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  • Unexpected costs to the buyer during due diligence

    Thursday, February 22, 2024   /   by Amy Brown

    Unexpected costs to the buyer during due diligence

    Buying a home is expensive but not simply the price of the house. There are a lot of costs along the way that if not budgeted for may surprise you.

    You are probably familiar with the associated inspection costs but once those inspection are obtained, it is time for due diligence negotiations with the seller. 
    These negotiations can take two scenarios but only one will result in possible additional costs to the buyer that you may not expect.

    Scenario #1

    You obtain the results of all inspections, identifying any defects, and ask the seller to complete those repairs prior to closing. 

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    Additional buyer cost: If you choose to have the home re-inspected there will be an additional inspection charge. (You can also choose to self inspect the home during the walkthrough at no cost to you.)

    Scenario #2

    You obtain the results of all inspections, identify the defects, and decide that you would rather ask for a credit at closing from the seller in lieu of repairs. (Maybe you are pretty handy around the house or you have a relative with experience that can help you).

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    This is where it gets a bit complicated...

    In order to ask for a monetary credit, we have to prove to the seller how much those repairs are going to cost in the form of contractor estimates. Depending upon the number and type of repairs, multiple contractors may need to make visits to the home.

    But here is where it can get tricky...a subcontractor knows that even though they are providing you with an estimate, it may not be their company that you choose to perform the work. Therefore, some companies charge a "trip charge" or an estimate fee. Some companies will charge both if the property is in a rural area. 

    Estimate fees can run between $100-200 per subcontractor. So if you are looking at a plumbing repair, electrical repair, foundation work, deck repair, etc., the total can add up very quickly.

    Also, from a timeframe perspective, contractors are extremely busy people and are usually booked out weeks in advance. In order to obtain estimates, you will most likely have to extend your due diligence period and while that is ok to ask for, it has to be accepted by the seller to be granted the extra time. That extension will usually trigger an extension of the closing date as well, again upon the acceptance of that change by the seller.

    This is where having a realtor that 1) has a book of business with local vendors that they have developed relationships with can save you money (I have vendors that I use repeatedly that do not charge my clients for estimates because I refer them business for other work) and 2) someone that is a savvy and knowledgable negotiator that can guide you to which path will be the most advantageous to you with the best possible outcome.

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    Real estate is complicated...let us handle the tough stuff!