Negotiating the deal

Negotiating the deal

More and more South African home buyers are now making their offer to purchase (OTP) contingent on a “satisfactory” home inspection report – usually paid for by the buyer.  This means that, while the signed OTP places seller and buyer “on the same page”  and guarantees the deal, the buyer still has room to negotiate if the home inspection report reveals any unpleasant surprises as to the actual condition of the home.

John Graham, of national home inspection company HouseCheck, says some buyers prefer to commission a home inspection before submitting the OTP.   Doing the house inspection upfront means that the buyer can pitch the offer price after first obtaining insight into the actual condition of the property.

Either way, says Graham, buyers who use a good home inspection company are in a far better negotiating position.  If the OTP is conditional on a satisfactory home inspection report then in many cases, the deal-making and negotiations will continue after the OTP has been signed.

For example, if you’re a buyer, the property inspection or sellers’ disclosures — maybe the roof system has some issues — may prompt you to seek a price discount. But where do you go from there?

Here are three tips for negotiating repairs after a home inspection:

1. Ask for a cash credit at transfer for the repair work which needs to be done:  The sellers are on their way out – thinking of packing and dreaming of their new home. The last thing they want is to undertake repair work on their old home.   Also the sellers may not have the cash to pay for the repairs before transfer.

As a result, they may not approach the work with the same conscientiousness that you, as the new owner, would. If you negotiate a credit at transfer, you can use that money to complete the project yourself after transfer. Chances are you may do a better job than the seller.  Also, if you get the credit, there will be less back and forth to confirm the work has been properly done.

2. Think big picture:  If you know you want to renovate a bathroom within a few years, then you probably won’t care that some of the tiles are cracked, that there’s a leaky basin tap or that the sealing around the bath needs to be redone. These things will get fixed during your future renovation. However, these repairs can still be negotiated. Asking the seller for a credit to fix these issues will help offset some of your transfer costs.

3. Keep your cards close to your chest during the entire sales process:  Revealing your feelings about the house or your future intentions, in the presence of the selling agent, could come back to haunt you in future negotiations.

For example, if you tell the agent that you’re planning a complete renovation of the kitchen, the sellers will certainly hear about it from the agent. And then they’re going to be less likely to agree to a credit to repair some of the defective kitchen cabinets. Likewise, if the listing agent hears you tell the inspector that you love the home so much you don’t mind fixing the leaking roof, then the agent will surely let the sellers know about that too.

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