We do things a little different in New York from the rest of the country, so a Westchester real estate transaction will have the home inspection prior to contract as opposed to being a contingency of the contract in most other markets. But the basics of what I am about to share probably apply to 99% of all real estate markets.
First, when buying residential property every buyer should get get the house inspected by a local, established inspector.
Every Buyer.
Every House.
Always.
Not Uncle Hank the contractor, but a licensed home inspector.
OK, now that we’ve got that out of the way, let’s suppose that the inspection yielded some discoveries that have to be addressed before going forward. The inspector found what may be evidence of termites in the basement, the water heater is on its last legs, and the roof is at the end of its useful life. And, just for fun, let’s also say that there are some double tapped breakers in the circuit panel.
First, here’s what the buyer agent should never do:
_______________________
TO: Phil@jphilip.com
FROM: Wanda.Schmidlap@xyzrealty.net
Phil:
The inspector said the house needs a new roof, has termites, needs a new water heater, and there is a problem with the circuit panel. The inspector gave us a $15,000 estimate for a new roof, and with all the other repairs my buyer got nervous and is asking for a $25,000 reduction in price and a $15,000 repair credit at closing.
Thanks and have a nice day. Please let me know.
Wanda Schmidlap
1982 Agent of the Year
_______________________
Communicating the above in a phone call is a no-no as well.
As 2013 nears, we have things known as “Digital Cameras.” Inspectors issue “reports” which can be “emailed” to the other side; as a matter of fact, that is the purpose of the inspection report, to document the findings. Our friend Wanda should get her client’s consent and send the listing agent the excerpts of the report, with photographic proof, of all issues the inspector found.
Moreover, in Westchester, and I daresay every other place, NO INSPECTOR should ever quote a price for repairs. Roofing estimates should come from roofers. Electrical estimates should come from electricians. Water heater estimates should come from Plumbers. I am sure you get the picture.
Of course, in lieu of documentation of the issues, the seller is likely to see this as a lame attempt to renegotiate a price arrived upon in good faith.
This is what Wanda should do:
_______________________
TO: Phil@jphilip.com
FROM: Wanda.Schmidlap@xyzrealty.net
Phil:
Please find attached to this email the portions of the report that document the issues found in our inspection of your listings. You will note what appears to be termite damage, evidence of three layers on a roof at the end of its life, an installation date of April 12, 1997 for the water heater and lots of rust, and a picture of 4 double tapped circuits.
I am attaching an estimate from Miller Roofing for a $7500 tear off, an $1100 estimate from Royal Flush Pest Control, a $300 estimate from Galcor Electric, and a $500 estimate from Ace Plumbing to replace the water tank. My buyer is therefore asking for a $9,500 reduction in price to address these issues so that we may proceed.
Kindly present this information to your client and assure them that if we can make this arrangement my clients will sign the contract tomorrow.
Thanks and have a nice day. Please let me know.
Wanda Schmidlap
1982 Agent of the Year
_______________________
Wanda has now done things right. She has
- Provided documentation instead of making an arbitrary demand
- Gotten estimates from legitimate contractors
- Not allowed panic to influence her client and advised them professionally
- Covered her rear end so as not to appear silly, amateurish, or unprofessional.
She has also put us in the position that, if we don’t do business with her, we are compelled by law to disclose these findings to every prospective buyer going forward. In short, she has followed protocol, which is becoming all too rare. Now, I can respond accordingly.
_______________________
TO: Wanda.Schmidlap@xyzrealty.net
FROM: Phil@jphilip.com
Wanda:
Thanks for the information. As you recall, the roof was already a negotiating point in the arrival at the current price. I am attaching paperwork provided to my client from the previous owner showing the termites predated their ownership and treatment was already made with a warranty in effect. My client has arranged for their electrician to repair the double tapped breakers. Thank you for bringing that to our attention. The water heater will be replaced Tuesday.
We can proceed at the current price with the repairs promised, as my client can engage a backup offer waiting in the wings if you choose not to proceed.
Please advise your client that they can be in their new home before the football playoffs start and celebrate Festivus in their new home if they sign the contract.
Best regards
Phil
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The above has all happened many times in many forms, but the takeaway for buyers and their agents is that inspection results cannot be treated like classified state secrets. Pictures are worth 1000 words. The buyer need not give the whole report over, but the better the documentation, the better informed both buyer and seller are, and best chance the transaction has of proceeding with integrity.
On Hovercrafts
Now, I have said that 1000 times, but the other 999 times I have said or written it, I said “if you want a do-it-yourself project, build a go-cart.” The one time I say it with hovercraft, it makes the media.
And my friends all picked up on the hovercraft thing.
Hovercraft do exist. Not just the science fiction kind, but the ones you build at home from a kit. I used to see the ads for them in the back of Boys Life and comic books, and I think they require parts from a vacuum cleaner. I don’t know. I was more of a sea monkey kind of guy.
But I have seldom felt so strongly about something as to the importance of having a trusted adviser in what is typically the largest transaction of one’s life. The median price for a home in Westchester is about $600,000. Assuming a 20% downpayment and a $480,000 mortgage at 4% interest, the total payments over the life of the loan are just over $825,000. But it doesn’t stop there. The taxes, conservatively in today’s dollars at $15,000 annually, would total another $450,000. The home insurance at $1200 annually would be another $36,000. Add in maintenance, improvements, a new roof and furnace along the way, updates, and you could spend another 6 figures easily over the life of the loan. Staggering. And I didn’t even add inflation or rising taxes.
One might think I am a lousy broker for scaring off potential buyers with those numbers, but the truth is that you have to live somewhere, and that somewhere is never free. The numbers are uglier for renters, because you spend almost the same money over time, with no tax benefit (Call a CPA. I am not giving tax advice. This is a muse. Hovercraft, dammit), and at the end of the term you have no asset and no equity. Living is expensive. But it beats the alternative.
Regardless, you never undertake that kind of a project alone without some experienced advocacy to help guide you. Not all agents are created equal, and I have always stressed to consumers that they should choose their representation wisely.
But do have representation. Jokes, hovercraft and sea monkeys aside, real estate should never be a do it yourself project.