Offering a High Price for a Home and Hoping for Inspection Savings

June 28, 2016 No Comments »
Offering a High Price for a Home and Hoping for Inspection Savings

Real estate agents have all types of tricks up their sleeves to negotiate a better price for their buyers or sellers, but some are a little less savory than others.

In today’s competitive housing market, you’ll often be told that you need to make a bid over the asking price to hear back from the seller. And even then, you might get countered or never actually hear a peep.

If you really want the house (or condo), your real estate agent might tell you to offer more (a lot more) and then try to recoup some of the overbid costs via the home inspection.

We Can Find Something Wrong with This House

The general approach here is that the real estate agent thinks (or knows) they’ll be able to find faults with the property once they have an inspection done.

So for example, if you offered $550,000 to buy a home listed for $500,000 just to beat out all the other offers, your agent might say that they can probably get your price back down to $540,000 or $535,000 once they inspect the place.

There are plenty of problems with this little trick, some of them borderline unethical unless there truly are defects that will require a price adjustment.

To touch on the ethical thing, if you’re just looking to find stuff wrong with the property that aren’t really major issues (or even minor ones), it’s plain wrong.

Even if you do find things wrong with the property, going into it thinking you’ll find stuff wrong is a little gray as well. It’s also a bit defeatist.

Also note that you as the buyer will need to qualify for the original offer price to ensure you actually get your bid accepted.

In our example, you must qualify for that $550,000 purchase price. If the price is later adjusted, great, but if not, the seller would be wasting their time going with your offer without a pre-approval that says $550k+.

Maybe You’re Buying Too Much House

The takeaway here is that bidding more for a property in the hope of finding something wrong with the house isn’t an effective strategy. In fact, it’s a pretty flawed one.

If you think about it, if there is something wrong with the property, you’ll need to fix it, so even if the sellers do offer a lower price, or provide some concessions, the money presumably would go toward the repair(s).

So you wouldn’t actually be receiving a net benefit of any kind unless you scared the sellers into accepting a significantly lower price than the cost of the required repairs.

Additionally, one could argue that if you’re taking this rather desperate approach, you’re probably buying too much house or getting in over your head. Or simply in a very competitive housing market that might be getting a bit overheated.

It might be better to pause and determine if it’s worth bidding so much for the house, and perhaps considering alternative properties instead.

Even if the inspection calls for repairs, the sellers in this type of housing market might not budge on their price.

Other, more traditional strategies to get your bid accepted include putting more money down, showing the sellers a strong pre-approval, and even writing a cover letter. Or potentially paying all cash and/or dropping certain contingencies.

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