For cash-strapped sellers, giving an “allowance” is more common than just knocking it off the price of the hoise. If I buy a hoise that needs a $20k roof, I want a new roof, not a marginally lower payment and needing to pay for the roof out of pocket. So the seller gives you an allowance to fix the roof after the sale. This comes out of the seller’s share. Generally banks don’t write mortgages on houses with bad roofs, so they will want proof the work was done.
Usually the seller makes some repairs before listing.
If any issues are raised upon inspection, the parties must negotiate who pays how much to repair what when. The contract MAY (and IMO SHOULD) specify what sorts of issues would be sufficient to queer the deal on inspection. (More on that below.). If the seller refuses to make/pay for the repairs, the buyer can walk. If the seller wishes to negotiate and pay for some/all repairs, the seller can either pay to have the repairs done, or can issue a credit to allow the buyer to have them made after the sale. As a buyer - I would generally go with the credit. Wouldn’t want to rely on seller’s “lowest bidder” repairs, and when making one repair, it is not uncommon to want something else done at the same time.
As I recall, 30 years ago or so, in order to fail an inspection, there had to be a material defect in either the structure or a major mechanical system. Much more recently, though, my clear impression is that buyers use the inspection to renegotiate price, dickering over minor issues. Further complicating things is that your average inspector is worthless. Spends their time on loose doorknobs because they are incompetent to assess structural/plant systems integrity.
In my opinion, a lot has to do with how motivated I am - as buyer or seller - to make THIS particular deal go through. I’m always surprised at how stupid home sellers and buyers will be (IMO) going to the mat over relatively small dollar amounts - compared to financing several hundred $K over 15-30 years. If I’m the seller and I want the sale to go through, I’ll likely give a credit of a few thou just to shut the buyer up. But in today’s market, I’d probably tell them to pound sand. If I’m the buyer and I really want this house and there aren’t many alternatives, I’m not going to dicker over a few thou unless there is something significant that has to be addressed.
I’m not sure I understand this - I thought you meant that after the sale, the seller gives the buyer the $20K to fix the roof - but how does that work if the bank won’t write a mortgage on a house with a bad roof ? The roof won’t be fixed until after the closing if I’m understanding correctly.
FWIW when I bought my last place I asked the bank if I could get the loan for more than the asking price (minus downpayment) so I could do some upgrades and they said absolutely not. They would only provide loan for the asking price.
So, if the seller had said they’d lower the selling price (say) $20,000 it didn’t really help except to lower my monthly payments a little. I’d still have to find $20,000 in cash to do those upgrades. I assume the same would happen for repairs.
Yep- ultimately there are two basic options- they leave it up to you, or they take care of it themselves.
If they leave it up to you, they almost always give you some sort of consideration- lower price, reduced or no closing costs, or something else you agree upon. If they do it themselves, then it’s just like any other home repair- they find a contractor or do it themselves and pay like they normally would.
They will sometimes write it if you have an agreement about the roof.
We had some sort of allowance when we bought our house. I don’t ecen rememberwhat for. It was a thousand, maybe? It was20 years ago.
Good advice, except it tends to go out the window in a hot market.
When we sold our home recently, we fixed a couple of known problems before listing it but did not get an inspection. The buyer (we had an offer the day after the house was listed) waived inspection, which seemed bizarre to us but, OK.
Naturally the sump pump failed a few days before closing, leaving scant water on the basement floor and necessitating last minute repair expense, but overall we got off cheaply.
md-2000
you are assuming banks make intelligent decisions when a house is sold. in 2008 I purchased a home from a bank that had been repossessed. After the inspection I asked for the bank to install a heater at their cost (there was none). No one at the bank could make a decision. They had 3 choices yes, no, or we split the cost. The bank could not make a counter offer on one will willing to sign the dotted line. What should have happened was the bank should have sent me a signed counter offer with the bank paying half and me paying the other half. But what I did receive was a request for me to submit another counter offer with the bank and I splitting the cost of installing the heater. An when I did no one at the bank was willing to sign the offer. The only way my realter got the bank to sign off was to go into the bank and tell them that their refusal to accept or reject my offer ment the sale was off and he would be submitting the papers at 5:00 PM that day.
At the same time my realter told another story of the banks not being smart. He had a house that was short selling. He submitted a short sell offer of about $350,000. And the bank had several other offers some for more some for less. No one at the bank was willing to put their name on the short sell. The house went into foreclosure. The bank had to spend a lot of money foreclosing. After the foreclosure the bank put the house on the market for $300,000 and got no offers. None of the realters were willing to work with that bank by then. The last time he knew the house was sold at auction for under $200,000.
Don’t expect banks to do the smart thing.
Jackmannii,
I bought in a hot market. When we started looking at houses they had offers within the 1st week. A house would go the market one day with the plan to submit the offers to the sellers in 6 days. Buyer’s agents would make an appointment to see the house. As a buyer you were given a time to look at the house, normally you were given 30 minutes look at the house. WE got to look at this house on Friday with offers going to seller at 6:00 pm on Saturday. The selling agent told our agent that she already had 5 solid offers by Friday afternoon.
We had lost out on several houses already because our offers were not high enough. We offered $60,000 over asking with an escalation clause to $80,000 to go over any other offers.
From about Febuary to May we saw house prices increase about $150,000.
I had contingences in my offer. And it is a good thing for both the seller and me. The seller did not disclose a lot of things that he knew were wrong, that is against the law. Without the inspection I would have come after him with a lawyer for the cost of the things he did not disclose. With the inspection I was able to get a $15,000 credit for the lrepairs.
It can be written into the escrow account. Something like stating the loan will be approved with repairs completed of a signed contract be provided at time of funding of the loan. Sometime the contractor will do the work and be paid off at the time of closing. He will have a lean against the house that the escrow company will have to pay out to give a clear title.
The whole debate here seems to be - who does the repairs, the buyer after buying or the seller before selling? (That is, before both commit to the sale) Any other arrangement is done on faith.
I would assume that a house that absolutely needs a new roof will have to get one before being sold, for example. If it’s simply a good idea and needs to be done soon, then maybe it will be left to the new owner.
The problem with the bank or the seller or the buyer agreeing to commit to money for repairs without a final sale is - how do you know it is done right? The seller (or buyer) may with the best of intentions commit to the repairs as part of the deal, and then find that the repairs are not to their satisfaction. It may not be deliberate, it may be the contractor turned out to be crooked or incompetent or the materials were not the best, etc. it is in the interest of the person irrevocably committed to the property to ensure the work is satisfactory. Equally, a buyer who does not have a final sale is less inclined to put money into repairs that may benefit someone else.
This is particularly an issue when the work is not urgent. Just because I insist on a new roof, does not mean that if I back out or fail to get financing, the next potential buyer is willing to pay $20,000 more for that house, new roof or not.
This is why I see a bank not signing off. The home owner and the buyer have a strong vested interest - this is their one and only home; the bank has a bunch of people behind desks who might manage to have a quick look at the property in the next few weeks and are less critical of workmanship; but if the deal falls through the bank just spent a load of money on something that is to nobody’s satisfaction.
(I sold a house about 15 years ago, where the oil furnace had just died and I replaced it with electric. The furnace was replaced, but at the time a hot housing market meant a shortage of workmen, so the ducting to connect the new furnace was not done by closing. I talked to the installer, he said it would be done in two weeks. A month and a half later after closing, the real estate agent called and said the buyer/occupant was wondering when the furnace would be connected, winter was coming. WHAT!!!???
It took a few phone calls - the installer had given the job to another person who did duct work with the assurance it would be done, and they had not told him they never got around to it…
But, I had paid for the full install before putting the house on the market, as … furnace? Canada? needed. )
I know I’m probably an outlier but I’ve never bought any houses that didn’t need renovation, and all houses are sold as is where is. Around here if you were to say “but it needs a new roof and the shower leaks and it needs repainting and I’d really like heating” the seller (or their agent) would laugh at you.
Of course it does. That’s why the price is what it is.
In the UK repossessed houses are almost always sold at auction. Caveat emptor applies there and it is entirely up to the buyer to make sure they don’t overpay for a property with a load of problems.
bob_2
In the US a bank will try and sell a house before it has to go to auction. In fact the little house that we purchased was still on the auction list while we were in contract. If our deal had fallen through the house would have been auctioned off in about 8 days. Banks like to sell a house before auction because they can usually get more money. At auction the house is sold as is and any discrepancies are the buyer’s problem. And buying a repossessed the disclosure form had written in every condition spot line "seller does not know the condition of property. Anyone wanting to buy at auction should make sure they have gone to the open house at any house they are bidding on.
While we buying there was one house that came up on the listings that our agent refused to even let us look at. The descriptions and pictures looked great in a good neighborhood. All except one picture. There was a red tag on the front door. The house was a shut down drug factory and would require a HazMat clean up before anyone could go into the house.
I’lll repeat what I said before - many MANY home inspections are useless. In fact - worse than useless, as they cover a false security. There is no guarantee that most inspectors will identify the biggest potential issues. In fact, every home inspector contract of the many I have seen expressly disavows any liability for missing anything. Moreover, much of the inspection industry relies on upcharges for additional inspections - such as scoping sewer lines. Purely to provide profit far exceeding any reasonable risk to the clients.
I know relatively intelligent people who erroneously depended on their inspection to identify the major problems with their intended purchase. Suffice it to say, the inspectors missed the most significant and most costly immediate repairs. But they DID notice every loose cabinet knob and hinge! 
How does that work? The whole point is that the auction ensures that no sweetheart deal is made to profit friends of the bank people. The entire public has a chance to bid.
I assume what happens is the houses are publicly listed for decent amount of time and anyone interested has an opportunity to put in an offer?
Where I live the sewer lateral must not just be scoped, but also pressure tested and signed off on by a city inspector with every home sale if a repair hasn’t been done within the last 20 years for a complete replacement or 7 for a partial repair. No sewer lateral certificate, no sale. So home inspectors don’t generally do that sort of thing locally, it’s more the province of licensed plumbing contractors and is a required added expense specifically for sellers. In our case we looking at a $7k repair estimate which we were prepared to eat, but the buyer agreed to assume the cost and hassle as a sweetener (another hot market).
We actually had a well-respected local inspector go over our house pre-showing and though we sold “as is”, we did do a few minor plumbing repairs since they were the sort off minor cosmetic leaks that can turn buyers off. In our case our relator recommended a thorough report, since experienced realtors know which inspectors are reliable and tend to be more at ease when they can disclose to their clients that what is there to deal with is likely more or less complete within reasonable limits.
md-2000
Most banks are working with real estate agents. The house is listed on the MLS where anyone can make an offer. The bank will set the price that they want the house listed at. So offers will be based on the listing price. If they get no offers they will lower the price. The little house was listed at $320,000 the 1st time we looked at it. The house had no heating so they were not getting offers. They dropped the price several time. We were not finding anything that suited us or if we made an offer someone else made a higher offer. My wife talked me into taking a 2nd look. Bu then the huse was down to $300,000. but no offers. WE talked and I figured it would cost me between 3 to 5 K to install a heating system. As they had no offers we offer $250,000 and it was accepted. We were going to get a loan on the house and the mortagee company would not write the loan without heat in the house. Long story but we got the bank to install heating before the close of escrow.
The way they make sure no sweetheart deal are made at below any offered price is using licensed real estate agents. If they do not present any offer to the seller they are not doing their job and it can cost them their license and possibly jail time.
There is not any particular reason to assume this. Homes are frequently sold with major repairs not being completed.
The primary purpose of the home inspection is largely to give a buyer an “out” where they get to retrieve their escrow payment if you find anything egregious, or really anything at all–most inspection contingent contracts allow you to back out without penalty if anything is found in said inspection. And of course, in really hot markets many houses are being sold with no inspection. There is some belief that banks won’t issue loans without an inspection, but that is not true–that depends on the loan program, type of loan, financed amount, equity, financial profile of the buyer etc.
I’ve advised several younger relatives on first time home purchases to understand what an inspection is and isn’t, and the limitations and quality issues with many home inspectors. They certainly aren’t a bad thing to get done, but don’t walk away from a mostly clean home inspection with the misperception that it’s a clean bill of health for your house. If you really, really don’t want to buy a house that needs any major work you need to call in a series of individual expert inspectors, specifically:
- Get HVAC looked at by an HVAC guy
- Plumbing by a plumber
- Electricity by an electrician
- Roof by a roofer
That covers a lot of the big ones. Note that some sellers if asked to consent to you doing that many inspections may simply choose not to do business with you, and in a hot market that will almost certainly be the case. Those inspections are also not done for free, and you will generally bear the cost of them. I’ve laid this out to people I’ve advised on buying–with the caveat that even having the experts check your house out isn’t any intrinsic guarantee. The best protection against a major repair being a problem is having savings set aside specifically to handle a major repair if it comes up, which they often will even with the best precautions.
Almost any property I was there at the same time as the inspector. I found things that the inspector missed, they were small thing that I could repair.
Your realter should have a good inspector that he will set up the inspection with. There are things that they can find with just a little training. Reversed polarity or ungrounded outlets, lack of GFIC in proper locations. Checking out the main and sub electrical panels. If he finds a lot of these then you can assume you are going to have electrical problems. They should also be able to tell if there are uninspected sub panels. Should be able to provide the age of the heating and air conditioning systems. Run both and be sure that they are heating and cooling. Does the stove, refrigerator, washer and dryer work. Are there proper smoke and CO decters. Check for proper water flow. There are a lot of little things that a fair inspector will note. If the inspector finds a lot of discrepancies it give the buyer an opportunity to seek a credit or cancel the sale. Few people want to purchase a money pit.
The one time I was not with the inspector was my present house. But I had a friend who was a general contractor be with the inspector.
There were a few comments like the HVAC appears to be working buy I would recommend having a qualified HVAC contractor inspect before closing. I am not qualified to truly asses roofs, but the roof is 20 years old and approaching the end of it’s life. Though there appears to be no leaks at this time. There were a few other things that if the buyer had any questions about they should get inj a qualilfed inpsector for as he was not qualified to make any assessments.