Expert: Dick Dennis - 8/30/2009

Question
QUESTION: We wrote a contract on a house that was NOT listed as an "as is" property.  We are getting an FHA Loan.  The sellers accepted our offer and in the contract we asked for a home inspection and a termite and moisture report.  Home inspector found several problems but most troubling were:  raised concrete patio is sloped towards house and water puddles and leaks down into crawl space.  Wood is wet now and the patio needs to be torn out and replaced and re-sloped.  Also, the bathtubs both have leaks down under the house and there is wet/rotted wood there.  Seller's refused to make any repairs based on the home inspection because they say they are selling the house at a significant discount (assessed at $250k and selling for $199k).  We are waiting for the FHA appraisal (hoping he will note repairs that are needed before they will approve loan) and also for the termite/moisture inspection which will show the moisture damage which will need to be fixed.  My question is three part:

1.  Is it a violation for them to list a property and not state "As Is" in listing and then refuse to make any repairs.  Seems like a bait and switch tactic to me.  If so, what remedies do we have.

2.  If appraiser notes moisture damage, Will FHA require sellers to fix moisture damage before lender approves to close? If so, will these repairs be subject to the 1% cap in our contract?

3.  If termite/moisture inspection reveals the moisture damage will they be required to fix or do we have to negotiate any repairs we want done?  

I suppose we could just "walk away" if they refuse but I'm hoping we have a legal standing on these issues.  We want the house.

The only way to "fix" the problem of the sloping patio is to tear it out and that will be expensive...
Hope you can help.  Thank you in advance.



ANSWER: It escapes me why you would even want this property, Kathy. If it has all those problems, I think I can guarantee you that you will discover lots more problems once the property is yours and you're into fixing it up. To me,a $50,000 discount from the valuation is not enough. You just don't know (or seem to not know) how much more you're going to spend on that house. However, I will answer your questions as you have posed them, Kathy.

1. If there is any shenanigans going on, it would be with the listing agent. He/she should have mentioned it in the listing. And your agent, if it is a separate person, should have pointed that out to you. But it is not a legal problem unless you were not apprised of all this mess before you bought AND CLOSED on this property. But then, that is why we now have all these inspection requirements these days. So, indeed you do know what is wrong with the property. Maybe. So, no, you do not have any legal standing on this. In fact, if you were to take it to court sometime in the future, the judge would wonder why you even bothered to buy the propery at a price that would not compensate for the "discount" if you were not a knowledgeable buyer.

2. Yes.
3. Somewhere in your offer to purchase it notes that should that inspection reveal work to be completed, it most likely has a cost limit imposed by your agent (and approved by you) or the counter offer (if there was one) stipulated a limit in cost. If that stipulated cost is exceeded, then you have FHA in their face. My guess is that the seller will not agree to pay for the repairs on this property as dictated by FHA.

All in all, Kathy, I think you should look for another house and if you fall in love with the next one and it has all kinds of problems, just make sure that your offering price more than compensates for the work required . . . even if you don't have to pay for it. Buying real estate is a very touchy game. Plus, prices in real estate are NOT going to climb back up like they did up until four years ago. so, you better buy a house that will retain its value in one manner of another. I do wish you well.

Dick Dennis
California broker license #00349415
dixiedee13@aol.com

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

QUESTION: Thank you for your response. My follow-up is:  I need an expert answer  to a legal question (not an opinion on whether we should buy the house or not)  The question is: Did the listing agency violate any rules or laws by not listing the property "As Is". Thank you for your help if you know the answer.

Answer
In my opinion, Kathy, the listing agent did not violate any laws. He/she may have been a bit derelict perhaps because of failure to ask the seller if the house is to be sold "as-is," but a good agent would never have left the answer to that question dangling. In fact, if the seller directed the agent to not mention that it is an "as-is" sale, that is the way the listing must be presented. The agent is responsible (if he/she wants to stay in business) to tie down the loose ends. If, however, your offer was made and a counter offer of any kind was made with the stipulation that the property is to be sold "as-is," then for sure the agent did not violate any rules or laws. That's simply the rules of negotiation. Then you gotta question your agent about protecting your interests. And that is a whole new ballgame. I wish you well.

Dick