Q: I am currently in escrow on a house. We had the inspection done yesterday. There are a few major concerns of which we were unaware. The largest is a faulty shower pan, which has been leaking for several years and has caused substantial damage to the sub-flooring.

What is the best way to handle this? Allow the seller to choose the method and company to repair this? Or should I have a professional estimate the costs, then ask for cash from the seller so as to allow myself control over the work? I would like to know the best way to negotiate an allowance (or discount off sales price) for these items. I don't expect the house to be restored to perfect condition for me, but I've heard of parties negotiating on such items.

Bill B.

A: Negotiating items from a home inspection is tricky business. Very quickly, a professional sales transaction can deteriorate to an argument likened unto a couple of pre-schoolers. “The roof needs replacing.” “Does not.” Does, too.” “Does not.” Does, too.” Etc., etc.

The reason this can happen is that home inspections are designed only to find defects and current condition of a house – not find out who’s going to pay for any repairs that might be necessary. In addition, sometimes, just because the home inspector finds something that’s not perfect, doesn’t mean it needs to be replaced now or must be paid for by the current owner.

For the seller, if the roof has worked for him over the past 20 years and it’s not leaking or showing evidence of leakage – then why should he replace it just because it MAY be “Nearing the end of its life cycle,” home inspector-ese for – “Watch out, this needs replacing, soon,” and usually it does.

Nevertheless, just because it needs replacement in the future (and let’s face it, every piece of the house will eventually need replacement in the future, so where do you stop?) shouldn’t be grounds for stopping a transaction.

Most mechanical parts of the house – appliances, heat pumps, furnaces, etc., -- roughly carry about a 20-year lifespan, depending on the quality and warranty of the original. If it’s getting close to the end of that cycle -- but it’s still working -- buyer be aware, but don’t expect the seller to roll over and replace it – especially if it’s still in working order.

If you do have several items on your inspection sheet that are obvious defects, however, there are several ways to negotiate these items.

1 – Request the seller to fix it. This is usually the first step. See if the seller will take care of the problem before you move in. Depending on what other contracts are offering (especially in a sellers market where competing contracts have eliminated a home inspection altogether) the seller may be willing to pay for the repair of some of the items. This is most prevalent if the item is something that the contract requires to be in working order, such as a plumbing or electrical issue. If your inspector found the defect, then the next buyer’s inspector will most likely find it, too, meaning it must be fixed.

2 – Place money in escrow to fix the defect once the transaction is complete. This would require an estimate from a licensed tradesman, depending on the extent of the damage. That amount of money would then be left in escrow to cover the costs. One concern for this scenario, however: once the repair work begins, the contractor could find more damage than what the surface inspection revealed, i.e., more severe rot than discovered earlier, more water damage, more of anything, and the agreed upon amount of escrow repair money won’t cover the real expense.

Nevertheless, if you’re talking a pretty basic repair, such as a new paint job, new carpeting, etc., then a cash amount left in escrow could cover the expense.

3 – Split the costs. Say you’ve found that there’s lots of rot on the back porch and you just can’t pay for the complete repair job. Even if the seller is releasing the property “as-is” he might still be willing to split the difference with you on the repair just to get the transaction through.

The great thing about real estate is that everything is negotiable. If a home inspection finds hidden defects – keep in mind, they were “hidden.” The seller didn’t know about them, either, and more than likely is not trying to hoodwink you into a bad deal. Negotiate with an open mind and willingness to get to the bottom line – your new home.

Published: November 1, 2002

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Mr. Carr has covered real estate since 1989. He is the author of Real Estate Investing Made Simple. Got a personal real estate issue? Post your questions and comments at Anthony’s blog: commonsenserealestate.blogspot.com.