Ok, we settled on a price. The inspection turned up some issues, some known to us that I mentally added to the price, and some unknown to us. My lawyer looked at the inspection report and took note of the issues that need to be resolved before close. Some of these need to be resolved because a house cannot be sold in that state in Illinois, and others because the VA won’t finance a house with those issues.
First the electrical system is only 60 amp and has fuses. A new electrical panel needs to be installed. The seller has sent word he will get it up to code with a 100 am breaker panel. I would like 200 amp service and am willing to pay the difference. This can be easily fixed before close I will convey that to my lawyer this morning. I knew that the system was 60 am fuses and had planned on replacing it ASAP.
Second the roof is not old, but it is not flashed with metal, but rather joints are tarred. This is not a good way to construct a roof for this area. It cannot be remedied in this weather, but the VA would likely accept funds set aside to fix it.
Third, the crawl space is unvented, there is no vapor barrier, and there is a musty smell and damp wood. This seems to be a recent issue as the mold is not widely visible and the wood seems to be undamaged. If it tests for mold, the mold must be removed before the sale can be recorded. Hubby has spoke to several contractors and the crawl space can be dried, drainage put in place, and then the whole thing sealed in the time left before close.
I have no idea what the seller is going to say about the second two issues. I want this house; the inspector agreed that it was basically of good constructions, the additions have been done competantly, and the house has been generally well cared for. The roof issue seems to stem not from a desire to cut corners, but from the roofers using techniques appropriate for a warmer climate.
I had already planned on paying for the first, but the other two are a bit of a surprise. I don’t know what the seller is going to say. Is there anything I can to to make this go better?
You didn’t mention one all-important matter. Do you have a sales contract signed by all parties? If so, what provisions were made to fix things?
If not, now is the time to negotiate. If you have an agent, he/she should be able to write a contract that expresses your wishes.
You might not need to have the electrical service, roof, etc., upgraded before closing if you’re in a hurry to close. Just get an estimate or two and negotiate a price allowance based on who will pay for what and how much.
Generally speaking, I think you are better off setting money aside to fix these issues, than letting the owner fix them for you. The owner has zero incentive to hire a good contractor who does quality, long lasting work. He has every incentive to hire a contractor to do the barest minimum to meet requirements and save his pennies.
Things that must be resolved before close, obviously have to be resolved, no choice. Things that can wait until after the close, get the owners to cut you a check for the repairs out of their proceeds and hire a contractor to do it yourself. You do risk having unforseen issues come up that will drive the cost higher, but I would personally take that risk for the ability to manage the repairs more closely.
When we did ours, we had the sale price reduced by the amount of the repairs. The only trouble was that we now had to come up with the cash to do the repairs, which wasn’t exactly putting us on a Ramen only diet, but if I had it to do again, I’d have gone with a check.
You are correct in pointing out that the VA may be the sticking point. They can be a real PITA, demanding fixes that neither party desire. Does your contract specify that financing will be through the VA? I’m assuming you are going VA due to a minimal downpayment?
You may have to decide exactly how you feel. If you really want this house, then you’ll be willing to eat a larger share of these repairs to make the deal go through. You can always rationalize it by thinking that it will only cost pennies/dollars more per month when financed over 30 years.
OTOH, if the house has been on the market for a while and the seller is motivated, this might be the time to drive a bargain to get concessions.
I assume your contract has a financing contingency some time prior to close. That gives you an additional possible out, if the VA won’t approve and your situation will not allow you to get commercial financing.
In one way you are fortunate in that you can play the VA as being the bad guy.
No advice to give, but I know how it feels to want the house, and then be on pins and needles until the papers are signed. Best of luck, and Happy Housewarming!
Whatever you do, don’t let the seller agree to do any work after you buy the house. You’ll never get them to do it without suing them, which will cost money anyway. Either get them to do it before closing, or get money back for it at closing. Yeah, I learned the hard way.
When we were in contract to buy a house, the sellers insisted that they wanted the sale to happen before the repairs. They would put the price of the repairs in escrow. However, they had selected a cut-rate repair shop who might not fix correctly (given that they had a reputation for this) and the repairs might end up costing more than what was in escrow.
Insist that whatever repairs are to be done are to be completed and re-inspected before closing.
Secondly, how old is this house? If it’s more than 50 years or so, you may be looking at having to replace the wiring in the walls, because some of that old wiring can’t handle heavy loads.
The house was built in 1938. The inspector said the wiring itself looked good from what he can tell. They are running microwaves and other high draw appliances now.
It is not so much the small down payment, but the lack of pmi coupled with no down payment. I have enough cash on hand to make all the repairs myself, that is not the issue. I could have done an 80-15-5 loan. I would rather do VA and have money for things that come up.
The letter has been sent to his lawyer. My lawyer says the thing to do now is to wait for his response. I hate waiting. I told my lawyer about wanting 200 amp service.
Honestly if he wanted to put aside cash to cover the minimum repairs needed to get it to code and we could use that with some of our cash to do them right, I would be fine. I still think we would end up with more cash on hand than with the other loan type. I am being told that he has to bring the house up to code before the sale.
I don’t trust inspectors who then get to make the repairs.
They are shooting fish in a barrel and you are the fish.
But the problem is that banks do not care about truth, but getting clean reports. I think there ought to be a better way. You and the seller are over a barrel this way.
The inspector is independent. We found him ourselves and interviewed him about his methods. He will not be making repairs, nor has he recommended anyone to make repairs.
I am very pleased with the work of this inspector. He did a thorough and was very careful with the house, not leaving any evidence of his being in it. He explained things patiently and included many things in the report just for our information. He did a good job of getting to the bottom of how the house works, such as verifying what was vented where, finding all the accesses to the various systems, and he took lots of pictures to back up his findings.
Generally he spoke well of the house, pointing out many things that had been done right. He noted that although the windows were quite old and single paned, they were in good shape and well installed.
What has us over a barrel is the building code itself and the requirements of the VA. The state has laws about buildings meeting certain standards before it will record the sale. The VA will only back up loans on property which meet safety standards and which are worth the amount of the loan. Both quite reasonable generally. I might want more flexibility now, but I understand the whys involved.
There is a contract signed by all parties, but it has a contingency on VA financing. I really want the sale to go through. The lawyer sent then a letter. No word from them yet. I have not heard from the appraisers yet either. I hope he wants to sell the house as much as I want to buy it. I think I gave him a pretty good price for it, one that was fair without being overly generous. It looks like my loan is going through, if the property is up to snuff. I don’t really think he will get any better offers anytime soon. The market is stagnant. Not many houses I have looked at have been sold. I just wish we would hear back soon.