This guide will tell you everything you need to know about renegotiating the property price after a building inspection.
Let’s dive in.
So, you’ve found the perfect home and secured it at what you thought was the right price.
However, after the building and pest inspection, you’ve uncovered a few issues. Now, you’re faced with a critical decision: should you withdraw your offer, or is it possible to renegotiate the price based on these new findings?
In this guide, I’ll walk you through both options, helping you make an informed decision that protects your investment and secures your future home.
Table of Contents
Why Should You Renegotiate the Price After the Building Inspection?
A building inspection can reveal hidden problems that may affect the property’s value. Issues like structural damage, pest infestations, or even minor repairs can provide leverage in negotiating a better price. It’s not just about getting a discount; it’s about ensuring you’re paying a fair price for the property in its current condition.
Option 1: Getting a Price Reduction Following a Building Inspection
Finding problems in a home inspection might seem like bad news, but it can actually give you a chance to talk about lowering the price.
If the inspection shows big issues, like something that could make the house less valuable or cost a lot to fix later, you have a good reason to renegotiate. Here’s what you can do:
- Understand the Inspection Report: Make sure you really get what the inspection report says. From small stuff like bad drainage to big red flags like a shaky foundation, these issues can help you argue for a lower price.
- Think About Costs vs. Value: Look at how much it would cost to fix the problems the inspection found and compare that to the house’s price. If fixes are expensive, it’s fair to ask for the price to go down to cover those costs.
- Get Advice from a Real Estate Pro, or quotes for Repairs: About 30% of home inspections find big problems. Talking to someone who knows a lot about real estate can help you understand how these issues could change the house’s value and what to do about the price. If you get actual quotes for repairs it will put you in a better place to renegotiate the price after building inspection.
- Choose a Good Inspector: Having a skilled and properly insured inspector is key. Their work can make a big difference in how you talk about changing the price.
- Know Your Rights with the Contract: Remember, you might be able to back out of the deal if the inspection is really bad. This can be a strong point when you’re trying to get the price lowered.
- Big Problems vs. Small Problems: What you do next depends on how serious the problems are. For little fixes, a small price change might be enough. But for bigger issues, you might need to talk about a bigger price cut or even think about whether this is the right house for you.
- Talk to the Seller via their real estate agent: If the seller really wants to sell the house, they might be okay with dropping the price to make the sale happen. This is even more likely if they know the problems could scare off other buyers. You’ll need to negotiate the house price with the real estate agent rather than the seller directly.
Option 2: Requesting Repairs to the Property Prior to Settlement
Figuring out what fixes to ask for after a home inspection can be tricky since there’s no law about what has to be fixed. Here’s a list of the big stuff to watch for and consider asking the seller to repair before you finalise settlement:
- The Roof: If the roof feels spongy, looks really worn, or has signs of leaks, it might need some serious work. Roof problems can be expensive, so it’s important to get them sorted out.
- Electrical System: An old or badly updated electrical system can be a hazard. Look for outlets that don’t work, messy wiring, or fuse boxes that are too full.
- Bugs and Pests: Seeing termites, rodents, or other pests in the house is a big warning sign. They can cause damage and indicate other hidden issues.
- Mould: Mould often comes from leaks or bad roofing and can grow without you noticing. If you spot mould, get it checked out to see how bad it is—it could point to a bigger problem.
- Windows and Doors: Problems like foggy windows, doors that won’t open, or broken locks might seem small, but they’re actually important for your comfort and safety. It’s worth asking the seller to fix these.
- Plumbing: Leaks in pipes can hide and cause big problems down the line. Make sure there aren’t any leaks that could turn into major headaches later.
- The Foundation: If doors and windows are jamming or there are cracks in the walls or floors, the foundation might be shifting. This is serious and needs a professional’s opinion.
- Asbestos or Lead Paint: These are dangerous, especially in older homes. If the house was built before 1978, ask if there’s any lead paint or asbestos, and check if the house has been updated since it was built.
How to Arrange a Price Reduction
When you’re thinking about renegotiating price after building inspection, you’ve got a couple of main paths to consider: changing the contract itself or making a settlement adjustment. Let’s break down what each of these involves and how they can affect your deal.
Changing the Contract with a Deed of Variation: If you’re aiming for a significant price drop, you might go for a contract variation. This is where lawyers draft a deed of variation, which officially lowers the purchase price. This new price is what your stamp duty— a tax based on the property price— will be calculated on. It might cost you a few hundred dollars to get this deed done, but it can save you a lot more on stamp duty. For instance, if you’re buying a house in Queensland for $1 million and manage to get the price down to $950,000, your stamp duty could drop by over $2,000.
Settlement Adjustments: For smaller price changes, you can adjust the numbers at the time of settlement without altering the contract. This way, the stamp duty stays based on the original price, but you still get a reduction in what you pay.
Why a Deed of Variation Matters: A deed of variation isn’t just paperwork; it’s a legal tool that makes sure your tax reflects the new, lower price of the property. Without it, you might not get the stamp duty savings you’re expecting.
Informing the Bank: Whichever route you take, you need to tell your bank about the price change because it’ll affect your loan. If you’re going for a contract variation, the bank will need to update your loan approval based on the new price. Just remember, changing the loan amount could affect any previous loan approvals you’ve had.
The Bottom Line: Whether you’re opting for a contract variation with a deed of variation or a settlement adjustment, it’s crucial to work with your conveyancer and legal advisors. They’ll help you navigate these options, ensuring that you understand the financial implications and that everything is documented correctly for a smooth transaction.
Withdrawing Your Offer After Building Inspection
Sometimes, after inspecting a property, you may need to reconsider your offer. This could be due to serious issues found or if the seller isn’t open to renegotiating price after building inspection. In Queensland, there’s a set way to go about withdrawing your offer or ending a contract:
Before the Seller Accepts: If your offer is still on the table and not yet accepted, you have the right to take it back. Just make sure to put it in writing and get it to the seller or their agent before they sign off on the contract.
Setting a Deadline: You can put a time limit in your offer, like 48 hours for the seller to accept. If they don’t sign by then, your offer is off the table.
Cooling-Off Period: Once your offer is accepted and you’ve signed the contract, you get five days in Queensland to change your mind. If you do, you might lose 0.25% of the purchase price from your deposit.
Get Expert Advice: It’s smart to talk to a conveyancing solicitor when you’re thinking about withdrawing an offer or ending a contract during the cooling-off period. They can help make sure you’re doing everything right and protecting yourself.
In short, you can withdraw your offer, but it’s important to know how it works and to act quickly. Whether you’re pulling your offer back before it’s accepted or canceling a contract during the cooling-off period, make sure you handle it properly to avoid any trouble.
Summing it all up
If you find problems with a house after an inspection, you have options that could save you cash and make sure you’re making a smart buy. You can talk down the price or ask for fixes, but it’s key to know what you can do and how to do it. If it all seems like a lot to handle, don’t sweat it — help is just a phone call away.
Give Hunter Galloway a shout for a free check-up on where you stand. Just ring us up at 1300 088 065 or contact us and we’ll take it from there.
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