You might encounter windows without proper seals, doors that stick, and drafts. These are typical issues and should not be expensive to repair.
Issues with Appliances
It is typical for there to be some appliances that do not function properly, like smoke and carbon monoxide detectors, kitchen appliances and/or other appliances.
Types of Repairs You Should Not Be Negotiating With
It is important to note that the majority of homes will not go through inspection without at least a couple of issues. A lot of the time these issues will be relatively minor because the seller probably would have known about it before putting the home on the market.
Keep in mind that not every little defect warrants a negotiation, focus on the big-ticket items not things like paint colours. When you are negotiating with the seller you are trying to get big-ticket items like structural and safety issues addressed.
This is not the time when you would be making a wish list of requests for the seller to meet. You should be able to back out of the transaction if there are issues that will be too overwhelming and/or expensive for you to fix.
The home inspector is charged with reporting on any issues small and large that they identify with the home. After you and your real estate agent or broker receive and review the home inspector’s report, you can figure out your strategy for negotiating the big-ticket items and what is not worth negotiating over, from here you can create a list of repair requests to submit to the seller. It is not worth negotiating over small things like minor landscaping issues, paint colours, cracked tiles, anything aesthetic or anything that would cost you less than $100 to fix.
After you and the real estate agent or broker representing you have identified your big-ticket items your agent or broker will present this list to the agent or broker representing the seller.
You have various options when negotiating with the seller after receiving a home inspector’s report
Frequently, sellers probably are not going to want to pay to make repairs for a home when they are leaving if they have already spent money on making upgrades to the home and doing other things to get the home ready to sell.
Additionally, if the current owners are selling their home for financial reasons, they might not have the money to pay for repairs. However, buyers usually do not want to have to pay for additional work on a home because they might want a move-in ready home.
Ask the seller to make repairs before closing
It is common for buyers to ask the sellers to make certain repairs before closing and puts the responsibility of having the repairs completed on the seller. However, it is important to consider that the sellers might not be as motivated as a buyer might be to pay the money necessary to ensure that the work to complete the repairs is done well.
Ask for a reduction for the previously agreed-upon sale price or credits for closing costs to cover the cost of making repairs
In some instances, you (the buyer) might be better off requesting a reduction in the home’s sale price to help defray the cost of repairs. You might be able to negotiate $10,000 off the previously agreed-upon sale price if the seller knows that you will need to be making immediate structural repairs.
However, what buyers might think is a fair price reduction for repairs and what sellers believe is a fair price reduction for repairs might be two different things. Therefore in this scenario, be sure to do your research so you will have a solid idea of what certain repair might cost and how you can ask for an appropriate amount of money to cover the cost of this repair.
Consider asking for alternate compensation
You might consider bartering with the seller as a way to negotiate repairs after receiving your home inspection report, you could ask them to leave behind some furniture or appliances that they were planning on taking with them to take into account the added expense for repairs. If you do decide to barter, make sure to ask for items that will be valuable for you because you are essentially taking these items instead of cash.
Consider asking for the seller to provide you with a home warranty
This is an option that you might not have considered but you can always consider asking the seller to purchase a home warranty that will cover you during your first year of homeownership. A home warranty can be great if the home has a lot of outdated appliances that are still working but might need to be replaced soon.
Home warranties usually cover most appliances and systems within a home, such as the plumbing system, electrical systems, heating, and cooling systems. Home warranties do not cover things such as garages, non-plumbing related roof problems, and septic systems. If you believe that your major needs might be covered by a home warranty then it might be worth asking the seller to provide one.
Tips for Negotiating With the Seller After a Home Inspection in Buying a Home
Make sure that the real estate agent or broker representing you as a buyer understands the repairs you want the sellers to make and what outcome you are hoping for
Be extremely clear with the real estate agent or broker who is representing you as the buyer in the transaction about the outcome you want regarding these repair requests and allow them to handle the negotiations. It can be easy for sellers and buyers to become attached to a house, having a real estate agent or broker who can keep a clear head can make this easier. And do not forget that there are actual people on either side of this contract.
Be reasonable when submitting repair requests
You need to be reasonable when submitting repair requests because no home is perfect, even a newly built home will have problems. Your first priorities should be fixing safety and structural issues followed by fixing other issues such as leaks or plumbing issues.
In other words, do not ask for every single defect your home inspector uncovers to be repaired. If you do this, you risk angering the seller enough for them to want to back out of this transaction.
It is important to remember that the seller will also be receiving and reviewing a copy of the home inspector’s report and your repair request. The seller(s) will then be the one(s) deciding whether or not they will agree to repair any defects. Technically, the seller will be under no obligation to repair or fix anything.
But, if you, the buyer, are reasonable with your requests, then most sellers will also be reasonable. It is important to remember that the buyer and seller are working together in this scenario to complete this transaction and make this deal happen.
Know when to ask for repairs
You should only be asking the seller to fix major problems like structural issues, damaged flooring or dead trees near the home. Keep in mind that in this scenario, you will not be able to pick and choose who is doing the work, when and how it is being done. So, if you want to have more control over this you might consider requesting a repair credit.
Know when to ask for repair credit(s)
You might consider asking for credit if you want to be in control and decide who does the repair work or if the repair is a complete deal-breaker. If you know the seller has moved far away, it might be better to ask for credit than try to have them arrange a contractor to come and perform repairs from a distance.
Think long term when making repair requests
Here is something to consider, if you plan on renovating the kitchen in the next few years, it might not be worth it for you to go back and forth negotiating with the seller about an outdated appliance or wonky cabinets. While it is understandable that you might your home to feel new when you move in, you might need to live with a few things if you will be taking care of these things in the new future.
Know the difference between upgrades and repairs
It is important to remember that a repair in this scenario is something that needs to be done to improve a home’s safety and/or ensure a system or component is functioning properly. Generally, a seller will not agree to pay for a repair unless the need for that repair has been documented in the home inspection report.
On the other hand, an upgrade is usually related to something that is a question of preference of aesthetics. While as a buyer you can ask for a credit to accommodate your upgrades, do not expect to receive this credit unless the seller has the money and agrees with you about the upgrade is necessary.
Avoid getting caught up with small repairs
While small defects and cosmetic issues might be frustrating, they should not derail your negotiation process. Do your best to focus on the big picture, focusing on the house as a whole and whether or not it’s safe and structurally sound.
Keep your cards close to your chest about your plans for your home
Do not let sellers know about your plans to renovate, remodel or gut the home quickly after buying it. It is normal for you, the buyer during the home buying process to imagine yourself living in a home when you are looking at it, considering the improvements you would want to make and how to make the home your own.
It is not recommended that you discuss remodelling in front of the listing agent or seller(s). When a buyer makes repair requests, it is possible that the seller might not consider repairing certain things because they might believe that the buyer is going to gut the home anyways.
Frequently, the buyer might overestimate the cost of repairing something when the seller could have the repair completed for much less money than the buyer is requesting for this repair.
Know that this is a negotiation and you are probably not going to get everything
It is important to remember that the goal of a negotiation in this type of real estate transaction is to ensure that the buyer nor the seller believes that they are being taken advantage of. Therefore, keep in mind that the seller might not agree to every repair on your list of requested repairs. This is why you should be focusing on them doing major structural repairs related to safety. If you are not happy with the results of the negotiation you will be able to back out of the contract.
Know when you should stop negotiating
When you are negotiating you might be walking a fine line between knowing when you should stop negotiating and when you should keep going to see how much you can get. You want to do your best to get as much you as you can from the seller but not so much to anger them so much so that they back out of the deal. Focus on getting the house and worrying about meeting your priorities but do not expect to get everything.
Know when you need to walk away
If negotiations are not going as well as you were hoping they would have, you might need to walk away from the transaction if the deal cannot be salvaged. This might happen if you are buying a home in a seller’s market, where the seller is holding the majority of the power and refusing to budge when you are trying to negotiate with them. Even if you are in love with the house but do not have sufficient funds to make the down payment and necessary repairs, you should not move forward with this transaction.
If you want to back out of the transaction, consult the real estate agent or broker representing you as the buyer in this traction. You should not be buying a house that might be more stressful and expensive than it is worth. It is important to remember that during the first year of homeownership you might need to budget between 1-5% of your home’s value for repairs.
If you are considering the repairs you might need to make on Day 1, it might not be worth it. Do not put yourself in a situation where you are knowingly buying a home that will end up being a money pit, a drain on your funds and emotions. You would be better off buying a home that is better suited to your needs that needs less work.
Buying a house is a journey, there will be incredibly exciting moments, potentially scary and/or nerve-wracking moments but it is important to remember that no house is perfect, every single house has its flaws and quirks. So, before you sign on the dotted line and get the keys to your new home, chances are that you will be going through at least a couple of rounds of negotiations with the seller about different things.
If you learn little else from this article, there are three things you should remember when you are buying a home and you are negotiating with the seller after receiving the home inspector’s report because you should never skip a home inspection in an attempt to save money. First, you need to ensure that the real estate agent or broker representing you as the buyer clearly understands what repairs you want the sellers to perform or have done for the home and your desired outcome.
Second, make sure you are clear on what the difference is between necessary repairs and upgrades that would be nice to have. Finally, the third thing, you need to be aware of your limits. Be honest with yourself about which circumstances you would be willing to compromise under and under which circumstances when you would have to back out and continue searching for your next home.
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