As happy as I'll be when the day comes that I don't have to do anymore short sales, the fact is that I am in the midst of several. And even though the public by and large understands what short sales are about now more than they did 2 years ago, questions remain, such as how to address physical issues with the property.
- Issue: FHA appraisal. The appraisal flagged the rotting wood on the rear deck. The seller has no equity or proceeds to address the matter. If the buyer wants to close on their FHA loan, they'll have to fix this themselves. Don't feel sorry for them; the price of the home more than takes into account the condition and repairs required for this home.
- Issue: Buried oil tank. These are cash buyers, but they want an above ground oil tank. The seller has no equity or proceeds to address the matter. If the buyers want the oil tank removed and replaced, they'll have to do it themselves. Again, the price of the house more than compensates for the cost of this work.
- Issue: Broken pipe. This past winter, we found a leak and shut the water off at the street for this vacant home. These buyers want the water turned on for the inspector. I can appreciate that. But if we turn the water on, the house will flood. The house is, again, priced tens of thousands less than other comparable homes in the complex.
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I always find it odd that a buyer of a short sale things that the seller has cash lying around to fix issues with the home. All of our contracts clearly say "as is" pertaining to all clauses un the contract.
Good points. I am amazed at how many Realtors ask my sellers to do routine maintenance even on a traditional sale (i.e. service the HVAC, flush the hot water tank, install GFCI outlets, etc.) only after a home inspection is completed. That is like buying a used car from me and asking me to rotate the tires and change the oil for you prior to cashing your check!
With some latent and material defects that were not self evident, I have had some lenders on short sale fix the problems since they understand the home will have to be discounted even more and well beyond the cost to cure if they don't!
[they are cheap for a reason]
YUP! Disclose what is known and buyer can weigh it against the price and projected costs 'worst case scenario'.
As a buyers representative, I feel obligated to push for corrections of big problems. Since we can prevail sometimes, it is worth the effort. If the answer is no, the buyer can then decide how, or if, they want to proceed.
So don't be surprised if the buyer's agent asks, we're just doing our job.
Lenders often will not lend money if there are health and safety issues
Wayne, as long as your client is prepared for a "no," we're good.
Mosha, in cases of severe health and safety issues the listing will require either cash or a rehab loan from the start.
Number 1 could probably be addressed in an FHA loan throught the 203K program. I always ask for those things because sometimes the seller who is supposedly broke is able to come up with the money to take care of it. If i don't ask then I'm doing a disservice for my clients.
J. Phillip - great blog. I have a contractor give a high bid to reduce the price on the BPO. I then let the buyers know that the sellers will pay for nothing, not even to turn on the utilities for their inspections.
Comment#2 interests me as I never came across a scenario where a lender will make repairs.
Amiri: In a forclosure the lenders, who ownws the property, won't pay for anything for repairs. In a short sale the current home owner still owns the property and the package is sent to the lender for approval. It is the current owner who can agree to anything and the lender will merely accept that or reject it or counter with whats acceptable to them. Again, I've asked for many things in shortsales for my buyers and have received them from time to time. Remember, if you never ask you shall never receive.
I am amazed by this, but I just recently sold my primary residence in a short sale (as I was laid off) and the buyer wants me to cough up more money because he is saying he found mice in the house's crawlspace. A pest inspection was completed and found nothing. The house was sold as is, but doesn't the buyer realized we don't have any money to pay to correct the "so called" problem. He is saying we knew about the mice and did not disclose the problem. Unbelievable to me that somebody could be so shallow and cold. Not to mention the home sold for under half of what we paid for it.