Monthly Archives: November 2014

Buyers & Sellers: What to do after a bad home inspection report

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brown houseA licensed home inspector has done a full inspection of your property, and the results are packed into a book the size of an encyclopedia. Whether buyer or seller, you’re less than enthralled with the results, and not sure of your next step.

Don’t panic. Take a deep breath, explore your options and discuss the situation with your real estate agent. What feels like a misstep now can turn into opportunity.

Buyers’ Options

Walk away. If your offer is contingent on a home inspection, you have every right to cancel your contract and walk away from the property. Talk to your real estate agent about getting a refund of your earnest money.

Ask the sellers to make repairs. You have every right to go back to the seller and ask them to make repairs. Make sure the repairs are done by a licensed repairman, and the sellers can provide paperwork for your records.

Use the report for negotiation & make the repairs after the closing. Did the home inspector suggest the house needs a $10,000 repair? Negotiate with the sellers for a lower price, and use the funds “saved” to repair the home after the sale.

Sellers’ Options

Walk away. Sellers can walk away because of the home inspection clause in the offer.
Don’t feel you have to make the repairs, or pay for repairs you feel unnecessary. Be aware that if the repairs are safety-related (i.e. electrical issues, foundation, etc.), you may HAVE to make the repairs to sell your home.

Make repairs before the closing. You have a better chance of closing your home sale if you select this option. Make sure to have all repairs done by a licensed repairman, and supply documentation to the buyers as proof.

Negotiate. If you don’t have the resources to pay for repairs, or cannot facilitate the repair process, offer concessions in the price or the amount of closing costs.

Turn to your real estate agent for advice. They have the experience and knowledge to help you through this home inspection issue, and getting you the results you want from this real estate sale.

The Importance of Earnest Money

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In the Merriam-Webster dictionary, the definition of earnest is “a serious and intent mental state.” Applying that definition to your real estate sale can be the difference between having the offer on your dream home accepted or lost among competing offers.

Earnest money is a deposit included with your offer that shows you’re serious—earnest—about purchasing a property. The amount of earnest money is applied to the purchase price at sale. For example, if you include an earnest money amount of $5,000 in your offer of $115,000, you will pay $110,000 at closing.

To determine the amount of earnest money you should include, ask your real estate agent for their recommendation. The amount of earnest money varies nationally, and even among communities and counties in Wisconsin.

If the purchase falls through due to contingencies included in your offer, such as an issue found in the home inspection report, the buyer should receive the earnest money in full. If the buyer defaults on the sale, an agreement can be made to compensate the seller while still giving the buyer a partial refund.

So why should you include earnest money with your offer? Earnest money is the edge that sets your offer apart, and shows your offer is genuine and committed. Including earnest money up front shows the seller you are making a down payment not only on a property, but also in the future.