How Building Inspections Can Make You a Better Negotiator
Many real estate buyers and sellers believe that the purchase price is negotiated and finalized when the contract is signed. If you don’t want to get the best price for your property, then you can go ahead and do that. I know I won’t. The true negotiations really begin AFTER a contract is signed.
Building inspections are a risk mitigation strategy. It allows potential buyers to understand the current condition of a property and to identify any issues or repairs that need to be addressed. No one wants unwanted expensive surprises, so a thorough inspection is a must have due diligence activity.
Other than the obvious reasons identified above that gives the buyer the peace of mind, building inspections can also be your best friend when you are trying to negotiate the selling price with the seller. It can be the catalyst for savings and discounts.
When an offer is made on a property it’s usually based solely on the information provided by the seller. The inspection results can help you justify credits, and discounts if there are existing issues that were not previously identified. You can ask the seller for a credit to fix these issues will help offset some closing costs.
Building inspections are an important bargaining chip for investors. Potential buyers have the option to do as detailed an inspection as they want. You would not be doing yourself any favors through if you didn’t get a thorough run through of the property. Your checklist should include as a minimum structural (foundation, roofs) and mechanical (HVAC, electrical, plumbing etc.) inspections.
If you are provided the opportunity to speak with the inspector immediately after the inspection, do it! The information is fresh in his/her mind and you might get some useful insight in the results. In addition you might get more information than what they will be willing to include in the formal report.
If you want to truly be able to negotiate the price, you also need to inspect more than the physical asset. Other than building inspections you also need to inspect all the leases, all the units, all the financials, all the service contracts, and utilities to name just a few.
No property is perfect so it’s expected that every report will come back with something that you can negotiate with the seller. Regardless of the results of the report, it’s good practice to go back to the seller to ask for a discount that will add value for you.
Don’t forget, successful negotiations should never be one sided. Both parties need to “get” something out of the deal. It should never be your goal to fleece a seller. Work with them to come to a fair agreement that results in a win-win for both parties. That’s a quality of a good negotiator.
Real estate is a great way to build wealth. To find out how investing in real estate can benefit you, get in touch with us.
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