Dear Real Estate Adviser,
An inspection showed several problems with a home I’m buying. The roof is shot (seller knew this when he bought it eight years ago); the aging water heater isn’t vented right; there are no smoke detectors; the ancient furnace wasn’t working; plus, the eaves and fascia are peeling paint. After getting a bid on the roof, fascia and soffit alone for $12,000, I realized I can’t afford to do this. The agent working on my behalf wants me to pay half or offer more to defray costs. I’m already near the top of my loan limit. Can I exit the contract or do I have to give the seller the chance to cure first?
— Jo Ann
Dear Jo Ann,
As the old cartoon lion, Snagglepuss, used to exclaim while beating a retreat, “Exit, stage left!” In other words, your instincts seem spot on and you likely have latitude to exit.
Asking the buyer to pay? Weird
First, though, let me get this straight. The seller and agent want you to shoulder half the repair bill? Hmm. Now, if this were a bank asking you to fund FHA-required repairs on a heavily discounted foreclosure home, well that’s understandable. But unless this place is an irresistible classic home whose seller has already factored in a huge “as is” price break, it sounds like a dicey deal at best.
Would seller do adequate work?
It is you who should be offered a whopping allowance by the seller to do your own repairs after closing, assuming you’d want to proceed. You really don’t want this already suspicious owner fixing important things, much less using your money to do so!
There are two significant risks: He might pull a fast one and cancel the transaction, and you’d be out the money (unless you sue — even more money). Or he might take the cheapest route and do a slipshod, barely adequate repair job, since he has no stake in the home once he departs. He apparently can’t afford to “cure” first.
Force a cancellation
Stick to your guns. If the seller refuses to issue full credit for all these repairs, then choose the major items on that long punch list that will force you to cancel the contract if they’re not factored into the transaction.
But before you do anything, revisit your contract and read the inspection and repair contingencies carefully. Some contracts provide plenty of room for negotiating on what gets fixed and what doesn’t, while others say that only building-code violations or “true defects” like that furnace and roof must be fixed. State laws also vary on this issue, so it may behoove you to do a little research or even contact an attorney if your legal position is challenged. But it seems you are in a pretty good position to cancel.
Is the agent working for you?
But I am also a little concerned about that agent you say is “working on your behalf.” I may be wrong, but are you trying to share an agent with the seller? If so, a dual agent is seldom a good idea unless the buying and selling parties are related or otherwise chummy and the deal is already hammered out.
You need someone who represents your interests exclusively, Jo Ann. And it’s doubtful that an honest-to-goodness buyer’s agent would press you to help pay for repairs on that apparently run-down home unless that agent is really, really hurting for money.
Getting your money back
If that contract gives you clear leverage to back out of the purchase because of your inspection findings and you’re doing it within the allotted time frame, you’re almost certainly entitled to get your earnest money back.
Unlike a cartoon character, I don’t expect your legs to accelerate in place before you speed off. But it seems your best course is to quickly exit stage left — or right — to avoid getting caught in that money pit.
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