As it turns out, there’s a lot that goes in to determining who pays for repairs after a home inspection. This includes the offer contract, as well as the types of repairs being requested and the laws in your state. Below, we’ll break it down so that you have an idea of what to expect.
A home inspection is one of the last hurdles that buyers and sellers have to get through before the sale of the property is complete. It’s also one of the most important. The inspection is a buyer’s final chance to identify any problems with the home that they’re investing in, including areas that are in need of repair. And it’s pretty common to want a couple repairs after a home inspection—especially in older homes. But who’s responsible for paying for them: the buyer or the seller?
Your Offer Contract When a home buyer and seller go under contract on a property, they both agree to certain contingencies that are outlined in an offer contract. These contingencies primarily determine instances where either the buyer or seller can walk away from the sale without a penalty. For instance, there might be a contingency that states if any major issues are identified at the home inspection (such as a serious mold problem or a crumbling foundation) then the buyer does not have to move forward. Some buyers though, particularly those who are purchasing in competitive seller’s market, may make an offer with less stringent contingencies. One of these includes agreeing to purchase the property “as is,” meaning that they can’t back out even in the presence of necessary repairs. So what does this all mean when it comes to who pays for repairs after a home inspection? It all comes down to bargaining ability. A buyer who has agreed in the contract to purchase a home “as is” can certainly request that the seller covers repair costs, but the seller doesn’t have quite as much incentive to do so. In the case of strict contingencies however, a seller may be willing to cover the costs if it means proceeding with the sale. The Types of Repairs Being Requested Just like most negotiations throughout the home buying process, figuring out who pays for what in terms of repairs after a home inspection generally requires a compromise on both ends. And for that reason, it pays for buyers to be strategic in what they ask for. A home inspection report will outline all of the issues with a home, both big and small. And most buyer’s agents will recommend that their clients focus on the issues that are most important to them, instead of presenting the seller with a laundry list of repair requests. A nick in a window pane may be less than ideal, but it pales in comparison to things like non-functioning appliances or pipe leaks. Motivation matters here. A seller who really doesn’t want to lose their buyer will be more likely to accommodate repair requests or a request for an associated price drop. Likewise, a buyer who doesn’t want to risk losing out on a property might just decide to take care of the fixes themselves after they’ve moved in. A caveat to all of this though is when it comes to major repairs that the seller reasonably should have known about when they put the home on the market. Sellers have a legal obligation to either repair or disclose serious issues with the home. If the repair request is a big one—and it’s not a surprise to them—they’re almost always going to be required to spring for the cost or lose the sale. The Laws in Your State States have specific laws that dictate non-negotiables when it comes to seller-funded repairs. A buyer and seller’s real estate agents will be able to fill them in on the laws in their particular state, but in general a seller is responsible for paying to fix severe water damage or mold issues, to replace missing or broken smoke detectors, and to remedy building code violations, among other things. State laws, including seller disclosure laws, are the only instance where a seller is obligated to pay for repairs after a home inspection. For everything else, it’s up to the negotiations between the buyer and seller, and who pays for what depends on what is decided after the inspection report comes in.
Scheduling a Home Inspection
It’s always a good idea to schedule a home inspection as early on in the sale process as possible so that there is plenty of time to negotiate and take care of requested repairs. The buyer’s real estate agent should be able to recommend an experienced home inspector to handle the job.
Sellers are expected to be out of the home for the inspection. This allows the buyer and their inspector to talk freely about the property and get as thorough of a look as possible at all the of the key systems. A good home inspector will closely examine a number of key structures and systems in and around the house, including electrical, plumbing, and heating and cooling systems, roofing systems, the foundation, and more.
Negotiating Repairs After a Home Inspection
Buyers and sellers have a few different means of recourse when it comes to post-inspection repairs. Some buyers ask for the seller to handle the repair on their own, including arranging for the repair and paying for it to take place. Others ask for a price drop to balance out what they’ll have to spend to make the repair themselves.
Another common agreement between buyers and sellers following an inspection report is for the buyer to ask for a home warranty. Home warranties are insurance policies that cover the cost of repairs for things like appliances and heating and cooling systems for a set period of time. The average price for a home warranty is just over $600 a year, which is a relatively small amount of money for a seller to pay to meet some of the buyer’s approaching repair needs.
If a seller refuses to pay for some or all repairs, it’s up to the buyer to decide what they want to do. Provided there is no “as is” clause in the offer contract, the buyer may choose to cancel the sale and back out. Depending on the agreed upon contingencies, backing out of the sale may require the buyer to forfeit the earnest money that is already in escrow to the seller—usually about 1%-10% of the total sale price of the home.
As for the timeline of negotiations, different states have different rules. Some states (like New Jersey) require that the seller handle any agreed upon repairs within seven days, otherwise the buyer can cancel the sale without losing their earnest money.
Regardless of where you live and what requests are being made in terms of repairs after a home inspection, it’s crucial for both the buyer and the seller that any and all agreements are in writing, and signed by both parties. This prevents any miscommunications from taking place that could lead to discontent, and also ensures that everyone is entitled to get what they’re agreeing to.
Be prepared to do at least a little bit of back and forth after the home inspection. If both buyer and seller are motivated to make the sale go through though, there hopefully shouldn’t be any issues making sure everyone is happy with the final agreement.