Expert: Matt Heisler - 1/16/2009

Question
Hi,
I am in the middle of purchasing a house in NH. I made an offer on it, they countered and I countered back. They accepted. With the purchase and sales agreement, I specified that it needed to pass a home inspection.
Of course there is no real pass or fail with an inspection. But one of the things that cam out was that the fireplace was damper was sealed shut, and no chimney lining. On the real estate listing it lists fireplace, but not whether it is workable.
My question is, do I go back and counter offer at a lower price? Or ( not sure if this part can be done) have them put a sum of money in escrow that I would use to repair the fireplace (and a couple of other items I have doubts on)if needed, and if all of the money wasn't used, they would get the remainder?

Answer
Russell:

I'll try to explain the situation to you, but these are pretty basic questions, and if you aren't sure about the answers, you definitely should be working with a real estate agent.  You're already past P & S, so it might be too late, but at least get an attorney to look over your agreement.  So let's cover your questions.

1) Home Inspection:  Typically this clause in a purchase contract states what your exit responsibilities are.  Typically, a home buyer can walk away if the inspector finds ANY deficiency that would cost money to repair.  Re-read this clause to find out where you stand, and what type of risk your money is at.  THIS CLAUSE CONTAINS YOUR LEVERAGE.  Since you can walk away for the cost of the inspection, most sellers will do repairs rather than go back on the market.

2) Chimney lining:  For all items, the listing is an ADVERTISEMENT, not a STATEMENT OF CONDITION.  That's because the agent doesn't live there, the seller does.  You should ask for a STATEMENT OF CONDITION from the seller, to see what their representation is of the chimney and other items.  In any case, to ask for a new chimney lining (cost $5000) that's really an upgrade, unless the fireplace is structurally unsound.  To me, it sounds like it needs to be cleaned and inspected (cost $200).  I'll bet you won't get the seller's to put in a lining, and you haven't demonstrated that you need one.

3) Your options to negotiate:
A) Walk away, and lose the deposits that are at risk (typically nothing) and the money you are out (the inspection).
B) Ask the seller to fix/replace items identified in the inspection as needing "immediate repair"
C) Ask the seller to pay you cash at close, or reduce the price, so that you can do the repairs yourself (I recommend this option for all items where the seller would be incented to do a poor quality job).
D) Put the money in escrow to do (C).  Generally, this is only done for major items where there is no other alternative. (Pool guarantees in the winter, for example).  Neither the seller's agents or the bank are likely to agree to these arrangements without significant wrangling.


Best of luck-

Matt Heisler

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Matthew D. Heisler
Heisler & Mattson Properties
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508.925.4626 (o)
617.755.3190 (c)
matt_heisler@heislerandmattson.com
http://www.bjheisler.com