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Thom, Both Buyer and Seller in Norfolk, VA

Short sale has possible water issues.

Asked by Thom, Norfolk, VA Sat Sep 4, 2010

I have a contract on a home that is a short sale. The home inspection shows a couple of holes in the roof flashing and water stains in a couple of rooms. The house has been vacant for about a year. I'm concerned about mold and water damage behind the walls. I'm considering walking away from the deal, my wife no longer is interested in the house because we've had water issues in our current home and do not wish to have to deal with them. We understand the bank will not do any repairs of the property and we will be responsible for the any repairs. If we ask to renegotiate the price of the home, we have no idea how much of a discount we should ask if we should decide to pursue this home. Thoughts???

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13
Hey, aren't you the same Thom who was firing his agent's a couple months ago because he had trouble working with them. Sorry, but it doesn't look like number four was much better. Still can't find anyone you trust. You've already made the key point -- YOUR WIFE SAYS NO to this one. Why are you still pursuing it? Time to move on the agent number five. Good luck.
2 votes Thank Flag Link Mon Sep 6, 2010
Thom,

If you really want this house, consider a 203K rehab loan. This loan allows you to do the repairs after closing and roll the cost of the repairs into one monthly payment. The rates are very competitive. There are additional costs associated with the 203K loan.

Should you elect to go with a 203K loan, your realtor should be able to negotiate a reasonable price for the property since the bank won't be doing the repairs. Getting the house at a good price is critical to closing this type of loan because the maximum loan amount is based on the future value after the repairs are done.
I also suggest you ask a General Contractor to meet you at the property to give you an idea of how much the repairs may cost. I would use this to renegotiate the price.

There are two versions of the 203K. The Standard and Streamline. The Standard version can be used for mold remediation, replacing the roof, painting, etc. The Streamline is for less extensive repairs or one or two projects. (See my blogs on the 203K Rehab Loan on Trulia for more information.)

Hope this helps,
JACQUELINE CLARKE
FHA 203K Rehab Specialist
Freedom Mortgage Corp.
Orlando, FL
Cell: 407-591-7693
Email: jacqueline.clarke@freedommortgage.com
1 vote Thank Flag Link Sat Sep 4, 2010
Thom,
Are you being represented by a realtor? You should have had a inspection at the beginning of the transaction. If you had, the roof issues could have been addressed then. At this point, you can ask two independent contractors to provide 2 estimates for the repairs. Then present the bids to the bank. Perhaps, they will consider the lowest one and adjust the price accordingly.

Best of luck to you!
Web Reference: http://www.DesariJabbar.com
1 vote Thank Flag Link Sat Sep 4, 2010
I suggest you follow your "gut" on this one.....water issues are not to be ignored. There are many houses out there!
0 votes Thank Flag Link Tue Sep 14, 2010
Hopefully your contract was contingent upon "buyers approval of home inspection". That gives you the right to accept, reject or counter offer - depending on the extent of the repairs.


Water issues are a major problem in many short sales and bank owned homes. because many sellers do not have the money to repair, then the house sits for months and months.

The listing Realtor should have advised the seller and lender that steps needed to be taken to protect the integrity of the construction. Most lenders will take step to at least have the roof covered with tarp. Failure by the listing Realtor, seller and their lender to protect the property from outside elements only falls on you as the potential homebuyer. Your concerns about water damage and mold are valid.

There are deadlines in the contract including notifying the seller and their lender IF you do not approve the inspection report and you are not going forward with the sale with a demand for the return of your deposit.
Contact you agent asap and confront the issue.

In future, when you see signs of water damage......... you CAN shop on.

Phyllis Crosby, Realtor/GRI
REMAX Top Notch Associates
Tampa Bay, Florida

813-886-2356
phylliscrosby@tampabay.rr.com
0 votes Thank Flag Link Fri Sep 10, 2010
Don't forget your inspection period. Get an inspection - get a bid - then go to the bank with the bid. You're right the bank won't do the repairs typically, but they do usually respond to hard numbers - like bids.
0 votes Thank Flag Link Tue Sep 7, 2010
Thom
Since you offer was accepted by the bank I doubt that will renegotiate the price. You have contingencies of home inspection satisfaction, which protect your rights to cancel the contract, and you are very concern with damages and repairing costs, then you should cancel it and look for another house, just remember bank owned and short sale properties are sold AS IS, so be careful with the next house
0 votes Thank Flag Link Mon Sep 6, 2010
Bill,
The bank has accepted our offer for the home. We have contingencies in our offer for the house appraising, obtaining financing and an acceptable home inspection.
0 votes Thank Flag Link Sun Sep 5, 2010
Thom,

As you may know, water or mold damage can be very expensive to address. As such, I suggest, in addition to obtaining an estimate from a General Contractor, you should contact a company that specializes with water damage/mold remediation (Serv Pro?) They can give you also a ball park for the repairs.

I think once you get those figures, you will be better equipped to make a final decision regarding this property.

Please note, if you decide to go forward, the FHA 203k Rehab Loan holds back an additional 10% -15% contingency to cover unexpected problems that may arise once the work has started. If the contingency is not used, then it can be applied to your mortgage as a principal reduction or used towards other improvements.

I would also ask your Realtor to find out why the previous deals fell through. The Listing Agent should be able to give you general reasons for the fallout. Was it due to financing? Borrower didn't qualify? Was it due to the appraisal or home inspection? "Your" realtor needs to step up to the plate!

Good Luck,
Jacqueline Clarke
FHA 203K Rehab Loan Specialist
Freedom Mortgage Corp.
Orlando, FL
Cell: 407-591-7693
Email: jacqueline.clarke@freedommortgage.com
0 votes Thank Flag Link Sun Sep 5, 2010
I would probably say walk away. There are plenty of homes on the market that you should not be forced to deal with water/mold issues.
Banks are getting tougher and at this point if they already did a BPO, you won't be able to negotiate enough to make it worth your while.

Good luck!

Elena Ollick
Amerivest Realty
Faith Home Loans
239-206-4500
eo@oceanhomesrealty.com
0 votes Thank Flag Link Sun Sep 5, 2010
Has the bank accepted your offer on the property? You have provided only a partial scenario that is most difficultcult to offer any insight on. The terms of your agreement should clarify your options.

Our recommendation is to review and thoroughly understand your agreeement prior to making any definitive decision. To be on the safe side, you may want to refer to an attorney for their advice!
0 votes Thank Flag Link Sun Sep 5, 2010
My main problem with the property is that it's been empty for more than 6 months with a leaky roof and evidence of water damage. If the leaks are repaired, there is no easy way to know what issues have developed since the leak occurred. A mold test was done last week and the results will be completed this week. Invisible water damage is my primary concern, not knowing what damage has already occurred makes it almost impossible to estimate how much of a price reduction we should ask for. There has been 3 other deals on this property that have fallen through (reasons unknown), which makes me a bit nervous.

I do have a realtor and he is kind of downplaying the problem in my opinion. If the property has been exposed to the elements for at 6 months and shows water stains on 3 rooms in the house, we're not so sure we are ready to dismiss the problems as minor.
0 votes Thank Flag Link Sun Sep 5, 2010
If you are already under contract it is unlikely the bank will be receptive to renegotiate the price. Have you had a contractor evaluate the extent of the problem? You can also perform a mold test to determine whether or not mold is present. Then you can make your decision about dealing with another water problem but you should know just what you are dealing with. If it turns out to be an easy fix you will be satisfied or if it looks serious you will know to move on.
0 votes Thank Flag Link Sat Sep 4, 2010
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