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Shortchanged by Shortcuts?

• Your Realtor and lender must have a good working relationship. In a perfect world, they’ll already know each other and will have worked together before. A successful closing depends on their collaboration. • As you get closer to closing on the home of your dreams, you must continue to be aware of these shortcuts. Don’t let them derail your rational thinking at the time when you need it most.

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Chapter Twelve:

You Get What You Inspect (Not What You Expect)

“Education is learning what you didn’t even know you didn’t know.”

– Daniel Boorstein

A home inspection is your chance to get a thorough education in the quality and condition of the most expensive thing you are ever going to buy. If there are any fatal, hidden problems, now is when you’ll want to uncover them.

If you’ll recall, I mentioned in Chapter 10: Making an Offer, that an inspection might be needed at that point – before you make the offer. But why would you, as the buyer, pay for an inspection (between $300 and $700) before you even knew you had an accepted offer? Here’s the logic: • If you don’t do it before making an offer, you’re going to need to do it after. • If you do it after, you’re going to need an inspection contingency allowing you out of the deal if you don’t like what the inspection shows. • Any contingency makes your offer weaker from the seller’s perspective.

• Doing the inspection before you write the offer will let you feel comfortable enough with the condition of the house that you won’t need to add that contingency to the offer. • Thus, making your offer stronger than anyone else’s offer that includes that contingency.

It’s a big deal. In a multiple-offer situation, as soon as one of the potential buyers waives the inspection contingency, any other offer that includes one is, for all intents and purposes, not a viable offer anymore. In most cases, if your agent discovers another potential buyer has done a pre-inspection on a home you’re looking at, you’ll need to plan on doing one as well or you’re going to have a hard time being competitive.

Happily, it’s not typical to be in such a competitive market that pre-inspections are needed. That’s why we’re covering the process from perspective of what happens after you’ve had your offer accepted, as that is far more common.

The inspection contingency states that the offer depends on the property passing an inspection to your satisfaction. Whether or not it “meets your satisfaction” depends on your particular contract in terms of cancellation. Some states have a very, very broad definition of a satisfactory inspection. For example, in Washington State, if you don’t like what the inspection report shows, without any other justification, you can get out of the deal and get your earnest money back. In some respects, it’s a “get out of deal free” card. Read your contract before you sign, so you know what your contingency will allow for.

It’s your responsibility as the buyer to schedule the inspection on the house and you’ll need to do it within the timeframe spelled out in your contract. I recommend you hire a professional home inspector, which, if you don’t have one, your agent should be able to recommend. It’s important to note that you’re responsible to

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pay for this service. Home inspections typically cost somewhere between $300 and $700 with most inspectors expecting payment at the time of the inspection. If possible, it’s a good idea to be present and go through the home with the inspector. They’ll be able to point out what they found and clarify your understanding of their report. This helps you get a better sense of the condition of the home and its mechanical workings.

Detailed and Thorough

Whether or not you’re present during the inspection, the inspector will provide a detailed – and I do mean detailed – report of the deficiencies in the house. There could be 100 items marked as “deficient” on that report, but don’t freak out. We’re talking about a house with all its mechanical systems, doors, windows, etc., so there’s a lot to cover.

Depending on the home’s age, the report could show a lot of things that aren’t quite right or flat out need repair. The report should include everything the inspector finds. To help you better understand the detail level of the inspection report, I’ve included a sample report for you at www.rationalrealestate.pro/inspection.

Everything comes up on this report… and it should! If you’re a bit squeamish, you’re in trouble. This report is going to list the details on those 100 different things that could be deemed deficient about the property. Brace yourself now and be prepared for it.

While you are touring the home with the inspector, be sure to ask anything you want to know about the house. Many inspectors have a background in building or construction and are knowledgeable about repair costs.

With any luck, most deficiencies will be minor, but it’s possible there will be some things you consider major to contend with. While it’s within your right to ask for repairs to things you were aware of when you wrote the offer, I think it’s bad form to do so. You saw it when you wrote the offer; therefore, you and your

agent should have included that in the price you offered. If there were no closet doors, and you knew there were no closet doors, your offer should be based on there being no closet doors. Going back now and asking for closet doors at this point seems to me to be negotiating in bad faith.

However, you will most likely have a long list of deficiencies that have come to light during the inspection. For these, you do have the right to say, “We will continue with this transaction if you fix the following….”

Here is where you can use your understanding of the typical shortcuts other people have to get what you want. My recommendation is for you to harness the power of Framing in your negotiation of the repairs. Suppose there are three or four items on the list you didn’t know about and you want the seller to handle. They may or may not be deal killers, but you’d at least feel better about the deal if the seller dealt with them. No problem. Start your inspection response by pointing out the 100 deficiencies noted in the report. Then present a list of ten things that you want the seller to fix. The negotiating pitch is that there’s a lot wrong with the house, but you’re willing to move forward if they take care of just these ten.

If the seller’s agent also knows how the game is played, they may come back and say, “Well, we’re not going to address all ten things, but we’ll take care of these five items on your list.” Of course, you could get lucky and deal with a seller using a discount broker, or someone else lousy at negotiating, and they go ahead and repair, or give you a concession in price, to cover all ten. Congrats to you.

This is a brand new round of negotiations. You can cancel the deal at this point with no loss (other than the money it cost for the inspection). If the seller is unwilling to meet your demands, you can dissolve the contract. It’s for this reason that offers without an inspection contingency are so much stronger than those

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