When Should an Inspection Kill a Real Estate Deal?

I had a deal bust last week over repair items revealed in the inspection. After the property inspection, the buyer asked for certain things to be remedied by the Seller, and the Seller refused. The buyer terminated the contract and we found them another house.

Who is dumber…a buyer who walks away from a good home over a few thousand dollars in repairs, or a seller who let’s a buyer walk away from a deal over a few thousand dollars in repairs? It depends. In this case, the seller is the dumb one.

In this particular deal, our buyer was already paying a price that was slightly above market value, which is ok in a hot area and a rising market, but after adding a bad roof and the cost of curing other items to the price tag, I felt the home was no longer a good value. The other factor is that a substitute property in the same neighborhood came on the market which was newer and priced at market value instead of slightly above. Had we been able to negotiate a better price up front on the first house, there would have been a higher level of tolerance for inspection items. The second house was newer, priced better, and ultimately had way fewer problems revealed on the inspection.

Where does this leave the seller of the first house? Now the seller of the first house has put the property back on the market and must disclose to all prospective buyers those defects and conditions that he is now aware of as a result of our buyer’s inspection. New buyers are not going to be any more accepting of those conditions than our buyers were. The seller is going to have to cure some or all of those issues anyway, or discount the price of the home to reflect its needed repairs. Either way, letting my buyers walk away over these things was not the smartest move.

Buyers can be equally dumb though when walking away from a good deal over nominal repair items. We’ve seen this happen too. If a buyer has negotiated a good price on a home and the repair items are normal and expected for a home of that age in a particular area, then we advise the buyer to stick with the deal even if the seller is stubborn about making needed repairs.

Our California buyers tell us that things are done differently in California. Apparently, they have a certain class of repairs that a seller has to make. Not so in Texas. All homes are sold as-is. Sellers may refuse to make inspection repairs but do so at the risk of having the buyer terminate the deal prior to the end of the Option Period, as happened in this case.

Posted by Steve
9 years ago

Steve is a Real Estate Blogger, Husband and Dad, UT Austin Grad, Runner, Real Estate Broker and owner of Crossland Team and Crossland Real Estate in Austin TX.

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