RE: Real Estate Podcast

Clint C. Galliano (00:37)
Hey Ben, how you doin'?

Ben Harang (00:40)
I'm doing terrific this afternoon, man. How you doing?

Clint C. Galliano (00:43)
I'm doing wonderful.

Ben Harang (00:46)
Landy here.

What were we talking about today?

Clint C. Galliano (00:52)
All right, so today we're going to talk about inspections on the home from the seller perspective. So we've talked about inspections from the buyer perspective, and we've kind gone into and covered a little bit on what the seller's ⁓ activities are. But we're going to do a little bit of a deep dive into what the seller's perspective is here. So.

when the way the inspections happen is that the buyers should have their agent immediately schedule an inspection to check on the condition of the home. And as we've said before, the inspection is not to beat the sellers up on over price and all that fun stuff, even though some buyers like to try and use that to do that. It's not a negotiating tool.

is basically for the buyers to understand what condition the home is in. But there may be some...

conditions that exist in the home that either will not allow the the loan or not allow the ⁓ home to pass FHA or rural development guidelines ⁓ Which could be things like exposed wood chipped or peeling paint appliances that don't work ⁓ could be something like and this is for

three GSE loans so that's VA, RD, and FHA if it doesn't have a permanent attached heat source that will keep the home above 55 degrees in the event of cold weather things like that the other thing would be damaged I think I said damaged appliances already so if you've got an air conditioner in there that doesn't work or

something like that or a dishwasher that doesn't work, then that would be a flag on the appraisal for FHA and RD. VA doesn't care. They figure that they're veterans. They've eaten out of tin cans. They can wash their own dishes, I would assume.

Ben Harang (03:13)
Well, the difference is if there's a dishwasher in the house, it has to work. There is no requirement that the dishwasher has to be in the house. So if it's broken, take the dishwasher out and leave the hole for the appraisal if the buyer is going to buy it in that condition.

Clint C. Galliano (03:27)
The so the

from my understanding ⁓ more recently FHA and RD will not accept a hole where a dishwasher used to be that there has to be some type of covering or at least finish that it you know can't say well he obviously just took out the dishwasher. ⁓ That was the point like two years ago where you could do that if it didn't work pull it out.

Ben Harang (03:47)
Okay.

Mm-hmm.

Clint C. Galliano (03:55)
and hey, you're good to go. It's not an on-working appliance because it's not there.

Ben Harang (04:01)
right that's But things change over time.

Clint C. Galliano (04:04)
⁓

Yeah, you know, up until about a year ago, window units were acceptable ⁓ cooling and heating apparatus for FHA and RD.

Ben Harang (04:18)
So we're sitting in South

Louisiana, right? ⁓ Where it tends to get a little warm. So the requirement is that we have to have a permanent heat source. We don't have to have a permanent air conditioning source. We have to have a permanent heat source. ⁓ It's a little backwards to me, but that's what the requirement is. So to...

Clint C. Galliano (04:22)
We are.

What

I suspect that that's based on is that much greater damage could come to the home from it freezing up, pipes busting and flooding the home and damaging the home than it just getting hot.

Ben Harang (04:53)
Mm-hmm.

Right. Right. I get that. It's just, it seems counterintuitive. ⁓ I just like to point stuff like that out. Because people say, wait, we need heat, but we don't need air conditioning. Well, that's the rules. ⁓

Clint C. Galliano (05:05)
I know, especially from down here.

And if we're in California, that would be the opposite. know, they need heaters, but most of them don't have air conditioners. And so when it does get warm, people freak out.

Ben Harang (05:30)
Yeah, because it's too hot.

Clint C. Galliano (05:32)
They're not used to it.

Ben Harang (05:34)
Mm-hmm. Yeah.

Clint C. Galliano (05:36)
So those

are some of the things that we look for, ⁓ or I should say that we see come across as repair responses. ⁓ Other things are.

Add in GFCIs to a pre, I'm just going to pick a date on the air, 1980 home. ⁓ Rewire a house. And I don't know the date they started requiring them when the code required it. But, you know, they'll say add in GFCIs. And that's a minimal matter. I mean, even paying labor, you're looking at

Ben Harang (06:03)
All right. Before they were required.

Clint C. Galliano (06:21)
Probably a total of a hundred bucks for an electrician. Maybe a little bit more. Right. Some of the other things would be like, well, you've only got two conductor wiring. I want you to rewire the whole house. That's my repair request.

Ben Harang (06:24)
Yes, that's a matter of just replacing the actual receptacle.

you

Clint C. Galliano (06:44)
uh and my sellers look at that and you know i had one in particular say we're already giving you 12 000 in closing costs uh to help you make this purchase so we're not gonna fly with that uh you know it and it's those are some extreme examples but it's things that you see common things or

Ben Harang (06:56)
Mm-hmm.

Yeah.

Clint C. Galliano (07:11)
You know, put the drain off of the TPR, temperature, pressure, relief, valve on your water heater. That across the board, the appraisers look at that say you need that. That's a safety hazard. Drain pan is, while every inspector will say you need a drain pan, plumbing code actually says, if it wasn't installed originally with the house, it doesn't need one. Ideally, you'd want one.

But the common pan that gets put, if you have a catastrophic failure of your water tank, it's not gonna do you much good. It's just gonna be able to retain, right, it's gonna just retain small leaks and keep that from leaking. And to be honest, if you have a small leak.

Ben Harang (07:48)
It's not gonna hold 40 gallons of water.

Clint C. Galliano (07:57)
unless it's a continuous stream, it's going to wind up evaporating anyways. So those are kind of minor things to look at and consider when evaluating ⁓ the repair requests. So as a seller, when you look at that, you kind of wonder, like, my god, this is a lot of things they're asking.

that could lead to a lot of money. So you're not obligated to make any repairs. Here are your options as far as the repair request goes. You can repair everything they ask for. You can repair some things they ask for. You can say, nope, I'm not repairing anything. Or you can repair some things and offer cash in lieu of repairs for the rest of it.

or whatever combination you want. And then it's up to the buyer to decide on if that's enough for them to proceed towards act of sale or if they feel that's a showstopper and they're canceling the contract. And that's their right. And they get their good faith deposit back and everybody moves on and we go from there.

Ben Harang (08:55)
Mm-hmm.

So what I tell people is from the seller side, if the buyer asks for anything, whatever it is, a new roof, rewire, tariff to the driveway, whatever it is, if you agree to it, the buyer's buying that house. If you don't agree to one of, if you agree to nine of the 10 things they asked for, the buyer will

have the last bite of the apple to say yes or no. So it's kind of a cat and mouse game. How bad do you want to sell it? How expensive are the repairs? ⁓ But I try to set expectations with the sellers. And we say it's not supposed to renegotiate. Generally, that's what we're doing.

If the buyer's asked for something, it means they're not happy. So let's see what we can do to make them happy. But be realistic. If the seller's requests are realistic and they are the appraisal issues or their safety issues, you ought to seriously consider doing them because you're to run into that with the next buyer if this buyer says no. If this buyer says, I don't like the color of the paint in the master bedroom or the primary bedroom, I want you to paint it. No.

That's not something that you should be considering. The buyer should be making an offer on the house in the apparent condition that it's in. With the expectation that if the house was built in 1980, it's not going to be in compliance with 2025 building codes. If they want a 2025 compliant house, can go sell them one. But the 1980 house is not for them. You know, so.

At the end of the day is $250 or a thousand dollars worth losing the sale over. The seller can probably get it done for less than the buyer would discount the price for. So you go ahead and do it. If things like electrical outlets that don't work, I just had one, the electrical outlet by the kitchen sink didn't work.

It was the GFCI went back. They agreed to change it. ⁓ A breaker was bad in a panel when we did the inspection. They changed it as soon as we left the house. They changed the breaker. ⁓ You know, so it's.

You respond based on what the buyer gives you. You don't get, don't get your feelings hurt because they're asking for something. It's a business deal at this point. You decided to sell your house. We want to get to the closing. If they're asking for too much, we're not going to get to the closing with that buyer. If they're not asking for too much, we'll probably get to the closing with that buyer. And the buyer's agent should be setting the expectation with the buyer on what they're getting.

If they're looking for a new house, if they want something compliant with 2025 building codes, buy a new house. Don't buy one that's built in 1980. Don't even look at it. You're wasting everybody's time. ⁓ So if you just respond appropriately, if we have reasonable expectations, if what they're asking for has safety issues or appraisal issues, those are the kind of things that you should consider. ⁓

Clint C. Galliano (12:49)
Yeah, I do.

Ben Harang (13:04)
If the listing agent did their job on the front end, those things should be minimized because you should have a conversation with the seller about what they should think about fixing before you put the house on the market. And we have a whole episode about how to get the house ready to go to market. Now compare it to a thoroughbred race. A thoroughbred race horse get in a starting gate. He wants to go, wants to go, wants to go, and we hold him back, hold him back, and all of a sudden we release it.

and how it sets the market in a perfect world. It lasts for a few days a week and it goes on to contract.

Clint C. Galliano (13:41)
Yeah, getting back to what you're saying about the buyer's agent should be tempering expectations. ⁓ You know, that that kind of that really explains in a nutshell what we see when inspections come across our inspection requests come across. ⁓ If they're asking for everything in the inspection report, then that's that maybe that conversation didn't happen.

if you're seeing maybe some three or four minor things and some major things, then maybe that's a negotiation tactic to give them some things to say, OK, yeah, I'll do this, but I don't want to do that. ⁓ It could go either way, but ultimately, like you said, the buyer's agent should be managing those expectations.

and explaining regardless of what that buyer is saying should be explaining to them we can't ask for everything this is the condition of the home and if you're wanting something in perfect condition or near perfect condition then there are some new construction homes up the road

Ben Harang (15:01)
one short war story, have a house under contract. Now the seal, the window seal went bad. We asked it to be replaced and the seller refused to replace it. In my mind as a buyer's agent, that's something that the seller should have addressed. But we were able to find out the unit is about five years old. We were able to find the builder who gave me the name of the building material supplier house that they bought.

The materials from a label to find somebody there that actually knew what they sold them and the window is under warranty. So they're going to ship a new window and the buyer is going to pay to install it, which is actually cheaper than the offer that they made to split the cost of a new window. you know, there's no roadmap on how to get it done. You just figure out a way to get it done.

Clint C. Galliano (15:57)
Yep. So overall, process is the inspection happens. The buyer's agent goes sometimes with the buyer, sometimes just with the inspector. They inspect your home. Then they review the inspection report and put together a buyer's response. They send that to the listing agent.

listing agent shares that with the seller, they review and decide what if anything they're gonna do on that request list and respond back and that's considered the seller's response. And then the buyer has the last word.

and they decide if that response is a good enough answer for them and if they're going to proceed towards act of sale or if they're to walk away. And I'd say probably 95 % of the time we proceed towards act of sale. Sometimes we get to the point where we

Ben Harang (17:06)
Yeah. ⁓

Clint C. Galliano (17:12)
Unfortunately, had a deal fall apart last week where they found all kinds of termite damage in the home. And at that point, the buyer was disgusted and said, no, I don't want this. And they were in their right to cancel the contract.

Ben Harang (17:28)
There's

legitimate reasons why they would cancel an agreement. Now, you and I talked last week about the timelines on response to the buyer's inspection request. And it goes something like this. The buyer has their time period to respond, to make a request to say everything's fine. Within their inspection period, a due diligence period, once they make the request,

If they made the request on the seventh of attendee inspection period, the inspection period is over. You don't get another three day bite at the apple. Then the seller has 72 hours to respond. A lack of a response from the seller to the buyer is an automatic termination. The buyer can terminate with nothing further. So you want to respond as the seller. When the buyer gets a seller's response,

Clint C. Galliano (18:22)
It's

not that the buyer can terminate, it's the contract is terminated, period.

Ben Harang (18:28)
The contract

is terminated, Right. But if you still have two willing parties, it's okay. You might need to do an addendum. And you also have the seller's response or the buyer's response to the seller's response. So if the buyer says, okay, I'll take the seller's response and they don't respond, the deal's off. So you need to close the loop from the selling side to from the buyer side back to the seller.

Clint C. Galliano (18:34)
Yeah, yeah, that's that. Right.

Ben Harang (18:59)
that you're accepting their final response. Even if their response was, we'll do everything, you still need to acknowledge that it was received in time and you're proceeding with the closing. So don't get caught on the way you decide to get caught in that technicality.

Clint C. Galliano (19:17)
Yeah, that's a critical one. All right, and that's pretty much it at that point. Either everybody's happy or everybody's looking for new transaction partners.

Ben Harang (19:31)
Right, right. And I tell people, because we do both sides, at this point it becomes a business deal. You like your house, you want to sell your house, don't get your feelings hurt because the buyer is trying to get you to do some things. Do them if you want, don't do them if you want. But it's a business deal. Don't make an emotional decision. Make a pragmatic business decision and try to get the deal to close because I think it's always cheaper to close than it is to put the house back on the market.

So that's just a tidbit of 30 years of experience. So, all right, I guess that wraps it up, Clint. I think it was a good movie. We some good content. If you're getting value from these podcasts, you can like, subscribe, and share it. ⁓ We're just getting started. think we've released 15 episodes. ⁓

Clint C. Galliano (20:13)
Yes, indeed.

Ben Harang (20:34)
four or five more in a can, ready to go. So if you have any questions, email us, go to the website rerealestatepodcast.com, send us an email, comment on the video or the audio, we'll see it, we'll find it, we'll talk about it in the next episode. So have a good day, Clint.

Clint C. Galliano (20:57)
And

if you go to the website, we've got a form set up where you can ask questions also that we'll answer here on the podcast. Yeah. Add that to your sticky note.

Ben Harang (21:05)
forgot about that. Good catch

Yeah.

All right, we'll see you next time. Y'all have a great week.

Clint C. Galliano (21:16)
All right, have a good one, Ben.