When buyers and sellers start going head-to-head, no one comes out a winner
- It’s reasonable to ask for roof and termite clearances and that the home’s primary systems work. It’s not reasonable to ask for upgrades, abatement or cosmetic changes.
As we begin seeing shifts in some markets, however, requests for repairs are beginning to reappear like spring flowers after a long winter freeze.
Rule 1: It is reasonable to ask for roof and termite clearances.
In normal markets, buyers have historically asked for roof and termite clearances. To facilitate this, most roof and termite inspection reports come with cost estimates.
Termite reports come with section one (any actual damage from infestations of wood-destroying insects or organisms such as fungus) and section two (items that, if left unmitigated, could lead to section one damage).
A termite report clearance is issued by the termite inspection company when all section one items have been remedied. This not only includes abatement of wood-destroying insects (methods vary depending on the type and location of the infestation) but also any structural work required to make the property whole.
Typically, sellers remedy section one items, and buyers address section two issues after they own the property.
To obtain a roof clearance, the roof inspection company or roofing contractor needs to complete the recommended work. Good roof repair companies usually offer a warranty along with their repairs (six to 24 months, depending on the condition of the roof and the company completing the repairs).
Occasionally, a roof will be in such poor condition that it’s impossible to provide meaningful repairs. In these cases, a new roof will be recommended.
If a new roof is called out, buyers will want to obtain quotes (if none have been provided) and factor this into their negotiations.
Rule 2: It is reasonable to ask that the home’s primary systems be working correctly.
The property inspection report deals with the condition of the property’s systems (electrical, plumbing, HVAC, foundation, etc.). It is broken into categories for each system in the home and provides an overview of each system’s condition along with any issues identified.
Property inspection reports do not come with projected costs to remedy issues.
It is reasonable to request that the home’s primary systems be functioning correctly (electrical, plumbing, heating) as of the date they were installed in the home. You need to be able to turn on lights and use the outlets without getting shocked.
Requesting that toilets flush properly; that sinks, tubs and showers operate correctly; and that all the plumbing be watertight is also par for the course. The heater should heat safely (no carbon dioxide emissions); the air conditioning units should cool; foundations should be sturdy and all windows and doors should open, close and lock and the like.
If the seller accepts a contract from a buyer with an FHA or VA loan, any items called out by the appraiser must be remedied to complete the transaction.
Sellers concerned about potentially excessive repair costs can contractually negotiate maximum amounts and have the buyer cover costs over the specified limit.
Rule 3: It is not reasonable to ask for upgrades.
Homes are built to the building code in place at the time of construction. When buying an older home, you are purchasing it with the applicable building codes of the day it was built or the day any permitted upgrades were constructed and signed off by the local building department.
As an example, older homes may have an electrical system that is no longer in compliance with current electrical codes. Homes prior to the mid-20th century did not require electrical systems to be grounded. Outlets in these homes typically accept two-prong plugs: hot and neutral.
As the 20th century progressed, increasing consumer protections instituted better electrical building codes. Receptacles in homes built to newer codes accept three-prongs: hot, neutral and ground.
The latest code (IBC) now mandates ground-fault circuit interrupter (GFCI) and arc-fault circuit interrupter (AFCI) outlets. Although it would be good to have these in older homes, if they are not present at the time of sale, they are considered an upgrade.
Depending on the age of a home, it may contain knob-and-tube wiring, screw-in fuses, 30 amp to 50 amp services and the like.
Although it’s OK to ask the seller to ensure that the existing electrical system is working correctly for the date it was built, it is not acceptable to request that the electrical system be upgraded to current codes.
The same applies to other systems as well: You should not be asking sellers to upgrade galvanized pipes to copper or PEX, install new furnaces if the old ones are still working safely (even if they are very old), seismically retrofit foundations, replace single pane windows with dual pane products, install insulation and more.
Rule 4: It is not reasonable to ask for abatement.
Older homes may have materials in them deemed hazardous, especially asbestos and lead-based paint. Sellers and agents are required by federal lawto disclose any known hazards of this kind, and you can order an inspection to ascertain levels and locations of the material. However, you cannot reasonably request it be removed.
A significant number of homes across the U.S. contain asbestos in some form (ventilation or furnace ducting, acoustic ceiling texture, sheetrock mud, floor tiles, fireproofing materials, roofing, siding, some textured paints and more).
The same applies to lead-based paint: you can inspect, but sellers aren’t expected to remediate lead-based paint.
Rule 5: It is not reasonable to ask for cosmetic changes.
Expect seller’s responses to be less than congenial when asked to make cosmetic changes to a home.
I’ve seen buyers insist that houses be repainted, carpets be replaced and wood floors be refinished.
On the extreme end, buyers have requested that pools be removed, air conditioning units be installed, extensive landscaping or hardscape be installed — and more. In 100 percent of the cases I’ve seen, these requests were not only refused, they insulted the seller in the process.
I’ve learned from experience that the more realistic you keep the negotiations, the better the chances of win-win solutions.
When buyers and sellers start going head-to-head, no one comes out a winner. Follow the rules and keep it realistic: if you ask too much, you run the risk of alienating the seller and ending up with nothing at all.
Carl Medford is the CEO of The Medford Team. Follow him on Twitter.