Marshall Park is a D.C.-based real estate agent at Redfin.
In March, 39.4 percent of new listings in the Washington area went under contract within two weeks of hitting the market. With speeds like that, prospective buyers may feel it’s impossible to get ahead of the competition without an endless budget or an all-cash offer.
One way to make an offer stand out is to waive the inspection contingency. This is really attractive to sellers because it eliminates one possible delay on the way to closing. But buyers need to understand the situation and weigh the consequences of using this tactic. The home inspection is an important part of any home purchase and buyers have some flexibility about when they conduct the home inspection, what they do with that information and what they communicate to the seller.
Here are some tips:
• Understand the situation before negotiations. Is it a multiple offer situation? Is there a backup offer? Was the home on the market for more than 100 days? The answers to these questions will have a bearing on how you negotiate the home inspection contingency. For instance, if a property has been on the market for a long time and yours is the only offer, you can feel more comfortable asking for repairs. If you are involved in a multiple offer situation and the home has been on the market for only a few days, the seller will probably be more inclined to reject most repairs because there are many interested parties.
If a home hits the market and you know it will be a highly competitive situation, you can do a pre-inspection before you make an offer or even before the open house. This lets you completely waive the inspection contingency with a little peace of mind that there aren’t major issues with the house. This tactic is rarely used, in part because a buyer will pay several hundred dollars for an inspection on a home he or she may not get.
• Know what to expect from a home inspection. Don’t expect a perfect house; every inspection will reveal issues. Depending on the size of the home, the inspection typically takes between two and five hours.
You should choose an inspector that you and your agent trust. The inspector should provide a neutral, well-written report with color photos and about 20 to 30 pages of information. At the time of inspection, the inspector should take the lead and run the show, but don’t be afraid to ask questions. This is your opportunity to get an expert opinion on the biggest financial purchase of your life and to really understand how the house functions. Afterward, make sure you and your agent go through the entire report together and then decide how to proceed with your negotiations.
• Pick your battles in negotiating with sellers. If you’re up against any competition for the home, don’t ask for the seller to fix minor issues that you can easily take care of, such as a leaky faucet, but do consider asking for repairs for big ticket items, such as the roof, structural issues or the furnace.
In a seller’s market, you can write an as-is offer with a right to void. This means that you as the buyer will not ask for repairs after the home inspection, but that you do have the option to void the contract. This is extremely common in the D.C. housing market right now because of low inventory.
• Ask for a credit vs. repairs. Asking for repairs means that the seller is responsible for making any agreed-upon fixes before closing. Contractually, the seller has to use a licensed contractor and provide the invoices for the work prior to the final walkthrough of the home, but the seller can choose the contractor. This is convenient for buyers because the home is move-in ready, but many buyers want to choose their own contractor.
A credit at closing in lieu of repairs means that you get money from the seller to complete the repairs yourself. I usually advise clients to go this route so they control what work is being done on their home and because it creates fewer headaches down the road. There’s no question who did the work and if the repairs were done correctly.
The credit amount is negotiated between the two parties, but buyers should be cautious about lender restrictions on the amount of credit. This is done to protect both parties. “The contract states that the seller is only required to pay closing costs up to the actual closing cost, so if the credit is $9,000, but the actual closing costs are only $8,000, the seller is legally only required to pay $8,000,” said Steve Fox, a vice president at First Savings Mortgage Corporation.
The best advice I can give buyers is to work with a knowledgeable, experienced agent who is on their side. Every situation is unique, so it’s really important to talk through the options with an agent before making any decisions.
Previously from Marshall Park: