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posted: 9/21/2012 4:30 AM

Buyer's inspection report can be valuable negotiating tool

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A homebuyer who pays for an inspection report isn't required to give the seller a copy, but can use it to lower the sale price or get other concessions if problems are found.

Q. I have read your column for a long time, and was especially interested in the comments you have made during the past few weeks about home inspections. I signed a deal to buy a home in early September, and paid $350 for a professional inspector's report, which uncovered some problems. The seller claims that I must give her a copy of the report, but I don't think I have to, because I paid the fee myself. Who is right, me or the seller?

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A. You paid for the inspection with your own cash, so you are under no legal obligation to share it with the seller unless your sale agreement states otherwise.

I hope you also followed my earlier advice to make your purchase offer contingent upon a report that you, the buyer, find satisfactory. If so, you can now use the document to make the seller pay for any needed repairs or to reduce the sale price so you will have the money to pay for them yourself.

To illustrate, say the inspector determined that the roof is slowly leaking, and you then obtain a written estimate from a licensed contractor that the repairs would cost $5,000. You could then show both the inspector's report and the contractor's estimate to the seller and demand that she make the needed repairs, give you a $5,000 credit when the deal closes to pay for the work yourself or at least reduce the agreed-upon price by the same amount.

If the seller refuses to accept any of these options, the fact that you made your original purchase offer contingent on passing a satisfactory home inspection will allow you to cancel the sale and get your entire deposit returned.

Without such a contingency, the seller would have no legal obligation to pay for the work or to cut her selling price. She also would have the right to keep the deposit that you paid for the home and then put it back on the market.

Q. Is it legal for a landlord to demand that a rental applicant buy a renters' insurance policy as a condition to get a lease?

A. Yes. Smart landlords always require tenants to purchase a renters' insurance policy before signing a new lease or renewing an existing one. Landlords also have the right to demand minimum coverage amounts, such as $50,000 for theft or damage to the tenant's own possessions and $100,000 for the tenant's personal liability.

Requiring such insurance at leasing time helps to protect the landlord from getting stuck with a big bill if, say, the tenant's home is burglarized or if a visitor is injured and then files a lawsuit.

Q. We are planning to refinance our mortgage. Last month, we received a check for $7,200 to settle a lawsuit that we filed several years ago. Can we list the money as income on our loan application to improve the chances of gaining loan approval?

A. You can, but it probably won't do you much good.

When most lenders review an application, they usually sort the income listed by the borrower into one of two categories: permanent income, such as earnings from a job or ongoing business investment, and temporary income, such as the one-time payment that you recently received from your legal settlement.

Lenders focus more on permanent income than on temporary income when evaluating a prospective borrower's creditworthiness. That's because permanent income suggests that the customer likely will have the ability to make payments in the long term, while those who rely more on temporary income to help pay their bills could run into trouble when the checks stop coming.

There are other types of temporary income that lenders often won't consider, or will at least discount when evaluating a loan application. They include short-term unemployment benefits, one-time tax refunds and a lump-sum payment that the applicant may have received from the estate of a friend or relative who passed away.

Though the check that you received from your legal settlement last month won't automatically boost your chances of getting a new mortgage, the loan representative could consider the money as a compensating factor that may indeed bolster your application if your credit score is borderline -- especially if you still have the money available or are willing to use it to pay all cash for your closing costs or to lower the amount that you want to borrow.

REAL ESTATE TRIVIA: Termites cost property owners an estimated $20 billion per year -- $16 billion to repair damages, plus $4 billion in preventive treatment.

• For the booklet "Straight Talk About Living Trusts," send $4 and a self-addressed, stamped envelope to David Myers, P.O. Box 4405, Culver City, CA 90231-4405.

2012, Cowles Syndicate Inc.

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