Many home buyers do not realize that California purchase contracts contain verbiage that says they are purchasing a home in "as is" condition. A seller is under no obligation to make repairs nor offer buyers a credit based on the findings of a home inspector. But that doesn't mean that a seller will refuse. Much depends on the type of market and type of seller.
Often a Sacramento home buyer will say to me: "But when we bought our home, the seller paid for X and Y and Z." They don't realize that a single transaction doesn't dictate how negotiations will proceed on another home because most people don't buy a lot of homes at one time. Their experiences are limited to a particular type of market and a different time.
A home inspection is for the buyer's benefit. A good home inspector will disclose defects, and all homes have defects. A home inspection is not an opportunity for the buyer to tick off defects and create a laundry list of demands for the seller to repair.
Generally, if a home inspection discloses a major problem such as a failing foundation, an inoperable HVAC system or leaky plumbing, sellers may opt to fix it or give the buyer a credit. But if you ask for a cracked window to be replaced, it's very possible a seller might say, "But you saw that when you toured the home and, if it was a concern, why wasn't it addressed in the purchase contract?"
We have a lot of foreclosures and short sales in Sacramento right now, and those types of sellers rarely agree to make repairs. If homes aren't selling, sellers are more agreeable to making repairs. If there is a lot of competition for that home due to multiple offers, a seller just might go on to the next buyer and let the first buyer cancel.
An experienced real estate agent can offer buyers advice and negotiate repairs. I tell buyers to pick your battles. One of my buyers is purchasing a foreclosure flipper. The home inspection suggested we further investigate the HVAC, so the buyer ordered an additional inspection. The initial inspection disclosed the HVAC system had no split differential, which could mean a cracked heat exchanger or it could mean the AC is out of refrigerant. Sometimes fixing a cracked heat exchanger could mean replacing the entire system.
The buyer was very concerned because the kitchen had no GFI. Well, a GFI costs about 15 bucks at The Home Depot. On the other hand, the AC repairs are running closer to $1,000. I suspect this particular seller will cooperate. After all, the seller would need to disclose this defect to the next buyer. And it was how hot yesterday? Tuesday's downtown Sacramento temperature was 92.
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Elizabeth Weintraub is an author, home buying columnist for The New York Times-owned About.com, a Land Park resident, and a Land Park real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown and East Sacramento. Weintraub is also a Sacramento Short Sale agent who lists and successfully sells short sales throughout Sacramento. Call Elizabeth Weintraub at 916.233.6759. Put 35 years of real estate experience to work for you. DRE License # 00697006.
The Short Sale Savior, by Elizabeth Weintraub, available through bookstores everywhere and at Amazon.com.
Photo: Caylyn Wright Brown
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Certified HAFA Specialist
My Sacramento Real Estate Listings
Elizabeth Weintraub is an author, home buying columnist for The New York Times-owned About.com, a Land Park resident, and a Land Park real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown and East Sacramento. Weintraub is also a Sacramento Short Sale agent who lists and successfully sells short sales throughout the four-county Sacramento area. Call Elizabeth Weintraub at 916.233.6759. Put 35 years of real estate experience to work for you. Broker-Associate at Lyon Real Estate. DRE License # 00697006.
The Short Sale Savior, by Elizabeth Weintraub, available at Amazon.com.
Lyon Real Estate is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan.
Photo: Unless otherwise noted in this blog, the photo is copyrighted by Big Stock Photo and used with permission.
The views expressed herein are Weintraub's personal views and do not reflect the views of Lyon Real Estate.
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We keep telling folks that all MD and VA resale homes are sold "as is" with the right to inspection and request repairs, replacement, etc.
Home buyers often believe that, if the inspector finds it, the seller must fix or replace it.
This is a matter that can easily be handled by an experiened agent and it's right in the Contract of Sale.
Elizabeth: What's your feeling on AS-IS and HOA violations? Obviously, buyers purchasing bank owned homes don't expect any cited HOA violations to be handled, but when there is a selller in a short sale situation, I think buyers sometimes don't realize that they are often times dealing with a seller in a financial hardship who can not afford to fix things. Just curious what your thoughts are.
Our contracts in FL are different. We have an "As Is" contract but there are others where there are provisions for both WDO and warranted items to be repaired. We have FAR, FAR-BAR and here in north Florida, NEFAR contracts. They are all slightly different.
Sharon
Hi Chris Ann: On short sales, you can end up between a rock and a hard spot on HOA violations. Many short sale banks won't pay for it. The seller often can't afford it and some buyers are short on funds. Not to mention, depending on the violation, the lender might not make the loan for the buyer. So, you know who pays for it, right?
I am closing a Sacramento short sale this week for an FHA buyer. When the appraisal showed chipping paint, I gave the buyer a shopping list: steel-bristled scraper, paint brush, broom, dust pan, bucket and primer. Then I pointed out more areas the appraiser missed and would most likely discover on his return trip. Sometimes you've just got to take things into your own hands.
"After all, the seller would need to disclose this defect to the next buyer."
We know they should but I am finding that that is not always the case, even with major issues. I am aware of a situation where the seller/agent is aware of Chinese Drywall in the property because of a prior inspection and they are not disclosing!
Elizabeth I agree with a lot of what you have to say - home inspections aren't a 'wish list' of stuff to be fixed. We are seeing a lot of seller/lenders (REO's) fixing quite a bit of stuff here in Phoenix because most of them have FHA loans and there is no getting around FHA requirements. We make sure buyers know if their bidding on shorts that it's highly possible the seller has no cash to repair anything.
Do you find it is pretty consistent that banks will pay for repairs of items that make a property uninsurable?
Elizabeth -
I always tell buyers that while they can ask, sellers are not obligated to make any repairs and that it is all about negotiation - the seller can simply say no. The point of the inspection is not to find the things for the sellers to repair but to educate the buyers about what they are trying to purchase.
Jeff
I just came across an old file yesterday. The client was emailing me saying that in his last purchase, the seller paid all of the closing costs, so he knew for a fact that was the way it is supposed to go. It's difficult to argue with someone when they are convinced they are right. At the time, it was a very competitive seller's market, but this buyer wasn't having any of that because he had had the one experience that taught him "how it is."
Elizabeth - I tell buyers that homes are sold as is also, but they can ask for repairs, but the sellers may decide not to do any repairs.
I just had an 'as-is' purchase inspected this morning. Found the CAC unit was running but not cooling sufficiently. So far, the owner will have it inspected and serviced, which may be all it needs. However, if it needs a new compressor, my client won't pay for that. After all, it was disclosed that there were no issues with it. If the owner doesn't fix it, he has to disclose that it doesn't cool. He won't sell his property with a bum CAC!
@Marie - Regarding the agent who has knowledge of the Chinese drywall, but isn't disclosing it. . . She's looking litigation straight in the face, and is only waiting for a case number.
I had a house listed a few years back, and the home inspection came back with a major issue. The buyer walked, and the seller literally wanted to get in my face because I insisted it needed to be disclosed. We agreed to disagree, and I gave the seller their listing back. Another agent listed it, and I honestly don't know whether the problem was disclosed during that transaction or not!
In another instance I had a buyer purchase a home in an older section of town. Elizabeth, you will know this area. It's Hollywood Park. We had a home inspection and pest report (thank God), but nothing was really disclosed. Yet, there was this little sump pump sitting on a work bench out in the tool shed that haunted me. When the seller was asked about it, they said, they had a small pond at one time and used it for draining it.
Lo and behold, the following winter, Sacramento had one of its rainiest years on record, and accummulated water under the house became high enough that it would drown out the heating system (very dangerous). Buyer sued seller for non-disclosure and almost spoke the "F" word - which in this instance stands for "FRAUD." The reason - a neighbor told the buyer that the previous owner had used that sump pump under the house in previous years when the area would accummulate water. So seller could have very well been sued for fraud.
It's one thing to buy "as-is". . .BUT the seller had better disclose any known defects.
Hi there..Im not a Realtor, so I look at things from the LENDER SIDE. With the high percentage of loans going FHA,VA, USDA and the like a GFI IS a big deal. Government loan, a cracked heat exchanger, IS a big deal.
Personally, I think that listing agents need to do a much better job of going through the house before they list it, and NOTE repairs, or improvements that MAY be needed or necessary and handling some of this up front! OBVIOUSLY< a Realtor is NOT a HVAC inspector, or anything like that..I realize this..however, what about a stain on a back bedroom ceiling?? What about a cracked window? Missing GFi in kitchen or bathroom?? What about a broken hand railing on the front steps, or cracked and peeling paint? Plumbing or electrical exposed or not working??
Mutliple offers or not, some of the issues simply will not matter...because if they are not fixed, NO lender will LEND on them! Obviously, if you have a cash buyer, that is a different story.
I think this blog is REALLY a good one! It makes one thing perfectly clear, the HOI is not a bargaining chip! THEY HAVE ALREADY AGREED to purchase the home for Pete's sake! Maybe, people involved in the Signing of the documents, have to make this MORE clear! This blog will definitely bring that to the surface!
Lastly, some words to remember regarding HOI's, repairs, etc..
Livability
Safety
Marketability
Darin aka; Bucky
Elizabeth, Most of my listings are sold 'As Is" with right to inspect. The biuyer can always ask but most of my sellers being in a short situation have no money or desire to do repairs.
In Oklahoma, we agree to a "repair cap" when the initial offer is negotiated. After the Buyer does inspections, we often have to renegotiate if amount of repairs exceeds the cap. Sometimes hard to keep a transaction together at that point - takes patience and compromise.
Elizabeth, our contracts say the same thing... all are sold as-is. Whether the seller will do repairs is never a guarantee...
We have repairs as a negotiation period. I always point at the "As Is" clause, but point immediately after to the home inspection contingency. The sellers have a vested interest in cooperating most times since they might not have known of defects and/or issues. After the buyer has paid for the home inspection, the sellers know now since any good buyers agent will be preparing the repair addendum. If the sellers don't want o make reasonable repairs then can either lose their deal if they don't want to make repairs, and then with material knowledge, they are either going to have to repair the issues called out, or disclose to the next buyers. It's sometimes MUCH easier to negotiate repairs!
We don't do as is on regualr sales form a non-distressed homeowner. In out contract we put in a repair allowance and if it exceeds it, the buyer or seller can walk away. Just had one where I informed my seller that we jhad a $2200 estimate on a $750 limit, and I got the repairs done for $1500 by licensed people where required. Being reasonable in negotiations is always helpful, expecially when it is time for the realtors to park their egos.
E
Elizabeth,
Every deal is different. In Ontario you can sell "as is". In a multiple offer situation in Toronto, you will have to go in firm, no conditions. An experienced vendor's agent will have a home inspection from a reputable company available for review. Then, the buyer takes his chances.
On a separate point, there are also "fly by night" inspectors who will come back with a laundry list of items for negotiation. Sometimes, that works with sellers who are under pressure, sometimes not.
Brian
Elizabeth, this was wonderfully put. I always tell my buyers that a home inspection is for them to determine the true "as is" condition, and if it is acceptable to them they can choose to move forward. If it isn't, we can ask for something to be done or replaced, but the seller does not have to do anything. Each home, each seller, each situation is different. There is no cookie cutter answer here.
Hi Elizabeth,
Reading your post made me read through our real estate contract with a fine toothed comb. I knew that you were right about transactions being original for each buyer and seller, but I was amazed at the number of things that can and cannot be remedied through negotiation after the contract is signed. I feel another series of posts coming on...
Hi Elizabeth -- Excellent advice as always. Negotiating inspection contingencies are full of variables and each one is unique, although there are local norms.
YOU ARE RIGHT THE BUYER HAS TO PICK HIS BATTLES AND WHETHER THEY REALLY WANT THE HOUSE.
After a completed Home Inspection - the Seller now has KNOWLEDGE !!! Should they lose this sale, they must now modify their Seller's Disclosure OR THEY ARE COMMITTING DELIBERATE MISREPRESENTATION !!! So basically defects once known, pose a problem to a Seller no matter who they sell the house to !!!
Elizabeth, hot weather will move those A/C repairs to the top of the list. Everything is negotiable. Some people have a frame of reference from many years ago about who pays for what and with time everything changes and can reverse from a previous experience.
Great advice too many times buyers will expect too much from the seller after they have received a discount for the property.
We have many VA loans in our area and repairs must be made in order to pass VA guidelines.. Again, this is a prime example that Real Estate is Local.
This depends heavily on the type of property that is being sold. With short sales and foreclosures I don't think the buyer should expect much in the way of repairs. But even with upscale properties I always think the advice of "pick your battles" is an important message to buyers. GFI's and light switch covers are not worth fighting over and distract from the more important issues.
Yes, everything is negotiable. You can ask but you may not get it.....then again you might.
Patricia Aulson/portsmouth nh
Roland- YOu made a GREAT comment! you are right! Same with us...I moved here from the Quad Cities, and we had over 38000 employees at the Rock Island Arsenal, many of which were veterans, or soon to be veterans. Hence, ALOT of VA loans!
Carla Muss-Jacobs, I want you as my next Realtor! :)
I'm of a "nothing ventured...nothing gained attitude" on everything.
I do talk to my buyers and explain the situation about what the home inspection is for and be reasonable.
Patricia Aulson/portsmouth nh