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Old 04-08-2013, 01:57 PM
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Default House Buying in the USA

Hi Folks,

After a bit of general advice on negotiation tactics when house buying . I have agreed a price with the seller, subject to a satisfactory House and Septic inspection.
I visited the property with the appropriate inspectors last week. The Septic system failed and a new one is required. I got the home inspection report today and there are a number of issues with drainage, sump pumps, the garage roof. The well pump is old, although functions, the furnace did not fire up when inspected.

Some are pretty major in my opinion. The owner is strapped for cash, so the have agreed that they will put in new septic and pay the installers on closing.

My question is, on the other issues, what is the normal process to have these fixed.
1. Do I get quotes and then renegotiate the sale price.
2. Should I expect the seller to fix these issues
3. Should I share the inspectors report with the owner.

I have engaged an Attorney and will be taking his advice, however just wanted to get some opinions.

Any advice appreciated.
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Eddie
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Old 04-08-2013, 03:16 PM
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Default Re: House Buying in the USA

Ed, in the end, all of these repairs you listed will cost far more than you'd expect. Most will require building permits (more 'Kaching-Kaching').
My question is, on the other issues, what is the normal process to have these fixed.
1. Do I get quotes and then renegotiate the sale price. Given the extent of what's needed hire a General Contractor to give you a 'one bid' price. Might this cost a bit more? In a word yes, but he's the one whose going to assure the work is done properly. Secure the building permits, construction inspections, etc.

2. Should I expect the seller to fix these issues. Unless you got one hell of a deal going in the answer is normally 'yes.' ("Good money after bad" as we say 'over here.) What you need is an appraisal (you'll need the contractor bids) done in "As will condition." Or what will the place be worth after the work is done. Will it be worth more than your "total cost of acquisition?"


3. Should I share the inspectors report with the owner. No reason not to, and the Realtor's involved. Reason is you're back at the negotiation table.

In a nut shell this place hasn't seen a bit of preventive maintenance for years. Even fixed, you'll will be finding out this is just the start, not the end ....

Edit: For context above I was in the residential lending business for 35 years.
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Old 04-08-2013, 06:29 PM
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Default Re: House Buying in the USA

Eddie: +1 for what Fred said. Every house I have sold over the years, I had to fix the items that the inspector said needed repairing before closing, so all of this is on the seller, not you. It doesn't really matter whether or not they are cash poor. I owned three different houses in Alaska and none of them passed the perk test and some work was required on the septic system before closing.

You guys either need to renegotiate the price or figure out a plan to have those items fixed and I'd make sure everything is in writing and probably a good idea to have a lawyer. I'd be really surprised that you would be able to get a loan on that property without the items repaired before closing. Fred has more experience in this than I do, but here is my experience. The housing market in the U.S. collapsed in 2008 due to some very shady lending practices. I bought a place for my son that had been in the process of being built when the owner ran out of money and the property went back to the bank. It didn't have an occupancy certificate, there were 22 items that needed completed. Five other people had tried to buy that property before I did, but I didn't understand what had happened. I hired a contractor to give me an estimate to complete all the items on the list, then contacted the title company that I had been working with to secure a loan and suggested that I could put that amount of money in escrow to have the items completed, they said that would probably work. Then along comes the lendor's appraisor, he says no, all those items have to be completed before closing plus his items. There was only three days to closing so this wasn't going to work and the bank didn't seem to care whether or not the house sold, they were planning on putting it up for auction and wouldn't extend the closing date. I then had my son contact the local inspector and the lending appraisor and find out what the critical items were that had to be done. Once we had that we put the contractor to work, two days later they came in and reinspected the property, all of the must have items were completed so they signed off on everything and the closing went off as scheduled the next day. Everything turned out ok, but I had approx. $12k into that house with no guarantee the closing would be completed, so I was hanging my neck out for sure.
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Old 04-08-2013, 07:09 PM
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Default Re: House Buying in the USA

Definitely pass on the inspector's report. In addition to what is said above, once the seller is made aware of the issues, I think they then have to disclose them to another potential buyer as part of the purchasing process. I think the term is they become a 'material fact'. That means that even if they refuse to address the problems and you walk, they will face them with the next potential buyer.

ps good move on the attorney. We spent the cash and bought piece of mind moving through the process. Nothing major came up and we felt good about our Realtor, but there are a lot of documents and steps involved and it is good to have an expert who gets paid the same whether or not the sale goes through.
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Old 04-08-2013, 07:47 PM
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Default Re: House Buying in the USA

Quote:
Originally Posted by williamhj View Post
Definitely pass on the inspector's report. In addition to what is said above, once the seller is made aware of the issues, I think they then have to disclose them to another potential buyer as part of the purchasing process. I think the term is they become a 'material fact'. That means that even if they refuse to address the problems and you walk, they will face them with the next potential buyer.
Absolutely correct. Once they are aware of the problems, they are legally required to include the information in the Seller's Disclosure, which means, either they fix them for you, or they fix them for someone else, unless they find a buyer willing to buy as is, and that buyer would probably have to be a cash deal as lenders don't like to loan money on property in bad condition. (I think Mrs. Eisenhart, my high school English teacher, would roll in her grave for that run-on sentence.)
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Old 04-08-2013, 07:57 PM
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Default Re: House Buying in the USA

My advice is don't buy that house unless you get a fire sale price and are willing to live with endless renovation dust, noise and hassles. As Fred cautioned you, you are likely looking at the tip of the iceberg.

I'm the guy that gets called to fix all that stuff that was just a little problem. They thought.
Gary
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Old 04-08-2013, 08:18 PM
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Default Re: House Buying in the USA

I was a realtor for a number of years and most of what has been said it the truth.
I also worked in construction remodeling homes for a number of years.

That being said, do not feel obligated in making the seller fix these things before the purchase. If you are getting FHA they will not loan on a house like that. A lot of the time sellers that are under pressure to fix it before they sell it use the cheapest methods to fix the issues. They are moving what do they care.
Most likely the seller cant afford to fix the house and does not have enough equity to sell the house for a great deal. That means you are stuck without a house.
The only way this will work is if the seller owes less on the note than what the repairs will cost + time to fix these issues. I doubt that is the case or they would be fixed.

If the seller has enough equity to drop the price, the only other recommendations would be to have a licensed general contractor look the place over and leave you an itemized list of fixes. Also note that you will be managing this whole process so you should be close by. If you live fare away and can't be there on a daily basis I would say to walk away.

Good luck and remember leave emotions out of this decision.
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Old 04-09-2013, 09:03 AM
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Default Re: House Buying in the USA

I can't speak for 'everywhere' in the US, but as far as the Western States are concerned, PA's dead on with his comments.
fae

Quote:
Originally Posted by pa dave View Post
Absolutely correct. Once they are aware of the problems, they are legally required to include the information in the Seller's Disclosure, which means, either they fix them for you, or they fix them for someone else, unless they find a buyer willing to buy as is, and that buyer would probably have to be a cash deal as lenders don't like to loan money on property in bad condition. (I think Mrs. Eisenhart, my high school English teacher, would roll in her grave for that run-on sentence.)
edit: "Good luck and remember leave emotions out of this decision."

SO YES!!!!

---------- Post added at 07:03 AM ---------- Previous post was at 06:43 AM ----------

Just another .02 cents here.

For the moment I'm going to think this just isn't a SFR =single family resident lot, but a decent chunk of ground with value ... how ever that may be described. If you can buy the place for just the value of the land, have the old one torn down and build a new home?

I've financed more than a few of those over the years.
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Old 04-09-2013, 09:44 AM
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Default Re: House Buying in the USA

It's all negotiable. If there's too much to fix, you can walk away. If it's on a Gold Medal stream, that's different.

Some of the details can be different in different states. Here in Colorado you do not need a lawyer involved in the transaction. Realtors are licensed to practice limited law, doing the contracts and such. One LARGE caveat, again this may apply only in Colorado, but home inspectors here are only as good as what YOU can see, and CANNOT be held liable for missing anything. There are some real shysters in the home inspection business here. I sold a house a year ago, the buyer's inspection report said that the roof had damaged and missing shingles. I invited the buyer and his inspector to climb up on the roof and show me, that objection disappeared.

Good luck with your purchase, and if it IS on the Gold Medal stream I expect that forum members will be welcome..
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Old 04-09-2013, 10:06 AM
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Default Re: House Buying in the USA

Nick brings up several very good points. One minor thing to add: BOTH the Listing Realtor and Selling Realtor are being paid by the Seller ... so its the Seller's 'best interests' that are being tended to ...not yours.
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