For most homebuyers in Australia, getting a professional pre-purchase building inspection is an essential part of the property due diligence process. While the main purpose of an inspection report is to highlight any structural or maintenance issues with the property, it can also be a useful negotiating tool to potentially reduce the purchase price. Here’s how to use your building inspection findings to negotiate a better deal.
Understand the Key Areas Covered in an Inspection Report
A standard pre-purchase building inspection performed by a licensed inspector will cover things like the condition of the roof, interior and exterior of the property, visible structure, electrical wiring, plumbing, potential pest damage, asbestos risks, and more.
The inspector will outline any noticeable defects, damaged materials, or required repairs. This includes things like cracked walls, outdated wiring, leaky taps, termite damage, mould, peeling paint, and other faults. The report should provide repair estimates and categorize issues as minor, major, or urgent.
Let the Seller Know You’ll Be Conducting an Inspection
Before you even make an offer, it’s advisable to let the real estate agent and seller know you’ll be having a professional inspection done if you proceed. This sets expectations and means any negative findings won’t come as a surprise to the seller later.
Consider Bargaining the Price Down Before the Inspection
If you have a fairly good idea that the property may require some renovations or repairs, you can try negotiating the price down upfront before paying for the inspection. Sight unseen, most sellers expect buyers will want to negotiate down after an inspection anyway.
Use the Inspection Findings to Justify Your Offer Price
Once you have the report findings, you can use these to justify a lower offer price. Be sure to follow up with the agent and seller regarding the inspection and provide a copy of the inspector’s report highlighting any issues found.
The number and severity of faults will determine how much you try to bargain down. For example, minor things like worn carpets or light cracking in walls may only warrant asking for a few thousand off. But more serious structural issues, pest problems, or faulty electrics may mean pushing for 10% or more off the asking price.
Get Quotes for Repairs
To strengthen your negotiating stance, get independent quotes from licensed contractors on how much the repairs will cost. This provides tangible evidence on how much you’ll need to spend if you bought the property in its current condition.
Suggest the Seller Fix Selected Issues
As an alternative, you could request that the seller fix or fund repairs up to a certain amount, rather than you reducing your offer price. For example, ask them to replace the outdated electrical wiring, faulty hot water system or get pest control in for termites. This may work better if there are one or two major costly issues, rather than multiple smaller repairs needed.
Be Flexible and Ready to Compromise
Keep in mind that both you and the seller will likely need to compromise. Don’t make extreme lowball offers based on the inspection. Be flexible to ensure you don’t lose a property you love over a small difference in price. The seller also doesn’t want the deal to fall through after coming so far.
Highlight Things You Would Improve or Upgrade Anyway
For any faults or defects you were already planning to renovate or replace if you bought the property, point those out to the seller as things you would need to spend money on regardless. This includes renovations to update decades-old kitchens and bathrooms, replacing worn carpets, giving walls a fresh coat of paint, etc.
Get Legal or Specialist Advice if Needed
For more complex defects related to zoning, structure, drainage, or other legal matters, seek professional advice. This could be an engineer’s report, legal guidance or a specialist inspection. Expert opinions from relevant fields will carry more weight in price negotiations with the seller.
Work Quickly so You Don’t Lose the Deal
Keep negotiations moving promptly so you can secure the property and not risk losing it. You don’t want another buyer to snap it up. Be prepared to make compromises on price and repairs to get to the finish line.
Use Common Sense and Facts Over Emotions
Try to keep negotiations pragmatic and factual. Don’t get emotionally invested or make aggressive demands. Calmly demonstrate to the seller how the inspection findings justify your offer price. Approach it as wanting to find a fair deal for both parties.
With the right inspection knowledge and negotiating skills, you can potentially save thousands off the purchase price or get the seller to fund important repairs. Paying for a professional inspection is nearly always worth the upfront cost for this crucial negotiating leverage it provides.
All the above comes with a caveat. And that is in a slow property market you will have much more leverage to negotiate a better price than you will in a busy market with a lot of demand. The seller can hold off if he is expecting other offers on for the property.
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