Expert: Connie Wildasinn-Broker,GRI,Realtor® - 2/28/2009

Question
QUESTION: Here I am with more questions.  In re to one of your tips about knowing when you found the house....Back in January we happened upon a house that we loved from the outside.  We were unable to get in to see it and the selling agent seemed to be very upfront about repairs needed.  We loved it, but for the price we decided not to take on such a big task.  In February the price dropped $60,000.00 and we decided to see what was really up.  To us, the main living portion of the home was solidly built and with a good cleaning very livable.  However there was an addition that definitely wasn't done well and more than likely was done without permits.  With the layout of the house we feel we can simply shut that portion off for about a year and then hire the right people to do the job right.  We are untrained but a kitchen and bathroom is in this addition I have no doubt it is tied into the main house and more than likely not done properly.  In addition the township has added public water...a trench is dug but the house is still well water.  They are the big items and we took "a friend" with us when looking.  The friend talked us out of the house saying it would never pass code and we wouldn't get a c/o and that if the town offers public water we will be forced to "hook up" before moving in.  This is an AS IS sale and all c/o's are buyers responsibility.  We can get this house at a great price which frees up cash for repairs, but not immediately.  What do you know about c/o's and if we will be forced to hook up to the public water?  It is empty so we also don't know the condition of utilities present.  No matter what type of house we buy...newly built or fixer upper, we need to take occupancy at time of purchase.  Just wondering if we'll end up with a house we can't live in.

ANSWER: Hi Mary,

It is interesting isn’t it that price will always make the difference.  I have personally always purchased fixer properties, but you must have the cash and where-with-all to know exactly what needs to be done.

I assume (hopefully) c/o is 'certificate of occupancy'.. now on to your questions....

Check with the township (city) where the property is located... you don't have to give specifics if you don't want to ... find out about the well water issue... here if you are on a well you 'don't have to join' but it is a great benefit when you turn around and sell the property later down the road... keep in mind items you would want to have done if and when you sell, do sooner than later so that you can enjoy the benefit of the improvement.

On the 'unpermitted' portion... many homes have unpermitted part to the property... my biggest concern is that some prior owner (may not have been this one) put up more 'foot print' to the house, that is more serious than interior remodels... do your self a favor ... if you relly like this property, get an offer accepted... then go in and have a professional inspection, not a friend, sorry to say, most friends will talk you OUT of even a good situation, you need to know from your heart and head that the property is right for you... so again, have the inspection done, and then get bids, and then decide if you can move forward with the purchase.

I advise you to have your own agent that will be an advocate for you in the process... not the listing agent on something this major… you need to fully protect your deposits and right to cancel… make sure your contingencies allow you the time necessary to complete the inspections, and any sub-inspections that may arise… and get bids.  Then add 20% to the money and that should roughly be your expenditure to get the home up to snuff...

If you can't make that happen ... re-negotiate the price until it works for you or walk away... better to spend $400 - $1,000 on inspections and walk, then tens of thousands  of dollars, get grand ideas and have a home you can never live in and loose your good credit status and monies spent… wait for the next right home that shows up...

I don't remember if you were 1st time buyers, but if you are, don't undertake items that make you uncomfortable, start with something that may only need carpet/paint/ perhaps a new kitchen makeover... things you can be a weekend warrior with....

I have seen many families ripped apart from home repairs... the money is always more than you thought and the time frame takes twice as long...

As I stated if you are good with that ... keep in mind for the right price any home is worth the investment... "For the right price!"

Little FYI on un-permitted structures... as the cities (I will speak for here in Calif) are getting further and further behind in their budgets I am seeing them "come after" homeowners in ways they never did when funds were flush... homeowners are a ready made source of tax revenue to the city... so make friend with the inspectors, have a good general contractor, and make sure your bids include the unknown... (That is that 20% I spoke of) and go out make your wealth and reposition your life!  

Good Luck!

---------- FOLLOW-UP ----------

QUESTION: Once again, thank you so much.  My husband is calling the township codes/inspection office to ask about the different items...water, structure, anything preventing us from taking occupancy and if we'd be granted up to a year to fix any items they take issue with.

I have the name and phone number ready for a "ball buster" inspector.  I am not a first time buyer and 3 years ago when I sold my home he did the inspection.  At that time I realized exactly why people are pushing the gun control issue.  I'll tell you if I was a violent person this man would cease to exist.  But now I will use him to my benefit...I hope.

My husband is a first time buyer and while I agree that the home has great potential and the bones are strong...I can just feel it...wierd but true...at this time we also have a FAMILY that takes priority over anything.  The main part of this particular house is very solid and I have no problem moving our family into it, as long as the plumbing and utilities work...all the rest can be dealt with later.  

So back to the inspection.  In this particular sale, it has always been listed "AS IS" (as opposed to the first house we bid on...the "AS IS" came after we made the bid).  Anyway, my thinking with an "AS IS" is that when we have the home inspected, it will kinda be for our reference only.  Anything major will help us decide if we need to walk away.  

So even with an "AS IS" sale, the inspection can be used to negotiate even more?  If this is the case, can I get some pointers on how that works and how to negotiate after the inspection?

ANSWER: Hi Mary,

I have been an agent for almost 15 years now, and from a family of realtors, so this is what I grew up knowing from the get go (real estate) …

There are many clauses in the contracts that although we all know what they mean it is not an ‘end all to all’… the ‘AS IS’ clause is there because a seller doesn’t want to fix any items… you as a buyer can walk into a property and notice many items that will need to be remedied to fit YOU…  these are not items to negotiate later… i.e.: the roof is shot… well if you and your agent looked up you would have seen that issue (assuming it is not a flat roof style) so how do you in good faith after your offer is accepted go back to the seller and ask for money to compensate?… I as a listing agent and the seller would be furious… especially if the disclosures said ‘roof at end of life’…

Now in the same respect... if you are purchasing a ‘fixer from a principle person’, not say a bank… ask for the disclosures upfront to see what they know of that is wrong with the house, most sellers (especially if they still lived at the property) are well aware of defects… i.e.: water heather doesn’t heat, A/C won’t cool, loose bricks on the front stoop to the left rail etc… these items should be taken into consideration when you writer your offer… or at least be reviewed during counter offers or immediately after acceptance…but before inspection…

Again, perhaps have your contractor go through the property … but lets say you write your offer with knowledge of the issues… and then have your inspection and low and behold the inspector finds something that the seller did not mention and you could not see on your initial walk through… now you open up the process of re-negotiation… and again it will depend on how good a price you got at the onset…

I have bought many homes, that once inspected found other items not on the initial list, but I felt that I got such a good price; I took the house regardless… I am not sure where buyers got the idea that for every purchase they have to ‘go to the jugular’ at the sellers and squeeze every once of blood out of them, but then I also believe in karma… and someday you will have to sell… how do you want to be treated? … what goes around comes around…

Also keep in mind a seller doesn’t have to reduce the price, give you money or fix anything… not even code violations… you must decide if the property is what you want for the price you are paying..

Good luck!


---------- FOLLOW-UP ----------

QUESTION: Okay, I think I understand a little more.  Basically the formal inspection is for our reference and any major defects that couldn't be seen with walk throughs would be brought up.  With regards to the crack in the first house, perhaps the inspector would have found the access to the attic and determined that it was structural or just settling.  If structural, the seller wouldn't be obligated to fix it, but we'd be able to say..."Whoa, that's just too much damage for us to undertake...we need to walk away...right?"

I kinda need to know if I'm thinking right for any house we ultimately purchase.

I'm not worried about putting the squeeze on per se.  I'm more concerned about major issues that would have made the first house a "bad" buy.  

So, for the most part the houses we are looking at are vacant and no utilities are on.  How do we know if the water heater or a/c works.  I figured all of this would need to be up and running when inspection was done.  We are looking at more houses tomorrow...let's say one interests us but it is vacant with utilities off.  Can we request another walk through with utilities ON before making a bid...in order to notice if heater, a/c, water heater is working?  

Answer
HI Mary,

..."Whoa, that's just too much damage for us to undertake...we need to walk away...right?"  Yes.. that is the beauty of a physical inspection contingency... buys you time and gives you an out without jeopardizing your deposits...

When you purchase a home with no utilities on, demand in your purchase contract that the seller turn on 'at his expense' ALL utilities... and it is also great to have the city come out and certify that they would allow the utilities to be put in a persons name... sometimes there are such issues that the city will 'red tag' an item and that has to be fixed prior to the turn on... a bank owned property they will have no way of knowing ... they have no relation to the property... on getting those utilities on before you bid? most likely NO... what incentive does the listing agent/bank have to accommodate you? Why would they go through the motions and you may not really be interested or able to buy the property... keep in mind that when dealing with a bank they are not interested in the warm and fuzzy... this is the big boys now... and you have to act and be a 'player' not for the faint at heart!  Also keep in mind you are in a better bargaining position if you have a 'contract' with the seller... now everyone in 'in the deal' ... not pretending or thinking about it... but in the deal... stronger don't you think?!

good luck!


PS on the 'squeeze'  pick your battles... or you will loose the war!