The inspection period -- which comes after an offer is accepted, but before a sales contract is signed -- is a time when buyers, sellers and their agents hold their breath. That's because this is when a deal is most likely to fall apart.
Inspections may reveal issues that the buyers did not anticipate when they submitted their offer. Suddenly they may feel they are overpaying. They may feel the seller should remedy every issue. Or they may want to renegotiate price in light of this new information.
Of course, the sellers may disagree. Tempers may flare. One or both parties may walk away.
Although this happens all the time, it need never happen at all. The key is for the agents on both sides of the transaction to manage their clients' expectations properly regarding inspections.
Advice for buyers
1. Hire a good inspector. Quality does vary -- as does price. Top inspectors are worth what they charge. They are skilled at identifying issues, putting their findings in perspective and counseling buyers in a balanced and objective way. I have seen lesser inspectors blow small issues out of proportion and cause buyers to feel unnecessarily uncomfortable about moving forward.
2. Unless you're buying a new house, don't expect a perfect inspection. Every inspection will identify a list of minor issues that you'll want to address once you own the house. That's why you're inspecting in the first place.
3. Don't view the inspection as an opportunity to renegotiate price. Instead, make sure your final offer reflects the cost of addressing the expected list of minor issues that your inspector will identify.
4. The only exception is when the inspection reveals issues of a structural, mechanical, hazardous or environmental nature. In these cases, it is appropriate to go back to the seller for a remedy, or to reopen price negotiations.
5. When an inspection reveals something major, remain calm. Unless the seller has a no-contingency backup offer, nine out of 10 times things will work out. Be patient. You are in the right. Most importantly, you have leverage. That's because by law, the seller is required to disclose major defects identified by your inspection to future buyers if they don't sell to you. Since they'll have to address the problems eventually, most sellers would rather address them now in order to preserve your deal.
The other one out of 10 times, be prepared to walk away. This will either prompt the seller to do something dramatic to keep the deal together, or the deal will fall apart and you'll buy a different, better, house.
6. Be reasonable. If your inspection uncovers an older roof with a leak in one small area, all the sellers should be expected to do is repair the leak. It's not reasonable to ask them to replace the whole roof.
Advice for sellers
1. Invest in a pre-listing inspection. This will reveal issues that a buyer will find and allow you to remedy them now -- so you'll have a smoother deal later on.
2. Realize that you WILL be expected to address findings that are structural, hazardous or environmental. For example, active termite infestation, electric that's not up to code, or asbestos insulation in the attic. It is not reasonable for a seller to refuse to address findings such as these, as no buyer will be willing to buy your house if these are not remedied.
3. Consider offering a one-year home warranty at closing. If you own an older house whose roof, furnace, septic and other systems may be nearing the end of their useful lives, this could make a buyer nervous. Investing $500 to $600 in a home warranty that will protect your buyers during the first year of owning your house is money well spent if it gives the buyer the confidence to go forward with the purchase instead of developing cold feet after completing their inspections.
4. Be reasonable. This advice cuts both ways. Refer to buyer points No. 5 and No. 6.
The bottom line is that the best deals occur when both parties feel good about the outcome. As buyers and sellers move closer to a common set of expectations regarding inspections, there will be more "feel-good" deals and fewer that don't survive the process.
Evi Coghlan's "The Real Deal" appears every other Friday. She is a licensed real estate agent with the Riverside Avenue office of Coldwell Banker and a former marketing consultant to Fortune 100 companies. She may be reached at 203-247-6691, by emailing her at firstname.lastname@example.org or visiting www.evicoghlan.com.