Dealing with inspection issues in today’s market

As a New Jersey real estate attorney, I talk to many realtors as well as some fellow real estate attorneys about the market. There has been a lot of discussion on how the market has changed significantly in the past five (5) years. Our discussion was not focused on the reduction in property values or demand, as those topics have been discussed at nauseam. Rather the discussion pertained to the buyer’s inspection of the property.

Years ago, when the market was “hot”, a buyer’s inspection of the property was usually a comfort factor (meaning, can I live with the property and all of its issues or should I walk away from the deal). This was due in part to the fact that properties were moving so quickly, and banks seemed to be handing out money like it was “candy”, there always seemed to be another buyer waiting in the wings. Thus a buyer was hesitant to ask for any changes for fear of killing the deal.

However, over the past few years, with the market doing a complete 180 degree turn-around, many buyers view the inspection period as an opportunity to renegotiate the deal, whether it is by reducing the purchase price or having the seller rectify insignificant issues. As a result, many buyers are providing inspection letters to the sellers citing as many issues with the property as possible, as opposed to listing significant issues with the property. The reason being is buyers (especially strong ones) understand that unlike five (5) years ago, there are not a slew of buyers waiting in the wings to buy the property. While this is true it also becomes a problem as many sellers – as well as realtors – are turned off by the insignificant issue demands believing that the buyer is not negotiating in good faith. In turn, the seller out of principal will refuse to fix anything or provide a credit, even where such a credit or repair is justified (e.g., a hole in the roof). Thus, with two (2) parties digging in their heels, the deal will most likely terminate when it really should not. How do you then deal with inspection issues in today’s market?

One of the things that we try to advise our clients who are purchasing a property (that is not new construction), is that an inspection report will provide a litany of issues that are wrong with the property. After all, the buyer is not purchasing a brand new home, so it will most likely need to be repaired to some extent. The thing that a buyer must understand is the differences between a significant issue and reasonable wear and tear (e.g., a hole in the roof or the replacement of a door stopper. The buyer must then decide what it can and cannot live with and push back with a list of only those items that are very important to it (e.g., fixing the roof, removing mold, etc). The reason being is the seller will most likely (i) see that the buyer is acting in good faith by not wanting every little item corrected and (ii) recognize that it will most likely have to fix these problems or provide a credit regarding the same for another potential buyer if this transaction falls through. Thus, the seller would most likely be inclined to work with the buyer by either rectifying the issues or crediting the seller for the same. However, please note that if such issues were disclosed in the seller’s disclosure statement, they were most likely taken into account when the listing price was set and the purchase price was accepted, and thus the seller may not be inclined to work with the buyer regarding those issues. As such, when providing a list of inspection issues a buyer needs to make sure that the same was not provided on the seller’s disclosure statement, unless the said issue is so bad that the buyer is willing to walk away from the deal in the event the seller does not rectify the issues or credit the buyer for the same. If you are thinking of buying or selling a home and want more information regarding inspection issues you should speak to a realtor or a real estate attorney.


Please note that there will be issues that a buyer feel’s it cannot live with despite a repair or credit from the seller (e.g., a poor foundation) and thus to avoid wasting anymore time, may decide to terminate the transaction.

Andy Roth, New Jersey Real Estate Lawyer

*The information in this blog posting is for general information purposes only. Nothing in this blog or associated pages, documents, comments, answers, emails, or other communications should be taken as legal advice for any individual case or situation. The information in this blog is not intended to create, and receipt or viewing of this information does not constitute, an attorney-client relationship.

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