Expert: Dennis Herman - 7/9/2009

Question
I am going to purchase a foreclosed home.  Closing is Aug. 13th.  The property has been empty for over a year and a half.  The pipes froze and burst before they could get it winterized.  They decided to begin fixing the plumbing. The job was done horribly and there are many leaks.  They also decided to not replace the hot water heater or the water softening system(country home with hard water) which both actually exploded and flooded the basement.  I spoke to a real estate agent an he told me that because they began the repairs the bank that owns the home is liable for all water based appliances as well. They are trying to pull the "as is" clause on us. We want the house badly but are not willing to fork out up to 1500 for a new softening system and another couple hundred for a new hot water heater.  Especially when the deal we got was not so great anyway.  What should we do?  Walk away or try to negotiate a new price.  The listing price was 163,000 we got it for 158,000  We also don't want to have a legal battle.  We just want them to do what's right and fair.  To us "as is"  would have been selling the home with the pipes broken and all. They did start fixing the issues so I agree with the attorney. We were told it will not pass an FHA Appraisal unless the hot water heater and water softener are operational as they are considered built in's.

Answer
You realize I am not allowed to comment on a contract I am not a party to.  I can of course comment on some of the experiences I have had with foreclosures.  I could get real sarcastic here but I will stick to the point.  AS IS has a legal application based on your location.  It usually does not remove the responsibilities of the seller.  In some states the statement is meaningless.  

Have worked with listing agents representing lenders, selling foreclosures, I can tell you, it is nearly impossible to get a bank to respond to any required repairs.  The term SOLD AS IS refers to the fact the seller will not offer any type of assistance for repairs.  You should have had an opportunity for an inspection.  If there are items on the inspection you did not know about, your agent can help you with this area.  This is why it is always best to use an agent representing you to write the offer and not the listing agent.  

The only time I have had a bank consider a price reduction based on  items found during an inspection concerned a defective heat exchanger in the furnace.  When it comes to structural and safety aspects the bank follows a whole different set of guidelines.  When detected, these must be disclosed in writing to all future buyers.  The seller may as well work with you, considering they now may be facing a price reduction with anyone else.  

Most water softener systems are rental units.  Very few homes in WI purchase a water system.  It would be unusual for a seller to install a new one.  

Some of the listing agents working for the sellers have a crew that does small repairs on the properties.  The crew may do tasks such as cleaning and maintenance.  The lender may have no knowledge of the repairs.  This may have been done by a listing agent other than the one presently selling the property.

When you consider a price you are paying for the property don't compare it to the list price, compare it to the market price.  Before you made the offer your agent should have provided you with a list of homes in the area of both active and sold units.  If you are paying $158,000 for a house in a neighborhood of $250,000 home you get yourself a pretty good deal.