Negotiating the repairs
Many home sellers in South Africa are discovering that the days of unloading undisclosed problems onto unsuspecting buyers are past, says John Graham CEO of house inspection company, HouseCheck.
Graham says savvy South African buyers are becoming much more aware of the potential risks which the standard voetstoots clause poses to buyers. To ensure that they know the true condition of the house which they are buying voetstoots, many buyers are now insisting that estate agents also insert a special home inspection clause in the pre-printed offer to purchase (OTP). This OTP is routinely provided by the estate agency.
Graham says after a home inspection the toughest part of selling your home isn’t negotiating an offer; it’s often negotiating the repairs that the buyer wants you to resolve as a condition of the sale. Once the offer to purchase has been signed, cautious buyers are now asking for a period of time, usually 7 to 10 days, to have the condition of the home objectively evaluated by a professional home inspector.
Buyers, who have made their offer conditional on a satisfactory home inspection report, have the right to terminate the contract if the buyer deems the condition of the house, as revealed in the inspection report, to be unsatisfactory.
So, the buyer gets the inspection done, and then the seller is presented with facts about the home that the seller perhaps had no idea were problems. And now suddenly that sale agreement may not be a “done deal”.
Graham says that very often defects documented in a typical home inspection report are minor and easy to resolve. However, even minor defects can lead to tension and cost issues which need to be resolved before the sale is finalised.
Graham says some buyers become nit-pickers and make the error of demanding that the seller agree to fix everything in the report – or make unreasonable demands for price reductions. Nit-picking buyers may even demand repairs or replacement of items that are old but still in working order – for instance an older geyser or moss covered roof. Graham says that not only is the seller unlikely to agree to replace or repair such functional items, but the seller may then become less willing to agree to take responsibility for serious defects that really do need to be addressed.
Graham says that buyers should remember that if they are buying a 50-year-old house, then they are buying 50-year-old roof. If the roof is still weatherproof, don’t expect the seller to replace it because it may be reaching the end of its life span.
On the other side, some sellers make the mistake of not being open to resolving issues around repairs that are absolutely reasonable for the buyer to expect. For instance, if the inspection shows that the roof needs to be replaced, the buyer is almost certainly going to ask the seller have the roof replaced.
Of course, the seller isn’t required to agree to anything. But if a roof needs replacing and the seller won’t budge – this could easily become a deal-breaker.
Graham points out that if the sale falls through because solutions to the reported defects cannot be negotiated, then the facts uncovered in the inspection report also present future problems for the seller. This is because once a seller has been given that inspection report, then the seller has an obligation to disclose the condition of the home to other buyers.
Therefore, the growing trend towards home inspection begs the question: Should a buyer demand that every defect documented in the report should be fixed by the seller? Certainly not, and for two reasons.
First, the buyer should remember that inspector is required to document all observed defects. But many of these defects are reported on for the sake of completeness and for information only, and don’t necessary need immediate attention. Sometimes it is also not practical or cost effective to repair defects – for instance a cracked floor slab in the garage or torn under-tile sheeting in the roof cavity.
Second, many of the defects listed in the report may be relatively unimportant and present neither a safety hazard nor a big expense. One such item may be a burned out light bulb or a slight wall crack. Has to be in the report, but are you going to risk a R2-million home purchase on a R20 light bulb?
Buyers and sellers both would be better off if they thought of repairs in three categories.
Category One is all the minor stuff that is minor. Such minor items should not form part of buyer-seller negotiations. On the other hand, Category Three includes the significant things that any buyer would require be done – for safety or structural reasons. These could include roof leaks, damp or an unsafe geyser. A seller either agrees on a fair solution for Category Three defects or nobody is buying the house. Category two is the negotiable stuff. Negotiation means compromise, and solutions reached should be reasonable for both parties. Buyers, sellers and estate agents should expect some give and take in this area.
The best advice for sellers is to budget for some repairs. The best advice for buyers is to be reasonable, and to concentrate on the big stuff. Buyers should be willing to tackle the smaller stuff yourself after they move in. This will help assure that you actually buy the home you fell in love with.