The Inspection Question: To Credit or Not? Negotiating Inspection Credits in Today’s Market

Michael Mazek

By Michael Mazek

By the time a real estate contract comes to my desk, the hard work is done. The agents have brought together two parties, unknown to each other previously, who have now agreed on incredibly difficult terms such as a purchase price, loan terms and a closing date. This is not an easy task, one that if left to the attorneys would likely take weeks or months of heated negotiation.

However, the first step into the world of legal dealing is usually the negotiation of inspection issues. And this subject, outside of the purchase price, is perhaps the most sensitive part of the deal. Buyers and sellers frequently take offense to this negotiation, whether it is because a seller is unwilling to make concessions or because a buyer has a lengthy list of inspection requests. It is at this stage of the transaction where a businesslike, objective approach is key.

Too often, real estate transactions fall apart due to inspection disagreements. For instance, the practice of attaching the full inspection report to a buyer modification letter and submitting it to the seller’s attorney, asking for each item listed to be fixed, should be retired. Many of the items that show up on an inspection report are merely suggested repairs or long-term maintenance strategies. They are not appropriate requests, in many situations, under the inspection provision of most standard real estate contracts. I recommend to my buyers that we pare down the inspection requests to those that are most pressing due to true, current deficiencies. This also has the effect of not overwhelming or offending a seller.

On the opposite side, when I represent a seller, I immediately start eliminating the inspection items that are outside the scope of the inspection provision of the contract. For instance, the commonly requested credit due to a mechanical or structural item being “beyond its useful life” is an easy one to eliminate. Not only is this type of request usually denied outright, it is completely beyond what the typical real estate contract allows. Nevertheless, about one in three buyer modification letters I receive will have some form of this request included. The problem with this shotgun approach to inspection items is that it puts the seller in a defensive stance. Picking apart someone’s home via the inspection report is a dangerous strategy. I’ve recently seen where an inspection letter has suggested that the work done on a home was neglectful and “shoddy.” Clearly, that negotiation took a different tone than if it were simply objective and businesslike.

In the end, the clients have the choice and will make their requests and responses, but when it comes to a resolution, I am a proponent of credits in lieu of repairs, to the extent that the lender will allow them. It is far too common these days to see a bungled repair job cause an issue at walk-through. And walkthrough is such an emotionally charged time for both parties. For the seller, the walkthrough is often done on the tail end of moving out, when sellers are, perhaps, leaving a home they have occupied for decades and raised a family in. Having a buyer suggest, a couple hours after the sellers have said their last goodbyes, that the toilet is a bit loose and didn’t get fixed properly is not going to be met with glee. In fact, sellers are far more likely to decline and say take it or leave it at this point.

Along the same lines, buyers are in a euphoric-but-hectic state when the walk-through approaches. The home usually looks a bit different from when the buyers first viewed the property and put in an offer – maybe the emptiness of the home differs from the joy-filled mental picture that has been created in the weeks leading up to closing day. At this stage, seeing a giant scratch in the hardwood floor or a repair that wasn’t completed is a stain on the life-portrait that has been painted in the minds of the buyers – or worse yet, a sign of seller neglect.

For this reason, a credit is a far better way for all parties to prepare for walk-through. The sellers are happy because they didn’t have to schedule any contractors and add to the stress of turning over possession. And for the buyers, they can choose whomever they prefer to have the repairs done and do so on their schedule. I know that many buyers want to walk into a home that’s move-in ready with repairs completed, but with all homes, there are maintenance issues that will come up eventually. No home is truly free of deficiencies, even new construction. So, urge for a credit whenever possible and see to it that both sides are happy to get to the closing table.

Michael Mazek is the founder of Mazek Law Group LLC, a boutique real estate and estate planning law firm. He is a two-time Rising Star selection by Super Lawyers, an honor recognizing no more than 2.5 percent of attorneys in Illinois 40 years old or younger. He is also a featured speaker at many real estate brokerages, as well as published author with his work appearing each year in the Norton Annual Survey of Bankruptcy Law. Visit for more information.