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post structural inspection price negotiations

Posted by kiki_redo (My Page) on
Mon, Feb 1, 10 at 17:37

We are in the process of buying a home. Our structural engineer discovered problems that were much more extensive than what we thought existed. We have our first contractor's estimate of the costs of repair and are waiting for the second to come in, and i'm trying to figure out how to do the next round of negotiations with the owners.

Q What are the different ways that buyers and sellers can arrange to handle the repair expenses? We would like for the repair$ to come out of the home loan since we would have trouble coming up with thousands of dollars in the next month or so :)

if you want more details, read on :)

The house is a late 70s contemporary, largely un-updated, in a predominantly colonial neighborhood.
it has been in foreclosure twice in its lifetime, and was purchased in forclosure two years ago by the current owners. I think the bank did a new roof, new paint and new carpet before they bought it. The current owners have started a basement remodel, (lighting, drywall ceiling and walls and internal french drain), basement floors are still concrete. These improvements unfortunately will mostly be undone in the structural work that needs to be done.

We like it mainly because of the school district and location but would not be heartbroken if the purchase doesn't work out.

I think our bargaining position is strong because we do not have a lot of pressure to purchase right now, although we would like to find a home. The current owners have ended their relationship and may be under some financial pressure to sell. The house has 4 areas which require major structural repair. 3 of them will cost around 17K, the 4th area cost is undetermined because we have to cut into drywall to see the extent of the problem. One of the repairs will reduce a 3 bay garage to a 2 bay garage.

They purchased it in foreclosure two years ago for 140K. Right now, we have offered them what I feel is a generous 143K. I'm sure they don't feel that is a generous number since they listed their home in December for 164,900 Based on their deed-of-trust, they need approximately 123K to pay their bank and their realtor.

We're going to put our position in a letter for their realtor to give to them, just to make sure that the realtor communicates everything -

I'm just having trouble figuring out what to say in our next communication and how to structure it so that the repair $ comes out of the loan.

Thanks for your thoughts!


Follow-Up Postings:

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RE: post structural inspection price negotiations

Unless you have deep pockets and are really in love with the place, pass.

Why should you be borrowing the funds for the repair?

What they paid and owe have nothing to do with the value of the property.

How will you recover extra money if your repair estimates run over?

A late 70s house with major structural issues probably has even more things wrong you have not found yet.

At the very least have the price dropped to the actual value of the house less the repair costs (and again, the value has nothing to do with the deed of trust).


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RE: post structural inspection price negotiations

I don't think you should be addressing them directly in any case. Normally you'd just tell the realtor to either get you a lower price (that reflects repair estimates), or (most undesirable) that you want them to handle repairs at their expense. It's undesirable because you have no control over who or how the work gets done.


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RE: post structural inspection price negotiations

What do you mean you offered them $143K? Do you not have a contract with an inspection escape clause? If you have a binding offer of $143K on the table with no inspection clause, you should hope they are foolish enough to turn it down.

And I have to ask, why will the repair turn a three car garage into a two car garage. Inquiring minds and all that.


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RE: post structural inspection price negotiations

thank you for the input so far - it is appreciated

we do have a contract, for 143K and we do have an inspection escape clause. we have had a very excellent home inspection done by a homeinspector/structural engineer. we are in the process of having construction groups give us estimates for the work indicated by the structural engineer.

some bearing walls in the home are not in vertical alignment, the inspection indicates the need for two additional beams to be installed in the garage ceiling, under the family room floor. the support for those beams will be probably 4 metal posts to the garage floor under each beam. the way i visualize it, the row of posts to the right and left of the middle bay will crowd it, narrowing it so that it would only be useful for motorcycles or lawnmowers or that sort of thing, not wide enough for even an economy car.
anyway, so the structural report and the construction company tell me ...

the front foundation wall also is showing some moderate bowing. they are going to fill some of the cavities in the concrete block wall with concrete and rebar to reinforce the wall, then they'll run a horizontal carbon fiber strip the length of the wall, then use helical tie-backs to anchor the wall.

we also need another beam in the basement, i think where the current homeowners removed a load-bearing wall in their remodel.

and lastly, if the radon test shows radon issues, then in addition to the radon abatement cost, the new interior open french drain will need to be replaced with a closed system. but we don't have the radon inspection results yet, so don't know if we have to factor that in.
we do have doubts about this house, but it's one of the few in this school district that doesn't feel like it's on top of other homes, that is for sale, and my husband generally likes contemporary 70s vaulted ceilings and open spaces. i'm willing to roll with it because i moderately like the house but loooove the school. and because i'm very tired of looking for a house.


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RE: post structural inspection price negotiations

I have news for you - you'll be a LOT more tired living in a house that doesn't work, after about 5 minutes! Being tired of looking is not a good reason to do it, and moderately loving(?) a house because of a school that your kids may not be in for more than a few years is also not a good reason. There are SO many places on the market now, for great prices - settling for 2nd best doesn't make sense at all. PS - radon is so rare as to be a nonfactor (if your test does read positive, I'd ask them to redo it).


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RE: post structural inspection price negotiations

Sounds like a money pit to me. I would run from this deal and keep looking.


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RE: post structural inspection price negotiations

Thank you for the clarification.

A house with that many fundamental problems is not one I would touch unless it was an absolute giveaway. Even then, I would hesitate.

But to answer your original question....You invoke the inspection clause and offer a reduced price. You tell your agent how much you are willing to pay and she/he writes it up and presents it to the sellers through their agent. The sellers then either reject it, accept it, or counter it.

The sellers could just ignore it, which is why it should have a short drop dead time, like three days or so. The offer is binding on you until the sellers reject or counter it, so make sure the drop dead clause is in there.

That's the way it has been done every place I have lived in the US. There may be some differences where you are.


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RE: post structural inspection price negotiations

run, don't walk away from this..There are a significant number of homes waiting to be purchased,many don't need a nickel of improvements...This home,having been foreclosed twice,has likely been neglected for years...Best of luck in your decision!!!


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RE: post structural inspection price negotiations

Money pit is right!
Not to mention the bad history (two foreclosures = YEARS of neglect)
Plus the contemporary styling in a neighborhood of colonials will be hard to resell.
Plus the numerous structural issues and shoddy repairs and remodelling.

A Money Pit!


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RE: post structural inspection price negotiations

Unless the home is seriously undervalued for the neighborhood and would genuinely be worth more than the purchase price plus all repairs (including the ones you don't yet know about)... walk away.


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RE: post structural inspection price negotiations

Unless you have money to burn, you would be out and out foolish to buy this house, given the extent of the KNOWN structural issues.

I can't even imagine why anyone would want to deal with such a situation...especially given all of the unknowns yet to be discovered.

What will you do if the house needs to be taken down?


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RE: post structural inspection price negotiations

It almost sounds like a teardown. What do lots go for in the area? In addition to the cost of the repairs, you have to factor in the lost value of the garage bay and you need to remove the value of the basements improvements since they will be removed. I would look elsewhere.


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RE: post structural inspection price negotiations

"...some bearing walls in the home are not in vertical alignment..."

Bearing walls in houses do not have to align vertically if the joists are sized to transfer the load from above correctly.

This sounds like way to much repair unless someone has been moving walls around after the initial construction.


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RE: post structural inspection price negotiations

"It almost sounds like a teardown."

Now THAT's a thought...


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RE: post structural inspection price negotiations

I do appreciate the feedback - and the fact that you all are in the !!!run away!!!! camp does not escape our notice.

@brickeyee - i think the joists must be too wimpy, because the floor sinks near the base of the walls and bumps up a little further away from them in compensation -
(i hope that makes sense, i'm not doing a great job of explaining it) and there is a slope to one part of the family room. i'm worried about the heaves too, because we'd like to do hardwood in some areas in the home.

we got the contractors' estimates back today and sent them back to the structural inspector for review and he emailed us saying that their estimates reflected insufficient repair - so the construction companies need to go back and revise how they propose to correct it - and then give us a new estimate. *sigh*

our reasons in favor of the home:
we are in a rural-ish area - there are 25 homes for sale on the mls in this school district, only 2 or 3 in our target price range. i have been watching the housing market here for 2 years, there is very very little on the market. i think maybe a lot of people are not listing their homes for sale now.

the neighborhood is a desirable one, although this contemporary and it's similar next door neighbor are alone in the otherwise colonial neighborhood.

houses on this street typically sell for $220K for a brick faced colonial in decent condition, even in this market. the garrison colonials (at least i think that's what they are half-brick/half siding with a shape like an overbite) sell for 180 to 200K (around $70/sq ft) it's difficult to figure out comparables for this house because there are so few contemporary homes, but if we figure that this home, structurally repaired and updated should probably sell for at least 160K (approx $55/square foot).
So we're hoping to persuade them to come off the agreed upon price in the amount of the repair estimate, which would then get us the house at a good price for the neighborhood, allow us to do some renovations and live there for the next 10 years or so, and hopefully build a little equity if the economy turns around.

It's a funny little area, we just moved here this summer, although we have known we were moving here for 2 years.
The houses are in three groups - the ones right beside the schools are tiny 1940s and 1950s homes, often ranches, with carports. The second group - the houses we cannot afford next to the river and the golf course. Then there is the third group -- a housing development that incorporated and formed it's own little town - it's very suburbia/middle america. This home is in the newer portion of that town. All the homes there have structural issues and often radon, since we've seen radon abatement systems in many homes. I'm not sure if the structural issues are due to incompetence of the original builder, or because of the character of the "expansive clay" soil that is everywhere here beside the ohio river. Anyway, it seems that structural issues are somewhat the norm here. Our structural inspector will come back while the work is in progress and will also certify at the end of the project that the work has been performed to the necessary standard. We know that the structural issues have loomed over this home at sale before, but we think that if they are fixed, the house would sell much more easily in the future because of it's location (with some demerits because it's contemporary :) )

I'm not a fan of contemporary style, but I'm also not wild about colonial homes so that really doesn't factor in for me. There are only 2 or 3 lots for sale, and they are priced beyond our means for building. We could wait another 3 or 4 months for another likely home to check out, spend another $600 on a structural/home inspection and see much the same sort of foundation stabilization problems since they are rife here. Plus there is a 6K tax credit if we are under contract this spring.

I'm afraid that the structural repairs might turn into an exploding can of worms. You guys have certainly heightened those fears - my husband and I have spent a lot of time trying to figure out what the house is worth - it's not easy -

i think after we get the revised contractor's estimates - if we decide to go back with an offer - if -- IF --
i guess we would go back to the seller and say "okay, you have to come down the cost of the repairs" and if they say no then we are done, walking away. i just don't want them to agree to reduce the price the cost of the repairs, and for us to get a loan for that amount and then have to come out of pocket for 20K in repairs, we have to work them into the financing.

my husband points out that we could just wait and it's likely the house will end up in foreclosure again because of the sellers' situation. of course that assumes that we do want the house after all -

sometimes it's just too much to think about, my brain starts to smoke. sorry this is long and a little stream of consciousness-ish :)

****anyway, i think it's really great to have people who are not emotionally involved in the sale to give feedback, and also to give a reality check. thanks you guys!!****


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RE: post structural inspection price negotiations

Everything else aside for the moment, do you have a lender on hand who is willing to roll the repair costs into the purchase financing? They would want an appraisal showing the value of the home after the proposed repairs.


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RE: post structural inspection price negotiations

Kiki, have you considered leaving notes for people in the neighborhood saying you are looking to buy? Someone who wants to sell but thinks they can't, or is sitting on the fence, may love to hear of a potential buyer.


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RE: post structural inspection price negotiations

sweeby&qdwag - i just saw your posts - the neglect from 2x foreclosure is definitely a good point. but as for a teardown, that's 70% of our whole budget for just the lot :)

creekside - our lender is aware that the home has structural issues that must be remedied. they will send their appraiser out to value the house. what they have told us is that depending on the house value, and depending on the size of our downpayment, that financing repairs is an option. there is also a line in our contract that says purchase is dependent on bank approval(appraisal) and we know our loan officer very well - so if at the last minute we should get cold feet - we can just tell the l.o. and he will nix the process - so that's our second escape hatch.

alabama-nicole - actually i haven't seriously thought of canvassing the neighborhood but i think that is a very excellent next step if this falls thru. right now i check mls in the am and pm, get zillow and trulia updates, check fannie mae and freddie mac fc sites, the courthouse wall, a couple of fsbo websites that are used locally, and the local free-ad bulletin weekly, the sunday real-estate section, and two local banks are on notice to call us if they have property they want to sell. Plus at elementary school pick up and drop off times, the other moms let me know pretty quickly if a new fsbo sign or real estate sign pops up. New ones don't come along very often though, about one every two or three months.

we could also just stay in the apartment for a while, some one sent me a quote that kind of hits home "don't sacrifice what you ultimately want, for what you want right now."
we waited for 2 years to sell our previous home and have been in an apartment for 6 months, so we're coming up on 3 years of being in limbo .. i'm just wanting a place to nest ;)


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RE: post structural inspection price negotiations

Kiki, I had a house on the market for two years and spent two years working on building a house (one year overlapped)... that now I'm not going to build and need to go shopping instead. I KNOW how you feel about being in limbo! I'm climbing the walls.

But don't make a big financial decision you'll later regret because of temporary inconvenience.


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RE: post structural inspection price negotiations

What about insurance? A structural engineer had to certify that my house was structurally sound before I could get a builder's risk policy on a house that needed extensive renovations.


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RE: post structural inspection price negotiations

I agree with alabamanicole. We did this in a neighborhood we wanted - it didn't pan out for us, but we got great response.

We targeted the houses we liked, found out the owner name & address (not always who lives in the house) via the County Appraisal District website & sent a nice letter w/ a self addressed, stamped post card that they could check "yes I'm interested", "no I'm not interested", "maybe, I'll call you"

We stated why we wanted that street & that we were not investors or realtors. I think we had a 90% return rate - no one wanted to sell, but we tried & nobody seemed upset or violated.

I agree with the others that there seem to be some pretty big issues with this house. Best of luck with whatever you decide!


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RE: post structural inspection price negotiations

i feel a little embarrassed to be flying in the face of the advice given, but we did go back to the sellers and told them if they would come down on the cost of the repair estimates ($16K) that we would buy the house.

we talked to the bank officer, he is fine with financing the repairs - the house should appraise for well over that amount, even given the fact that the comparables in this market are much lower than two years ago.


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RE: post structural inspection price negotiations

Getting the buyer to pay to fix the problem by lowering the price, and then getting that financed is the same as having the home already be fixed. There still seems to be some variability on the exact cost of repairs, but you are in a position to buy now to take advantage of the tax credit, so you have done the proper course of action.


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RE: post structural inspection price negotiations

to cover the cost of repairs, we asked them to come down to 128K - they came back with 131K, the realtor says that this number puts the sellers in the red on the closing and is as low as they can go.

thanks swampwiz - i think we would rather oversee the repairs ourselves than leave it to someone who would care less. and i am glad glad glad of the tax credit. it's a lagniappe for sure! after 2 years of trying to sell our last home, with my husband working away from home those 2 years, i'm profoundly grateful to have something break our way !
eastgate and guvnah - good thoughts an about the insurance, I'm checking into it -

alabamanicole - thanks for the support, i'm hoping that you luck into just the right house, at just the right price and afterwards you have a moment where you realize "ooohh, things were supposed to work out this way, i just didn't know it then, this is waaaay better!" anyway, that's what i'm wishing on you!

i think i've been moping a little, because i really don't like the style of the house - but when i think back, my top three priorities when i started looking were nicer neighborhood (our last one had some Issues), good school district and storage space. all that is present in the current house, so i just have to compromise and be glad of what i did get. i hope that the structural engineer gave us a comprehensive scope of the things to do. i do think the fireplace is gruesomely ugly though, and i know we need to insulate the garage ceiling under the family room.


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RE: post structural inspection price negotiations

"to cover the cost of repairs, we asked them to come down to 128K - they came back with 131K, the realtor says that this number puts the sellers in the red on the closing and is as low as they can go."

Unrealistic sellers.

They dug a hole, let them figure out how to get out of it.


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