In this post I want to share some tips about renegotiating the offer on the property after receiving the results of the survey (inspection) and valuation.
I am not an expert negotiator and there are many real estate investors that are more experienced than me, but there isn’t much content about it. A post like this in the past would be a great help for me.
The advice here is based on my recent purchase of a rental property in Dublin in which both the survey and the valuation showed some problems. I successfully used their results to lower the price of the property even though the market at the time was very hot.
Photo by Sora Shimazaki from Pexels
What to expect from renegotiating after the survey
When you buy a property, after the seller accepts your offer you enter the ‘Sale agreed’ phase and you should quickly get the valuation and survey scheduled. Before you officially sign the contracts you can still walk away or renegotiate if you are not happy with the results of the survey or the valuation. No one will return you the money you have spent already though.
Before starting the renegotiation you should think carefully if the deal is still worth it with the new information.
If a huge problem was uncovered during the inspection, it might make the property not worth buying without a sufficient concession. A serious construction issue could cost tens of thousands and take months to be fixed.
Will you proceed with the deal if the seller doesn’t make any concessions?
Is there here a specific number below which it makes more sense to just walk away and take a small loss instead of big trouble later?
What things are justified to be a reason for renegotiation
You shouldn’t expect the survey or the valuation to provide you a great excuse to lower the offer price if you bid too high and now are having second thoughts. The price concessions need to be really justified or the seller might ignore your requests or the deal might even fall through.
Stuff that you could clearly see during the viewing shouldn’t be the part of the further negotiation. Same goes for the info that the seller has previously disclosed (it could be written on the ad for example).
For example if the kitchen is looking dated and you are now thinking about the cost of renovating it - it’s not the reason for renegotiation. Yes, there might be additional cost to renovate that, but you saw it during the viewing. If you didn’t include the cost of it in your offer, too late!
If something is obviously broken that previously looked fine, it’s an easy case for a concession.
A more tricky case might be if something looks old and might need to be replaced at some point, but not right now. For example electric heaters looking old. Things have their expected lifetime, the seller could say that you have seen it and should have taken it into account in your initial offer. If however during the inspection it turns out that half of the heaters are not working, then asking for a concession would be justified, because you would have to repair the heaters right away.
What to ask for
You can ask the seller to do repairs before closing or you can ask for money for the repairs.
Asking the seller for the repairs has some pros and cons.
- It might be cheaper for the seller to do this this way and they might prefer this option (e.g. if they have a good contractor already)
- Seller takes the risk of the repair going wrong and costing more than expected
- It’s less work for you, the buyer
- Some trust is required, what if the seller doesn’t care and does a bad job?
- Seller might want to sell ASAP and not want to deal with repairs
If you ask for the price concession, you get more money, but you are responsible for these repairs. It might turn out that the repair is not actually needed short term or that it turns out much more expensive than expected, so it’s important to estimate the costs as well as possible. Good estimates will also be more convincing for the seller.
Estimates are hard, especially if you haven’t done something like that before and you aren’t a contractor or don’t have contractor friends. Try your best searching online and even call some contractors for some quotes. If you see conflicting information, pick the less optimistic price quote. You can also ask on an investor facebook group.
Renegotiation email example
It’s best practice to submit the bid and negotiate in writing. For example you can do it by sending an email to the estate agent (I would also cc your solicitor on it).
The renegotiation email should contain:
- specific ask to the seller
- list of issues sorted by significance
- proof that the issues actually exist, e.g. through quotes from the survey (you could also provide contractor quotes for the repairs if you have them available)
I am sharing the real email I sent to renegotiate my latest transaction. I cut out the parts that were specific to my property, but you should get the idea:
I hope you are doing well. This week we’ve received the survey and valuation reports.
Sadly, there were multiple issues found, but we would still like to make this deal work.
The surveyor found 2 major issues during the inspection (see below for excerpts from survey report):
- Issue 1 … - will need repairs and likely replacement
- Issue 2…. - likely replacement
And some minor issues:
I am supplying the relevant quotes from the survey below:
“Quote 2 “
“Quote 3 “
Due to those issues we would like to request a concession in the sale price of XXXX euro, that we estimate those repairs could cost us (according to our research the repairs potentially could cost us even more, since ….).
We are happy to take care of them ourselves after the sale closes, but we are also open to having those repairs be done by the seller (instead of the price concession).
We’ve also received back our valuation report. The valuer highlighted the XXX issues:
… (describe the issues).
Our mortgage broker is worried about the issues discovered by the survey and the valuation, but we will do our best working with the lender.
According to the valuation, overall the apartment appears suitable for mortgage. I hope we can make it work with you.
In the case of our last purchase, we asked for 2000 Euro of a price concession, the seller proposed 1000 Euro instead to which we agreed. The seller was convinced that the repairs should be cheaper than what we have estimated. It’s been a while since that renegotiation took place, we have already performed some repairs and it seems like the seller might have actually been right about their price estimates. However, the time will show. I wouldn’t be surprised to uncover some new issues when the tenants move in.
I hope you found this post useful, if so please share it or comment below. If you want to learn more about real estate negotiation from people much more experienced than me, check out the Book On Negotiatin Real Estate, it’s not a step by step guide, but it has a lot of high level advice and helped me to be better prepared for the negotiations like the one mentioned in this post.