Seller wants additional deposit + $500 deductible on inspection findings - thoughts?

Fiancee and I found a beautiful house. Very quiet neighborhood and the house is decently private albeit close to other neighbors.

We put in an offer at 10k under asking, but still about 5k over comps. I gave 1% deposit.

Seller's agent says the price looks good, but that they may push for an additional 1.5% deposit after inspection, and a $500 deductible on anything that comes up in the inspection.

Should I be balking at this? They've already got a good chunk of change to show I'm not going to walk away, and the house is over 80 years old so I'm sure the inspector is going to find a few things.

Thoughts on this?

I'm confused, isn't it normally the seller that gives concessions upon finding issues with the house during inspection?

JorgeBurrito said: I'm confused, isn't it normally the seller that gives concessions upon finding issues with the house during inspection?

That's the deductible. Anything under $500 we eat, anything over $500 they'll fix minus $500.

nycll said: christoj879 said:
That's the deductible. Anything under $500 we eat, anything over $500 they'll fix minus $500.This part seems reasonable to me.

This is the part that's actually a little confusing to me... inspection is subjective and is done by buyer... normally the whole inspection process kicks off a small round of negotiation so it's a little confusing how the above factors in.

Is it the first $500 of whatever they come to agreement during that round of post-inspection negotiation? etc.

I'm suprised that you're familiar with a 10% deposit... each of the two homes I bought it was like 1%. But overall the extra 1.5% deposit seems like a pretty insignificant thing (as long as the purchase agreement is still contingent on inspection and he isn't risking the forfeiture of the deposit if the place has major problems).

christoj879 said: JorgeBurrito said: I'm confused, isn't it normally the seller that gives concessions upon finding issues with the house during inspection?

That's the deductible. Anything under $500 we eat, anything over $500 they'll fix minus $500.
Anything and everything are two totally different things. If they cover "anything" over $500, it could mean that they cover things that they are legally accountable for (for the home to be compliant), whereas "everything" would mean every single thing an inspector finds will be paid for by the seller.

For example, if they find issues with the roof, and it costs $10k to fix it, you only pay $500 while they cover $9,500?

As you said, 80 year old homes will definitely have some kind of issues with it, so I'd be surprised they'd cover everything over $500..

If there are other homes you are considering, I say leave the offer as is, and see if they take it or not.

skagen said: Is it the first $500 of whatever they come to agreement during that round of post-inspection negotiation? etc. That is my understanding. I think it is a good structure to align the buyer and seller's interst toward a smoother closing.

I'm suprised that you're familiar with a 10% deposit... each of the two homes I bought it was like 1%.Are you in NY state? My experience is outdated. In a buyer's market I guess the deposit could trend down. In our area typically lawyers are involved in real estate transactions. This makes losing deposit by forefeiture unlikely unless the buyer walks away with no good reason.

christoj879 said: JorgeBurrito said: I'm confused, isn't it normally the seller that gives concessions upon finding issues with the house during inspection?That's the deductible. Anything under $500 we eat, anything over $500 they'll fix minus $500.Usually all that is negotiated after the inspection.

By signing this, you are agreeing to buy the house no matter how bad the inspection turns out to be. You have given up all your future negotiation rights!

A buyer would be VERY STUPID to sign a deal that negates the right to walk out of a deal because of what is found in the inspection.

Suppose as suggested earlier, the house needs a new roof. They could hire an unskilled handyman to install a cheap, crappy roof - and you'd be stuck with it, without the right to negotiate what is installed.

The last time we purchased a house, the inspector found serious damage that had been hidden by the seller. The owners were a contractor (him) and a real estate agent (her), so they knew how to hide damage very well. There's no way we would have wanted that house even if they had "fixed" it.

We were able to get out of the deal, and even though the seller had no right to do so, they kept our earnest money far longer than they should have.

In general the contract for buying a house is a custom thing. Sure there are some common attributes, but the terms you are talking about are generally negotiable.

What does your attorney/real estate agent say?

By deposit I assume you are talking about "Earnest Cash". Earnest cash is typically held in escrow until closing. You would get this back if the deal falls through on a contingency. I'm not sure why the seller is pushing this. 1% is common and the amount of the deposit doesn't get the seller more money on closing. The $500 deductible on repairs is fine ... kinda of odd, but fine. Perhaps the seller thinks the house is in good shape and doesn't want to haggle over the small stuff.

Make sure that the required repairs are determined by an independent inspector that you trust. Then make sure that in your contract you specify that the repairs need to be done by the seller and approved by an independent inspector you agree upon. House + Insect inspection will run you ~$400 which you'll have to shell out anyway in order to get bank approval on your mortgage.

When in doubt talk to a real estate attorney or your agent to make sure you're protected against any strange contingencies. This is money well spent.

Edit:

As others have mentioned it seems odd to haggle on price of repairs when you don't know what repairs are mandatory and optional yet. Expect to have another round of negotiations after inspection to determine what needs to be fixed. You could also put a walk away for any reason clause in the offer.

Xnarg said: By signing this, you are agreeing to buy the house no matter how bad the inspection turns out to be. You have given up all your future negotiation rights!

A buyer would be VERY STUPID to sign a deal that negates the right to walk out of a deal because of what is found in the inspection.No, this little deductible arrangement doesn't negate the inspection contigency. Geez, you need to sit down.

ive never seen this deductible BS here in CA.

If anything, seller states a CAP on maxiumum repair costs after inspection, not a deductible to avoid small stuff.

Also its very likely seller is interpreting this as a per-problem deductible rather than an overall deductible.

For example if the heater needs $400 work
floor needs $300 work
plumbing needs $350 work
electrical needs $700 work

I think they are trying to say they will not need to pay for any of the small repairs that are under $500, and just $200 of the electrical.

Just forget this whole deductible BS and tell them that nothing is known until the inspection. At that time, seller can agree to fix the items, place a cap on the amount they will spend to fix, or you walk.

We had an inspection deductible on the house we just bought. It was our first pre-owned house purchase, and it was owned by a relo company. Our realtor explained that when the relo company bought the house they had done their own inspection and had stuff fixed, and they didn't want to deal with the nit-picky stuff that can come from an inspection (I believe it was in total, not per issue). It didn't waive our right to an inspection, or the right to walk away based on what the inspection found (not that we had to test that). Honestly, it probably worked too, because there were some stuff that we overlooked because it wasn't worth the $500 to us.

It may be that you worded it funny, but as I read it the seller's agent said they "MAY" push for something "AFTER" the inspection. If you did not put that something in your offer, don't worry. Go get your inspection done. Tell your agent not to make any agreement (written or verbal) with theirs about this "maybe stuff"

Never fall in love with a home you want to buy to the extent that you can't walk away from the deal up until the very last instant. Once you "gotta have" that one particular home, you are at the mercy of the seller and agents.

You are being played. It's a shame that your agent hasn't pointed this out to you. He/she probably wants the sale so bad, that they are sorta looking the other way.

If I were you, I wouldn't agree to anything they proposed, and I would let the terms of the original offer stand. If they refuse... well, good luck finding another buyer in this market

Xnarg said: Never fall in love with a home you want to buy to the extent that you can't walk away from the deal up until the very last instant. Once you "gotta have" that one particular home, you are at the mercy of the seller and agents.

I have fallen "in love" with the home, however I see it as a purely financial transaction. I have no issue with walking away. Once emotions come into play you make mistakes.

mnsweeps said: christoj879 said:
I have fallen "in love" with the home

Seller = 1, You = 0

You already lost the emotional game with the seller. First lesson to learn before buying anything materialistic is NOT to fall in love with it.Reading the second half of his post:I see it as a purely financial transaction. I have no issue with walking away. Once emotions come into play you make mistakes.I think he meant to say haven't..

SUCKISSTAPLES said: ive never seen this deductible BS here in CA.

If anything, seller states a CAP on maxiumum repair costs after inspection, not a deductible to avoid small stuff.

Also its very likely seller is interpreting this as a per-problem deductible rather than an overall deductible.

For example if the heater needs $400 work
floor needs $300 work
plumbing needs $350 work
electrical needs $700 work

I think they are trying to say they will not need to pay for any of the small repairs that are under $500, and just $200 of the electrical.

Just forget this whole deductible BS and tell them that nothing is known until the inspection. At that time, seller can agree to fix the items, place a cap on the amount they will spend to fix, or you walk.

Exactly. Our condition was that if inspection found out something major in a list (we had a whole list of things) then we had the right to walk away from the sale without any penalty. But if the defect was minor and the seller was ready to fix it then we would have to forfeit the deposit if we decided to walk away.

Frankly speaking, in this market the seller has little say on these issues if they are really willing to sell the house. Hold on to your ground and negotiate. It has to be a win-win for both parties. In our case, we called the previous owner a few times just because he would be the best person to advice on certain things, and he did help even many months after the sale.

christoj879 said: I told them no to the additional deposit and the deductible and they accepted.

Way to go. They blinked. I wish you all the best.

They didnt do anyuthing wrong making that request - they made the request in hopes you would accept it as it was to their advantage. It doesnt even sound like terms the HOMEOWNER themselves would request - it sounds like something the people advising them (agent or attorney) threw in.

you didnt agree since it was to your disadvantage, and you discovered they really didnt think these terms were crucial. Good job not caving in.