Expert: Dick Dennis - 7/11/2006

Question
Okay, this is a compicated situation. We have made an offer on an older home (60+ years old) with a newer (12 years old) addition in Tennessee. When we asked for the building permits for the new addition, we were informed (by the seller; the seller's agent seemed only to take their word for it) that they did not need them at the time it was built. We have had our home inspection (our offer was contingent on it in spite of the fact that they are selling as is) and it uncovered some really dangerous "handyman" electrical work that is OBVIOUSLY not up to code (NEC). Our suspicion is that there has never been an electrical permit obtained or inspection done in spite of the fact that it is required. We want the electrical problems fixed throughout the house (frankly in the old part too since they've tampered so much with it). We know that the seller will be reluctant because he holds onto an appraisal that he had done two years ago that had the value of the home set at about $35000 above what we're currently paying (which, to my mind, means squat because of the permitting issues and dangerous wiring noted above). I have a number of questions about this situation:

1. Can they sell this home "as is" since part of the problems are violations of national, state, and local codes?

2. If the seller refuses to have the permits retroactively issued, what happens to the legality of the sale?

3. Could we (or subsequent buyers...we're not taking it without appropriate permits and inspections) get a mortgage or home insurance on a house with these problems? He'll obviously have to disclose these problems in the future.

4. When the bank does their appraisal, will they take into consideration what we know of the condition of the home? Will the value actually go down?

5. If he wants to reduce the selling price, I'm not sure what to do. That doesn't give us the cash available for the repairs, and I'm worried that we might get a new appraisal in the course of getting a mortgage that will be low enough (?) that we'll be forced into paying PMI and that our payments will therefore go up, thereby further reducing the cash we have available to make the necessary repairs.

Our plan of action is as follows:

1. We want the permits issued retroactively and copies of them presented to us.

2. We want a state licensed electrician to come in and evaluate the problems and give an estimate. We want the seller to pay for it.

3. We want either the repairs made or cash back at closing in the amount of the estimate.

I think that this is a reasonable course of action. There are other issues that we are not asking for repairs on (windows that need replacing, etc.) because they are selling the home as is. However, the electrical problems are dangerous, and I'm worried about the implications if we buy a house without the permits required. Can you outline for me the legal ramifications of this situation?

Ashley Simerl

Answer
Well, Ashley, you're either buying the house "as-is" or not. If you're buying the property as-is, then the seller must disclose EVERYTHING he knows about the property. Here in California we have a Transfer Disclosure that is checked off on everything the seller knows about the property. I would think Tennessee has something similar.

With the knowledge you now know from the seller, you hire a home inspector, maybe two separate ones in this case, and decide whether you want to continue on with the purchase of the property. If the inspector(s) reveal more work than you are willing to take on, then you pass, get your earnest money returned, and go look for another house.

But as-is means the seller is revealing what he knows about the property but he is not going to do any repairs for you. Presumably the value is down from where it would be if the house was in good repair. If he is doing repairs for you, then you are not buying the property as-is. Then you got some tall regotiation to do.

There is a certain point at which the seller will tell you to go pound sand. As long as you have not reached it yet, see what you can negotiate. But as-is means as-is.

If was I the seller, and I was selling the property as-is, I would tell you to go find another house if you expect me to do all those repairs. You can't have it both ways, Ashley. At least not with me you wouldn't.

I do wish you well.

Dick Dennis                dixiedee13@aol.com

www.OldProblemSolver.com