Dear Monty: I had my house inspected before I put it on the market. The building inspector tagged the furnace and said I should have a heating engineer check it. The furnace company inspected it and said there were no defects. He also offered to replace it for $8,000. I am embarrassed because when an interested party sees the report, it can cause a problem. At the same time, I find it hard to justify spending $8,000 when the heating company says it’s OK. Do you have a suggestion?
Monty’s response: The home inspector’s job is to find defects. Faults can be defined differently from state to state. A “defect” is defined as “a condition of any part of an improvement which would significantly affect the health or safety of future occupants of a property or which, if not repaired, removed or replaced, would shorten significantly or adversely affect the normal expected service life of the component.” Faults most often occur in major components or systems.
The buyer will want to know the answers to these two questions. What prompted the inspector to report it? What did the furnace technician find to satisfy the inspector’s concern?
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There are several choices from which you can choose a direction. There may also be other options not listed here to consider. Whichever option you choose, the effectiveness of any option except furnace replacement may depend on your resolve and your customer’s opinion. Your client may have yet another option.
Option #1: Do not replace the furnace. The positives for you are: a) You keep $8,000 in your pocket. b) You maintain the buyer’s confidence because you have disclosed the report and invested in having the inspection done in advance. c) You have transferred responsibility for the decision to the buyer. The negatives for you are: a) The buyer may see this situation as an additional cost. b) The furnace can turn into a negotiation.
Option #2: Replace the furnace. The positives for you are: a) You have increased buyer confidence. b) You have eliminated a negotiation. b) The downside for you is that you risked $8,000. Be glad you haven’t set the price yet. Can you recoup the cost when setting the price?
Option #3: Offer the buyer an $8,000 credit at closing. a) You retain the buyer’s trust. b) You transfer liability to the buyer. c) You can still save $8,000. The negatives for you are: a) The buyer may resist doing the work. b) You cannot save $8,000.
Other options are in the hands of the buyer, over which you have no control. Although they can order their own inspection, the likelihood of a second inspector discovering a new defect not reported by the first inspector is slim. The buyer can ask the seller to replace the furnace. The buyer can leave.
Homebuyers who allow home sellers to manage repairs or replacements will often be disappointed with the results. Examples of common complaints are cheap products or spare parts selected, poor workmanship, the problem not being eradicated, or work not completed. While many very competent owners are capable of this, there seem to be just as many who are not.
Richard Montgomery is the author of “Money from Home: An Insider’s Secrets to Saving Thousands When You Buy or Sell a Home.” It advocates industry reform and offers readers unbiased real estate advice. Follow him on Twitter at @dearmonty, or at DearMonty.com
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