I recently had an experience with a client that served as a huge reminder of the importance of inspections. Often, buyers do their inspections and identify minor repairs that are needed around the house. It’s normal; they are not buying a brand new home. Sometimes the seller will pay for the repairs and sometimes they won’t, but they can usually come to a satisfactory agreement, and the buyers can press forward and buy the property. In this instance, everything went well with the home inspection. Minor issues were uncovered. The seller was willing to fix most of the items to my clients’ satisfaction. Then we had the mold inspection. The mold inspector detected moisture in a wall on the ground level. He tracked the source of the water to a leak at the exterior wall where the weather proofing had been ripped apart. (The weather proofing contractor would later explain that the weather proofing installed when the house was built was yellow jacket, an inexpensive, not very durable material.) The mold inspector drew the conclusion that the plant roots along the side of the house caused the tear in the weather proofing and ultimately, the sprinklers leaked into the house. This discovery led the seller to reveal that there was moisture in the same wall 10 years ago. The wall was patched but the source of the leak was never identified. The sellers merely cut down the time on the sprinklers, never noticing that the weather proofing was no longer in tact. So it was quite possible that the sprinklers were leaking into the house for at least 10 years. No matter the fault, we had caught a relatively serious issue, and the seller agreed to replace the weatherproofing and stop the leak. But there was still the issue of the moisture in the wall. The inspector suggested we open up the wall in order to dry it out and to assess the damage. The seller said no, because they had looked in the wall only 6 weeks earlier while doing some aesthetic patching and said it was dry. My clients were frustrated with this conflicting information. They really wanted the house and were willing to pay for some of the damage, but they wanted to make sure that the cost wouldn’t be astronomical. They even offered to pay for the cost of opening and patching the wall in order to look inside it. After days of negotiating, the seller finally agreed to open the wall. When the wall was opened, we ultimately found that the studs were riddled with mold. And it was possible that the mold extended into the second floor. Repairs would have cost much more than what my clients were willing to spend, and the house would no longer be a good buy. The mold inspection identified problems that never came up on the home inspection report or on the seller’s disclosures. It was only the buyer’s due diligence and thoroughness that uncovered problems that could have been easily overlooked. Had my clients closed escrow and had not spent the time and money to do their inspections, they could have been saddled with some extensive mold and water intrusion problems down the road.
When negotiating with an unrealistic seller, it helps to gather as much information as possible. You want to know at what price the seller purchased the property. How much money, if any, did he put into the property? Are there any specific circumstances that have led to the seller putting his home on the market? This will help determine where the seller is coming from. He may be trying to recoup the money that he paid for the property. Or it may have been a labor of love, and he feels that his house is worth more. Either way, it’s going to take a lot of work to convince the seller to sell for less. If the seller doesn’t have to sell, then most likely he won’t. So it’s good to know the seller’s level of urgency. If the seller can wait it out for a couple of years, he will be unlikely to negotiate because he doesn’t have to; he’s merely testing the waters. “If somebody bites, great. If not, I’ll try it again when the market turns.”If the seller does need to sell, then you have something to work with. If possible, try to find out if there have been any other offers and at what price point. The listing agent may or may not be willing to give out this information. Legally, they can. As long as the seller is okay with it, the listing agent can disclose how much the other offers were for. But if the offers are low, many agents will not be willing to divulge this information. If you know that the seller has received a couple of offers that have been lower than hoped for, he may be getting a clue to where the home’s market value really lies. Market value is what people are willing to pay. If buyers keep coming in with offers at X, then clearly Y is not the right price. If you make a similar offer, he may no longer be surprised, and possibly ready to negotiate. The listing agent will also have more ammunition to talk the seller down. How the seller responded to past offers can also be insightful. Did the seller ignore low offers? In that case, it may be a better idea to make an offer at market value and say it’s your highest and best offer. If the seller’s pattern was to counter any low offers, then you may be able to start lower than what you’re willing to pay, and come up. This makes the seller feel like he’s getting something more out of you.In the case where there have been no offers, then Days on Market can be very telling. A listing that has been on the market for months, in an active market, is clearly overpriced. Having a strong understanding of the comps and a good rationale for your offer price can help the seller see the light. But it’s also important to make sure the listing agent agrees with your assessment, because it’s the listing agent who will advise the seller on how to respond.