First Time Home Buyer (post-inspection)

[jimbohoward69]

I'd been looking for my first home for months until I came across one that I really liked. It was built in 1900 but the listing stated it was refurbished down to the studs back in 2016 (i.e..flipped). I did a walk around with my agent and decided to put in an offer, which was ultimately accepted.

Afterward, I ordered an inspection and the results were not good. Part of the foundation in the crawl space has bowed inward...I'd never seen brick/concrete bend like that. Also, the "remodeled" kitchen floor slopes downward and VERY noticeable when you walk on it. There were other write-ups as well but those were the two major ones. Also, a sewer scope was done and there were a ton of rocks (could hardly get the scope through) and a crack in the main line.

So, at this point, I'm leery about going forward with the process. As each day passes, my love of the house lessens more and more. My agent is drafting a "reply to seller" letter...with estimated repair costs of $15-20K. However, my stress level only continues to increase. Maybe being a 51 yr old first time home owner has got me paranoid...but even if the seller agrees to all repairs, I still can't "un-see" that foundation or "un-feel" that sloped kitchen floor.

My agent told me that if you don't at least give the seller the chance to fix things to your satisfaction, it's pretty much a foregone conclusion that you'll lose the earnest money (which I'm willing to do at this point). What worries me is language in the contract that states the seller can seek legal remedy due to non-performance. Could a court "force" me to move into a house I no longer wish to buy?

 

[Bamaman]

It's up to your agent to word the offer correctly where you can pull out of a contract if there's major repairs to be done.

Now, he can negotiate you out of the deal completely. I'm sure you can find other repairs that'll make the deal a no go--too expensive. There are other suckers out there looking.

You'll seldom find a house that old that's not got some major issues. There's always another house out there. And if the agent doesn't perform right, fire him.

 

[jimbohoward69]

It's up to your agent to word the offer correctly where you can pull out of a contract if there's major repairs to be done.

It's my understanding that a vast majority of the verbiage in a real estate purchase agreement is mandated by the National Association of Realtors...I guess that means "purposely vague" to protect both the buyer and seller? I looked through the PA and found the following language:

E. IF DEFECT IS IDENTIFIED: If an Inspection Report reveals a DEFECT(S) with the Property, the Buyer must:
1. Provide the inspection report, or relevant parts thereof, to the Seller; and
2. Give the Seller the opportunity to remedy the defect(s).

F. SELLER RESPONSE TO INSPECTION DEFECT: If Seller is unable or unwilling to remedy the defect(s) to Buyer's reasonable satisfaction before closing (or at a time otherwise agreed to by the parties), then Buyer may terminate this Agreement or waive such defect(s) and the transaction shall proceed toward closing.

G. DEFECT DEFINED: Under Indiana law, "Defect" means a condition that would have a significant adverse effect on the value of the Property, that would significantly impair the health or safety of future occupants of the property, or that if not repaired, removed, or replaced would significantly shorten or adversely affect the expected normal life of the premises.

H. PREVIOUSLY DISCLOSED DEFECT: Buyer agrees that any property defect(s) previously disclosed by Seller, or routine maintenance and minor repair items mentioned in any report, shall not be a basis for termination of this agreement.

I. INSPECTION RELEASE: Buyer releases and holds harmless all Brokers and their companies from any and all liability, including attorney's fees and costs, arising out of or related to any inspection, inspection result, repair, disclosed defect or deficiency affecting the Property, including but not limited to lead-based paint, radon, mold and other biological contaminants. This release shall survive the closing.

 

[W2R]

Tell your agent (firmly, but politely) that you don't want this house and it is not the house for you. Get him to figure out a way for you to get out of the deal somehow. I don't know much about real estate law, but I am sure he can get you out of the deal somehow.

Don't buy the house! It's obvious that you will regret doing that.

 

[njhowie]

My agent told me that if you don't at least give the seller the chance to fix things to your satisfaction, it's pretty much a foregone conclusion that you'll lose the earnest money (which I'm willing to do at this point). What worries me is language in the contract that states the seller can seek legal remedy due to non-performance. Could a court "force" me to move into a house I no longer wish to buy?

First thought - does your contract have a clause that it's dependent on you obtaining financing? If so, contact your lender, advise what's happened. Suggest they yank the financing as it would surely appraise for significantly less with the problems identified. That could be the end of it and get you out with your earnest money.

Better thought - contact a local real estate attorney. It would be well worth the hour or two in fees to discuss your options. He/she may have ideas as to how you can walk away from the deal and get your earnest money back, or minimally draft an addendum to the sales contract for going forward which you'll require seller to sign indicating new terms to get to closing.

Do not talk any further with "your" real estate agent about your options going forward - he/she is not your friend, does not work for you, is not on your side, and will not press seller to perform. Advise real estate agent not to send the "reply to seller" letter - have your attorney do that if he/she believes that is the way to go. Again, attorney may have better options for you that will get you out of the deal and made whole. This is what a real estate attorney is for - someone who will stick up for you and force seller to perform.

I would say not to accept money or discount of estimated cost to remedy - require seller to fix all of the items identified by your inspector. Who knows what might happen during the fix - maybe something else is identified, or the price goes significantly higher - which happens all the time. At the completion of the repair work, require seller pay for your inspector to come back and do a full new inspection that must pass to your satisfaction. Only after passing a new inspection will you proceed to closing.

If the issues are as severe/significant as they seem, maybe you contact the county and see if they might condemn the house and pull the occupancy certificate...until the repairs are completed and county inspector signs off on repairs. Again, this is something that an attorney could advise on and file necessary paperwork on your behalf if it's an option.

Your first moves should be to tell the real estate agent to hold off on the letter, and to advise seller you're talking with an attorney to decide how to move forward.

Just my thoughts and what I would do. In our state, it is customary for buyer and seller to have their own attorneys. When we purchased our first home, on the day of our closing, after sellers were moved out, we went and did our final walk-through. There was an issue as seller removed a "fixture" that should not have been, and ripped their alarm system out of the wall leaving a nice hole which they did not repair. We showed the pictures to our attorney, he gave us the keys, wished us well, told us to go move in, and would not release funds to seller. This was on a Friday afternoon. By Friday night the real estate agent was calling us and cursing up a storm. I told her to go speak with our attorney.

 

[ERD50]

...I did a walk around with my agent and decided to put in an offer, which was ultimately accepted.

Afterward, I ordered an inspection and the results were not good. ...

In my (limited) experience, the offer is put in contingent on the inspection. The way you have it worded, the offer went in w/o the inspection contingency, and later you decided on having the inspection made? Is that correct?

I'm not sure what you can do now if it wasn't built in to the offer. I'd be very wary as a 1st time home buyer to buy a home with those sorts of defects. There could be a lot of underlying problems, and very likely very expensive. And messy. And time consuming. And frustrating dealing with contractors.

Was the house on the market a long time (meaning other more experienced home owners maybe saw these issues, or backed out after an inspection contingency)?

As mentioned, check your options with the RE agent (hmmm, though getting you out means they lose a commission? conflict?).

How much is the escrow money? It might be better to take the loss if there is no other option to negotiate. Tuition payment.

OTOH, at least in IL, the requirement to disclose defects is pretty high now, so if there is any evidence that they knew of these things and didn't disclose, you should be able to get out and get your money back.

Check out all your options, Good luck.

edit: I cross posted with njhowie - I think that post is very good, see an attorney, unless they are just ready to let you back out (doubtful).

-ERD50

 

[RetiredHappy]

You should be able to walk away and get your entire deposit back during due diligence period. Pass up on this property and look for another house. I cannot imagine putting an offer on a house without a contingency on home inspection. I suspect your agent is lying to you because he/she wants to make the commission on a successful closing.

 

[OldShooter]

... I suspect your agent is lying to you because he/she wants to make the commission on a successful closing.

Even if the agent is not a liar, your offering document should have included an escape clause, at least for major faults. Lack of such a clause is evidence of incompetence. Tell the agent you're out of the deal and you want your money back. If you don't immediately get the money, take the agreement to a lawyer for review.

@RetiredHappy is implicitly pointing out that the agent's ONLY interest is to get a deal, any deal, closed and to get paid. Never forget this.

You already know one of the most important rules in contracts, including real estate: Never fall in love with a deal. There is always another one coming.

Another important rule: He who is in a hurry loses.

 

[SecondCor521]

It sounds like you have a fully executed contract. Your options really will depend on what your contract said.

If you did not include an inspection contingency, then you probably are out your earnest money. (@ERD50, including one is normal, but in many places these days desperate buyers are waiving inspection and financing contingencies.)

If you did include an inspection contingency, then I would follow the process implied in your quotes in post #3 on this thread.

If you do not have a contingency that saves you, then yes, in theory they could sue you for specific performance and try to get you to buy the house per the contract you signed. I've never heard of that happening. In practice the seller would probably take your earnest money as damages, and relist the house and hope to sell it to someone else. Or I suppose if you're the only buyer around, they might be willing to come back to the table to renegotiate - but I've never heard of that happening either.

 

[Aerides]

Unless you waived rights to inspection to get the offer accepted (and then did an inspection independent of the contract) you should be fine.

If your Agent is saying the seller should have a chance at a good faith remedy, then it's either going to be a tremendous price slash or repair everything - the latter of which cannot be done within most offer timeframes.

 

[pb4uski]

Tell your agent (firmly, but politely) that you don't want this house and it is not the house for you. Get him to figure out a way for you to get out of the deal somehow. I don't know much about real estate law, but I am sure he can get you out of the deal somehow.

Don't buy the house! It's obvious that you will regret doing that.

+1 OP, check the wording in the contract, but my understanding is that if your contract includes a home inspection contingency that you'll have wide latitude in getting out of the contract and getting your earnest money deposit back... you can just say I didn't like the home inspection report result and I'm cancelling the contract.

 

[street]

Unless you waived rights to inspection to get the offer accepted (and then did an inspection independent of the contract) you should be fine.

If your Agent is saying the seller should have a chance at a good faith remedy, then it's either going to be a tremendous price slash or repair everything - the latter of which cannot be done within most offer timeframes.

Yep, I agree.

 

[JRon]

Did you have any contingencies at all with the offer such as a financing contingency? If so, tell your lender how nervous you are about the house and you’ll likely get turned down for financing.

If your offer had no contingencies and you didn’t specifically agree to no contingencies, then get a new agent to help you find a house. This one didn’t do their job.

 

[jimbohoward69]

All,

THANK YOU for the advice/guidance thus far. I've attached a Word conversion of the purchase agreement PDF (sanitized). Section N is where it starts discussing Inspections. I've seen the word "contingency" being used in this thread...but am unsure what the term's latitude has regarding this specific PA.

 

[jimbohoward69]

I forgot to mention the loan appraisal just came back (slightly above the purchase price). But I have not had the opportunity yet to make them aware of the inspection results.

 

[njhowie]

Easy solution...

L. HOMEOWNER'S INSURANCE: Completion of this transaction shall be contingent upon the Buyer's ability to
obtain a favorable written commitment for homeowner's insurance within 30 days after acceptance of this

Agreement. Buyer should consult with one or more insurance agents regarding optional, or additional, coverage.

Agreement is dated July 4. You cannot get written commitment for homeowners insurance with the defects. Defects can/will not be remedied by August 4.

There's your contingency that cannot be met.

 

[SecondCor521]

All,

THANK YOU for the advice/guidance thus far. I've attached a Word conversion of the purchase agreement PDF (sanitized). Section N is where it starts discussing Inspections. I've seen the word "contingency" being used in this thread...but am unsure what the term's latitude has regarding this specific PA.

You do have an inspection contingency. N.2 on page 4, line 187. The other options alluded to very well might work, but the inspection contingency is IMHO your best bet, since that's your real issue with the property.

 

[OldShooter]

I think you're golden and the agent is lying because he wants his commission.
----------------------------------------------------------------------------
207 F. SELLER RESPONSE TO INSPECTION DEFECT: If Seller is unable or unwilling to remedy the defect(s) to Buyer's
208 reasonable satisfaction before closing (or at a time otherwise agreed to by the parties), then Buyer may terminate this
209 Agreement or waive such defect(s) and the transaction shall proceed toward closing.
210 G. DEFECT DEFINED: Under Indiana law, "Defect" means a condition that would have a significant adverse effect on
211 the value of the Property, that would significantly impair the health or safety of future occupants of the property, or
212 that if not repaired, removed, or replaced would significantly shorten or adversely affect the expected normal life of
213 the premises.
----------------------------------------------------------------------------

Simply rework your OP paragraph into a letter to the agent or the seller:

• "Part of the foundation in the crawl space has bowed inward...I'd never seen brick/concrete bend like that. Also, the "remodeled" kitchen floor slopes downward and VERY noticeable when you walk on it. There were other write-ups as well but those were the two major ones. Also, a sewer scope was done and there were a ton of rocks (could hardly get the scope through) and a crack in the main line."

Include a copy of the inspector's report as required by the purchase agreement. Add some words that say that you don't believe that the foundation and kitchen floor defects can be corrected to your satisfaction and ask for a release from the purchase agreement.

If you are afraid that the seller might inclined to play hardball, spend two or three hundred bucks and have a lawyer write your rejection letter.

Fire the agent.

 

[njhowie]

You do have an inspection contingency. N.2 on page 4, line 187. The other options alluded to very well might work, but the inspection contingency is IMHO your best bet, since that's your real issue with the property.

That's just that buyer can have an inspection done, which he has. Read line 198 and down E - If defect is identified - provide inspection report & give seller opportunity to remedy. F could apply if seller is unable/unwilling to correct before closing, then Buyer can terminate.

 

[SecondCor521]

That's just that buyer can have an inspection done, which he has. Read line 198 and down E - If defect is identified - provide inspection report & give seller opportunity to remedy. F could apply if seller is unable/unwilling to correct before closing, then Buyer can terminate.

I know all that. OP seemed to be unsure/unclear on whether he had one, so I was trying to be helpful to him on that point.

As far as the sequelae, I earlier wrote:

If you did include an inspection contingency, then I would follow the process implied in your quotes in post #3 on this thread.

which I thought was clear enough, but maybe not.

 

[ivinsfan]

Honestly does anybody not get their earnest money? I've know quite a few cases where it's pretty much a given you'll get it back. Most likely they will release you from the sale instead of spending time and energy trying to deal with a bucky buyer.


It actually sounds as though the OP has cold feet more then anything. To expect a 120 year old house to be blemish free isn't realistic. If the repairs are 15 to 20 for everything the house isn't in danger of tipping over.



This is how old houses work , I've been in newer houses that more deficient then my 100 year plus farm house.

 

[NgineER]

You do have an inspection contingency. N.2 on page 4, line 187. The other options alluded to very well might work, but the inspection contingency is IMHO your best bet, since that's your real issue with the property.

+1
With your inspection contingency it should be quite obvious that you should get your earnest money back. The seller might be able to argue that you should have seen those defects before putting in the offer, but I have never heard of anyone not getting their earnest money back either in a situation with these deficiencies.

Move on and find a better place.

 

[ERD50]

It's not clear to me if the OP submitted a request for repairs/adjustment before the deadline.

I almost missed my deadline, I went back and forth with our realtor about how to address some of the various (pretty minor) issues, and no one reminded me of the deadline (I think it was 5 business days after the inspection. The inspection also had to be done in X days after the offer).

Yes, I should have been on top of it, but I was also dealing with getting our house prepped. Was disappointed the realtor didn't keep mentioning the deadline. I got a vague email from our lawyer about needing an answer "today", but it wasn't worded strongly, like with an "OR ELSE you forfeit the contingency!!!" explanation. They do this all the time, I hadn't bought/sold a house for 29 years, so they should keep me aware of deadlines.

-ERD50

 

[RunningBum]

It actually sounds as though the OP has cold feet more then anything. To expect a 120 year old house to be blemish free isn't realistic. If the repairs are 15 to 20 for everything the house isn't in danger of tipping over.

A foundation wall bowing is a lot more than a blemish.

 

[athena53]

A foundation wall bowing is a lot more than a blemish.

I agree. I'm no expert on houses but the first one I owned was a 2-family I bought with a friend and it was 60 years old. The termite inspector thought he'd have a field day and he found nothing. There was a settlement crack in one wall but it never got any worse. We had the house for 3 years and ripped one bathroom down to the studs (which were true 2" X 4" studs!) and re-modeled it and never had any unhappy surprises. The one the OP was planning to buy had some issues that I'd find alarming.