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Putting a Dollar figure on negotiations after finding an issue

June 17, 2016

negotiation-house-buying.jpgThe art of negotiation can be a fickle science at times.

If you come in too heavy, then your opponent may dig their heels in, if you don't come in heavy enough then you are not getting the best possible deal.

One question we are regularly asked is:

"how much price reduction can I request for a specific problem that has been found during the inspection"

The thing is, there is never a clear cut response that we can give to this, as each case is unique in and of itself.

Probably one of the first things you will need to keep in mind is the fact that the building inspection report does not give you the legal right to have the offer price reduced. 

Even if you have included the terms 'subject to satisfactory building inspection' within your offer.

The issues found within the inspection report may give you grounds to cancel the offer, they do not give grounds to force a price reduction.

This is a fine point, but an important one to keep in mind.

If the report comes back with wear and tear, and a few smaller maintenance issues, but no significant structural issues or safety violations, then your offer may still legally stand and there is no onus on the seller to reduce the price to keep you happy.

This is one of the reasons we always suggest that people get their inspection report before they make an offer. 

If you want to be able to have the price negotiated based upon a string of smaller issues, then this is something that needs to be brought to attention BEFORE you make an offer.

 

So How Much Can You Negotiate on Each Major Issue Found?

Again, this will be largely defendant on what we find when we conduct the inspection, and what time frame we have conducted the inspection.

Small Issues Found Before an offer

In this phase, the price point is entirely up to you to dictate, and the vendor will either accept or decline.

The only chance you really have for using the smaller non-structural and non-safety related issues is in dictating your offer. 

If the inspection report has come back with nothing major, but there is a series of smaller maintenance projects that will be needed, then you may use this as a negotiation tool.

For a series of smaller issues, you will need to roughly calculate how much it will cost you in both time and money to get the property up to a level you will be content with.

This may be a good argument point for you to come in at the lower end of what the seller is asking.

For major structural or safety related issues

If we find significant structural or safety related issues, before or after an offer, then it is time for you to make a decision as to how to proceed.

You will be able to use the report that we generate to go and get some quotations from local builders, and start getting rough estimates of how much it will cost to fix the issues immediately.

Once you have a dollar figure estimate from them (try and get this in writing if at all possible, even if they include terminology such as 'approximate quotation only'), then it is time to go back to the seller with the quotes you have received.

This is when the main negotiating will take place.

There are four principle outcomes that can event from this:

  1. You use the report and the major issues found, as a justification for backing out of the offer and find another property.
  2. You back out of the offer, renegotiate a price reduction, and then make a new offer which is not bound by the building inspection report, with the understanding that you will fix the issues after settlement.
  3. You back out of the offer, keep the agreed price, but let the seller know that you will not re-issue your offer until the issue has been addressed, and then re-inspected
  4. You and the seller come to a mutual agreement on how to proceed

Negotiation can be a delicate and precise art, but having your arsenal well equipped with a thorough impartial building inspection report can be the difference between success or failure!

If negotiation is something you are interested in reading more about, check out our free Negotiation Ebook from the link below:

Get Our Free Guide To Negotiating On Price!

 

Categories: negotiations

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