Home Buying in 95060>Question Details

Jen Wren, Home Buyer in Santa Cruz, CA

I'm looking at a house that is perfect in every way except..... drywood termites, fungus/dryrot and some

Asked by Jen Wren, Santa Cruz, CA Mon May 26, 2008

moisture issues. The seller has set a specific date for when he will review all offers. My realtor tells me that this means that the seller wants to sell as-is and let the buyer take on the tenting costs, etc. And, that, with multiple offers, that may be the only way to make my offer stand out if I'm serious. I think that the buyer should either a) drop the price a decent amount to cover the costs and inconvenience or b) address all the section I issues on the termite inspection report at a minimum.

What is the norm around this region? I've just moved here and not sure.

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Hi. Don Tepper with Solutions 3D in Fairfax, Virginia, here. The situation you're facing is great. Your initial reaction--that the buyer should drop the price to cover the costs or should address all the issues--is exactly what 90% of the potential buyers will think. And that knocks out 90% of your competition.

As the other comments below note, there may be reasons why the seller won't address those issues--an REO, and estate sale, etc. Don't worry about it.

The question you have to ask is: (1) What is the ARV (after repair value) of the property? (2) What are the costs of the repairs? (3) When you subtract the cost of repairs from the ARV, is that number higher than what you can buy the property for? For instance, assume the property, without any damage, is worth $500,000. And let's say all the termite treatment, water issues, and termite and mold repair and remediation come to (I'm just making this number up) $10,000. Well, if you can buy it for $475,000, it's a fairly good deal. If everyone else is scared away and you can buy it for $450,000, it's a very good deal.

And even if there are multiple offers (and that's just speculation), the other buyers may overestimate repairs. That's pretty common. Last month, I heard a real estate rehabber speaking. He buys houses with structural problems all the time. He said he's never paid more than $15,000 to have a structural problem fixed. (Maybe some luck, but he's done hundreds.) But many people think structural repairs will run $100,000 or more. So most don't make offers. And those who do offer much less than he does.

So, get an expert in there to give you good numbers on what the repairs and remediation will cost. Don't get hung up on what you think the seller ought to do. You know what the seller's going to do, and what he's not going to do. That's reality. And, like I said, that's great for you. Now--with a Realtor's help--figure out an offer that would represent a good deal for you.

Hope that helps.
2 votes Thank Flag Link Tue May 27, 2008
Don Tepper, Real Estate Pro in Fairfax, VA
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Hi Jen, Michael McDonald with Coldwell Banker here. There is an important factor to be considered - what is the market value of this house? How does the list price relate to the market value? Your agent should be able to help you with this. Does the list price already take the condition of the property into account? The bottom line for you as a buyer is to make your informed decision about how to account for the termite/dry rot issues - not based on the list price but based on hard market data.

Chances are, if they are truly going to get multiple offers on the house, it's likely priced under market. If that's true, then offering the full list price might already give you the "credit" needed to cover the section 1 issues.

Make sure your agent arms you with all the information you need, so you can confidently choose how to realize your dream! Best of luck!!
1 vote Thank Flag Link Mon May 26, 2008
Jen, I am Lillian Walker Broker/Owner of Exit Beach Cities Realty Huntington Beach:
It sounds like this house might be bank owned also known as an REO which stands for Real Estate Owned. IF that is indeed the case, you need to be aware that lenders who have taken back property and are now selling it usually do so in an "As is" condition. They price the home and take into account its condition and have discounted the house, so the list price reflects the current condition for the home. Bank REO's since the begninning of the year have gotten a lot of attention from home buyers and what I am seeing for homes 15 miles from the coast line is that there are multiple offers on the home. The result is that the lender get's asking price and does not have to give any seller concessions since the demand for the house is high. If you are the only one offering on the home, then you have a position of greater leverage and you can ask for more. There is a lot of inventory out there, some houses are great deals disquised with retail prices. A good realtor can uncover these for you. You also have great finds with houses which have been on the market for over a 100 days.
Bottom line whether it's termite, a new roof, new carpet or paint. Whatever the issue the bank looks at it all the same and are looking to get rid of the house and sell it in it's current condition.
That being said when I represent my buyers my philosophy is better to ask and get a no, than never ask and never know. Exceptions do occur.
IF this is sold by a homeowner or an investor your agent needs to talk to the list agent and find out the particulars.
1 vote Thank Flag Link Mon May 26, 2008
Jen,

There really isn't a "norm" in regards to how to repairs, termites or otherwise, are negotiated. When it was a seller's market, many buyers would write offers "as-is" and be happy that they simply were able to get into a home. Times have changed and in many areas, multiple offers have dried up and as-is sales are tougher to find.

First question is whether or not there really are multiple offers. This information will be shared when your offer is reviewed and assuming there is a reply. You must be comfortable with whatever offer you put forward and know where your bottom line is to be satisfied with the deal. If the termite damage, repairs, and treatment cost are known, the offer could be forwarded with an adjusted price or with a request for section 1 work to be completed by seller. Whatever offer you put forward can be countered and that is when it is most important to know how far you will go to get "this" house.

Your agent should be able to guide you toward the best offer for the particular area and situation. They should know the local market best and can advise on what a competitive offer would be with or without the repairs. Again, your bottom line is what drives the offer and if you are going into a multiple offer situation it is even more important to know your limits to the deal.

Good luck,
CJ
Web Reference: http://www.TalkToCJ.com
1 vote Thank Flag Link Mon May 26, 2008
Jen, Curt Abramson from Bailey Properties in Santa Cruz here. There isn't a standard approach to the repair issue in this area, but one way or another, the cost of repairs should be borne by the seller. Either in the form of a reduced selling price, credits or the actual repairs done by them. This market is not so strong that a multiple offer situation should occur unless the asking price is enough below market to generate that frenzy - 10% or more below, in my opinion. Your agent should be advising you whether or not that is the case. There may be other reasons they are setting a review date - is it a trust or probate sale?
1 vote Thank Flag Link Mon May 26, 2008
Hi Jen! How exciting! Don't let the termite report scare you. Santa Cruz is riddled with termites!
Look at the report with your agent and determine the degree of damage or potential risk. Often
a report will reference hundreds of dollars of deck work, not necessarily a 'must do'. Look for big structural components that need repair. Those are serious and may compromise value to you. However, not every buyer will react the same. A general contractor may not flinch at those repairs, where as a buyer with no handy skills may feel overwhelmed. If the seller has more than one buyer then he does hold the cards and is not obligated to participate in the repairs. Decide how you will feel if you 'lose' the house. How hard will it be to find another home you love? If the repairs are manageable, consider them part of your overall, long term maintenance program and go forward to Seas Your Dream!
1 vote Thank Flag Link Mon May 26, 2008
Welcome to the California Coast :) Unfortunately, with such low inventory and high demand sellers do no have to make concessions or address repairs the same way they would if the market were a bit "cooler". That said, like others have advised, your agent should be able to assess what is a reasonable/acceptable amount of damage and what should be negotiated. When you are buying a home termites, fungus, dry rot and moisture mentioned in a pest inspection may seem worse than it actually is. Your agent will know what is common and what is unreasonable. If you would like another set of eyes on the report I would be happy to assist
0 votes Thank Flag Link Tue Nov 4, 2014
Hi Jen, do you have bids on all the costs involved and extra cash to fix? Sometimes the bids are higher than if you shopped them around too. Termite reports can sound terrible when the damage sometimes isn't all that bad. When you read about damage under the house it can sound like the floor is about to fall through when its a very small amount of damage and can be addressed easily. Most buyers don't want to climb into small spaces and find out. Some of the termite reports now include photos which I find very helpful to get a better idea of the extent of work required. It's probably best to talk to a structural engineer to to see what really needs to be done. Realtors can't advise as to wheather or not a house is structurally safe. I've done many of my own remodel projects and found it fun to learn what makes a house work as well as how to upkeep it properly... check out http://www.maui4rent.com/remodel.html for some projects I've completed.
Web Reference: http://www.maui4rent.com
0 votes Thank Flag Link Wed Oct 1, 2008
i don't know

LOSER
0 votes Thank Flag Link Sat Sep 27, 2008
Thanks, everyone. Very helpful answers and I will follow the tips and advice from almost all of you. Much appreciated.
0 votes Thank Flag Link Tue May 27, 2008
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