Inspection as a Buyer's Tool to Get Price Reduction (disclosure, plumber, negotiations)
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We just put in our final offer on a parcel that we are relatively sure will have "issues" during the inspection. We are actually buying the parcel for the land and water, not for the existing house, but the Seller didn't move down quite as much as we had hoped. My husband thinks we can probably accomplish the price reduction from things found during the inspection.
Is this an often used tool? In reality we could care less about anything being fixed - we plan to raze the existing house and build a new home. It's just too bad the existing house is in the money shot for beautiful mountain views.
Here in Colorado we are using a transactional broker - he is both the Seller's Agent and our (Buyer's) agent, and suspect he has played both ends against the middle. We will insist on our own inspector, and not someone the broker has "connections" with...probably not a easy feat in the rural community where the property is located.
This tactic is not often successful--particularly if the seller didn't come down in price more during negotiations. The seller may very well offer to make repairs.
If you know for sure you are going to tear down the building, why waste money and time on inspections?
What if the seller says no to the repairs, will you cancel, after you have spent money on inspections?
What if the seller says they will repair the problem? That would be a waste of money for both of you.
I always caution when trying to use inspections to reduce the price, as opposed to requesting repairs. From a legal stand point you are reopening negotiations. The seller could say "Yes, I will reduce the price, but you must increase your earnest money (just an example)". Then what will you do?
If you really wanted to pay less, you should stick to your offer price, take it or leave it. Playing games after agreeing to terms will likely just come back to bite you.
Enough people are under this misconception here (including, apparently, some agents) that the Texas Association of Realtors has written about it, making it clear that the inspection is NOT a tool for price negotiation after a price has been agreed upon. Repairs can be negotiated, not price.
Is this a cash deal? Because your lender, if there is one, is going to want to know that you are planning in advance on tearing down the house that they're making the loan on.
Enough people are under this misconception here (including, apparently, some agents) that the Texas Association of Realtors has written about it, making it clear that the inspection is NOT a tool for price negotiation after a price has been agreed upon. Repairs can be negotiated, not price.
In any state call it what you want. There is a contract price. There is an inspection. Inspection shows $3K repairs will be needed. Seller agrees to correct the defects or issue a buyer credit. Is the buyer credit a price reduction? Not really, but in effect it is.
There is a contract price and that will always be the contract price unless the deal fails. All there is after that is addendum to modify the original offer. Generally they show as buyer credits at COE.
Hey, if they lowered the contract price then buyer's and seller's agents would lose commission. Only a stupid Realtor would go for that.
29. GOOD FAITH. Buyer and Seller acknowledge that each party has an obligation to act in good faith including, but not limited to, exercising the rights and obligations set forth in the provisions of Financing Conditions and Obligations (§ 5), Title Insurance, Record Title and Off-Record Title (§ 8), Current Survey Review (§ 9) and Property Disclosure, Inspection, Indemnity, Insurability, Due Diligence, Buyer Disclosure and Source of Water (§ 10).
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