Renegotiating the terms when repairs are necessary

When the inspection turns up significant physical problems with the house and your contract doesn't require the seller to remedy them, you might ask the seller lower the price of the house or to pay some or all of the cost of repairs. If they won't do so then you might want to try to have the cost of repairs added to the mortgage so you can finance the repairs rather than paying for them up front. We'll cover all those things on this page.

But first, you'll need to get an idea of how much it will cost to have the problems fixed. Call a local contractor and get a bid on how much the repairs will run. You don't have to get multiple competitive bids because you're not shopping for the best price at this point, you're just trying to get a ballpark idea of how much the repairs will cost.


Asking for a reduction in price

The obvious concession to ask for when repairs are required is to for the seller to lower the price of the house. You don't necessarily have to ask for the full amount of the repairs, though. If the asking price is $200k, and the repairs will run $10k, you might ask for only $5k off the asking price. That's because the seller may figure that any significant problems with the house are obvious to potential buyers even before they have the house inspected, and that the price is figured with those defects in mind. Though in that case you might wonder why you would ask for anything off the purchase price? The answer is that it usually can't hurt. Usually the worst that can happen is the buyer says no, in which case you can try to negotiate a smaller concession, or just buy the house for the original asking price. In theory the seller could be offended by a requested reduction in price and try to back out of the deal, but that's rare, and as long as you have a contract the seller is obligated to sell.

Asking the seller to pay closing costs

An alternative to asking for a price reduction is to ask the seller to pay part or all of your closing costs. What's the difference between the seller paying $3,000 of your closing costs vs. lowering the purchase price by $3,000? Nothing, really, at least nothing significant. So why would you ask for this vs. asking for a reduction in price? The answer is that a seller might be psychologically attached to their sales price and won't want to change it, while it might be easier for them to make concessions in another area.

Note that your bank might limit the amount of closing costs the seller can pay. For example, I'm currently working on a house purchase where my bank limits the seller's contribution towards closing costs to 3% of the purchase price of the home. I have no idea why they impose this limit; I didn't get a good explanation about it when I asked.

Asking the seller to pay for repairs

Instead of asking for a discount, you can simply ask the seller to pay for the repairs. This can either take the form of having the work done before you actually buy the house, or having the seller put the repair money into escrow so you can pay for the work after the sale goes through. If the work is being done before the purchase goes through and the repairs will take a while, then make sure to amend the contract to account for a later closing date if necessary.

Rolling the repair cost into the mortgage

If the seller won't pay for the repairs, you will probably want to have the repair costs added to the mortgage so you don't have to come up with the cash up front. For example, let's say you were going to get a $180k loan, and the house needs $10k of repairs. If your bank will allow it, you would instead get a $190k loan, and use the extra $10k the bank loaned you to pay for the repairs. Some banks won't do this, but if not then you still have another option...

Pad the sale price to account for the repair costs

Let's say the seller won't pay for the repairs, and your bank won't let you finance the cost either. The sale price is $200k, and you were going to put down 10% ($20k) and get a $180k loan for the rest. The cost of the repairs is $10k. What you do is to increase the price of the house by $10k and get the seller to pay for the repairs. The seller shouldn't mind because they're not out any extra money -- you're paying them the $10k through the increased sales price, and then they pay that $10k towards the repairs. But doing it this way lets you add the cost of the repairs to the mortgage. Let's see an example in action:

Original Way

Clever Way

Sale Price



Down Payment (10%)



Loan Amount



Seller's contribution towards repairs



Seller nets



Giving the seller a few different options

If you're going to ask the seller to change the terms, give them two or three different choices. If you give them just one option, they'll view their decision as between accepting a concession or rejecting it. But if you give them a few different choices, then hopefully they'll view their decision as which concession they'll accept. This won't work every time, but it's an old and useful sales trick: get the other party to choose among various options that all benefit you, vs. choosing between accepting your offer and rejecting it.

Let's see an example. Let's say the seller is asking $200k for the house and it will need $10k in repairs. Here are three different choices you could present to the seller:




Sales price




Seller's contribution towards closing costs




Seller's contribution towards repairs




Cost to seller




As long as the seller picks any of these options, you win: You got a concession from the seller.

You'll notice that A is the best deal for you and C is the worst. Why wouldn't you set them all up to be equal? Because if you did that then the seller could be indifferent to all of them. But if you make any choice a better deal than the others, then the seller may focus on that as the best deal for him/her. You can easily see a seller gravitating towards B or C because it's the smallest concession. But remember, if the seller picks any of them, then you win by getting a concession. You lose only if the seller rejects all of them. That's why you want the seller focused on which concession s/he'll make rather than on whether s/he'll make a concession.

Once you and the seller have agreed to any new terms, you're ready to order the appraisal.

Amount spent so far.   Red items apply towards the purchase. Amounts are typical, not exact.


Credit Check

To the Lender


Option Fee

Paid to the Seller. Might apply towards purchase, depending on contract. Allows you to walk away for any reason.


Earnest Money

Held in Escrow, probably by the Title company



To private inspection company to find physical problems with house


Termite inspection

To private company; required by your lender


Termite treament

(If necessary)

$1690 - $2390


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