Question: I'm a real estate broker working with an investor. I've written at least nine offers for him, always less than asking price and three have been accepted.
We get home inspections and he wants the report to show anything that's not up to code, where preventative maintenance has been missed, etc. He wants the sellers to address everything on the home inspection report which some listing agents consider to be speculative and my buyer is deliberately using these reports to drastically reduce the price of the property.
For instance, he wants GFI electrical safety switches in the homes. I asked him if he had some in his home and he didn't know nor was it a concern for him. He also promised to apply for mortgage, did that just to get a pre-approval letter, and never followed through for the appraisal because if the seller reduces the price of the property then my buyer will pay cash.
My big concern is that the listing agent will see that no appraisal has been scheduled. What am I to say to satisfy this agent other that I'm working on it. This puts me in an awkward position with the listing agent and yet my buyer is not doing anything illegal.
Any ideas for me other than "find other buyers?" We're going through this process for the third time and I don't think the seller is going to address everything highlighted on the report, and secondly, I don't think I will work with this buyer again as he is very time intensive and totally unproductive for me.
He has been using home inspections to reduce the sales price, more than to address problems with the property.
He sees the problems when we visit the property, I usually point them out if they are obvious, he writes up offers and then relies on home inspections to reduce the sales price considerably. Home inspections are a mechanism put into place to protect the buyer by pointing out property deficiencies, (which he saw when he viewed the property) that can be negotiated, but not a tool to dramatically reduce the sales price. Your thoughts on the matter please.
Answer: The buyer is absolutely right to ask about building code violations. If he buys a property that's not up to code he will not be able to rent it until the property meets all appropriate standards. Why should he pay for a cost if he can get the seller to pay? Why buy a property that's not up to code?
You say some listing agents consider the buyer's offers to be "speculative." Listing agents represent sellers. You represent the buyer. Why is it wrong for buyers to speculate? Would the listing agents prefer no offers for their seller clients to consider? The owners can always say no -- but three of nine didn't.
You say the investor uses inspection reports as a "tool to dramatically reduce the sales price." Are there stone tables which say this is immoral? Why shouldn't buyers try to get the best possible price and terms? The sellers have an option when the buyer seeks to re-open negotiations -- they can say no.
An appraisal is routinely required by lenders, not buyers. When there's an appraisal addendum, it typically says that the buyer has the right to an appraisal satisfactory to the purchaser, by an appraiser of the buyer's choice, that must be completed by a certain date. If the appraisal is not completed then the appraisal clause typically is negated -- it's no longer an "out" for the buyer. Speak with an attorney for specifics regarding the language used in the buyer's offers.
If your buyer is paying cash then he has no obligation to require all the protections that a lender might demand. All-cash buyers should insist on basic protections such a title report, survey, home inspection, appraisal, etc., but if they elect not to then they're accepting a heightened risk. Thus if an all-cash buyer does not want an appraisal, that's the purchaser's option -- and gamble.
You say your client offers less than asking price. So what. In three cases his approach has been right -- otherwise his offers would not have been accepted. Why should a buyer pay a given price simply because that's what sellers' want? Do you think it ever happens that sellers "test" the market with listing prices that are unrealistic?
As you point out, your buyer has done nothing illegal -- and nothing not in his own interest. He wants to buy properties that are safe and with as many costs as possible paid by owners. What, exactly, is unreasonable with this approach?
Question: My wife's grandmother is looking to sell her home and we are looking to buy it. She wants to sell the home for a price that's very reasonable, but my wife and I don't make a lot of money. Is there a way the grandmother could lower her price and have us pay the difference to her later, just so the monthly payments on the home are less. We're not trying to rip off the grandmother, just trying to make it easier for my wife and kids.
Answer: It may well be that the grandmother has only one major asset in the world, her home. If she sells to you at a discount below that very reasonable price she may suffer a material harm. Also, if she sells to you there may be other children and grandchildren who would like to buy the property, especially if it's available at a discount.
To reduce monthly payments speak with local lenders and ask if you might qualify for a bond-backed mortgage or mortgage credit certificate (MCC) financing. These are programs through your state government.
Also, before going further have your grandmother meet with a legal clinic or an attorney who specializes in elder law. She should get independent advice regarding this transaction and she should also have a will and living will.
Question: I purchased my home about four years ago. I fell in love with the house, but was a little reluctant to purchase due to the fact it's about three-quarters of a mile from the county landfill. My broker assured me that if I had any trouble reselling it, the landfill would purchase it from me at market value after listing it on the market for a year. As it turns out, now that it has been a year and a month, I have found out that the re-purchase agreement was only with the original owners and doesn't apply to me. Is there any obligation on my old broker's part since she made this statement to me?
Answer: Was such a statement ever made in writing or in front of others? If yes, speak with an attorney. If no, then it may be that what you heard and what was said are different.
Question: I'm recently divorced and have (for better or worse) stayed out during the housing boom and saved money for a down payment. Now, prices are being cut on the condos I like. So, should I jump in a buy via a low bid on a place that has already had one price cut? Or, should I give this softening condo market more time to cool off?
I know what I like want and I've found it, but patience can be a virtue -- still, timing is everything.
Answer: Cliches aside, no one knows what will happen to future values -- as they say on Wall Street (and then ignore) -- past performance does not guarantee future values.
Here's an alternative idea: Where do you want to live? Why not find a place that best reflects your personal preferences and let the market go where it goes. It's going there anyway, regardless of what anyone thinks.
Question: I'm looking at purchasing a home. The asking price is $274,900. I did a property search and it states that the total assessed value is $168,000. Is this the actual value of the home?
Answer: Assessed values reflect the tax basis for the property. The assessment itself may be current -- or it may be several years old. Also, assessment rules may limit annual assessment increases. The result is that assessment values may not reflect current sale prices, especially in markets where prices are moving rapidly in one director or another.
For a better sense of market values, get a buyer broker and ask about recent sales of like properties in the immediate neighborhood. Look at comparable properties now for sale and see how they compare with the property that interests you.
Question: I have two sons, one a recent high school graduate with a sincere desire to attend college. I want to become involved in real estate to earn money to send my son to college. How do I find an investor to purchase a house that I've found that appears to be an extremely good deal. The house needs a lot of repair and I'm interested in pursuing this, but I have no money. I've heard that it's possible to do something like this with no money and that there are people who are looking for "good deals" like this one.
Answer: Let's change this around. Imagine that you were an investor and someone pointed out a good property for you to buy. What would you pay for such a suggestion? Would you have an obligation to pay anything?
There are several things you need to do.
First, speak with your son's high-school counselor regarding scholarships and grants for your son. Such funds can greatly reduce his college costs.
Second, to further reduce costs have your son start in a community college. Such schools are often excellent and credits from two-year programs can usually be applied to four-year colleges.
Third, take the class required in your jurisdiction to become a real estate salesperson. This will allow you to become a real estate licensee. You can then work under the authority of a broker -- and if you lead an investor to a property you may then be entitled to a commission for your work, a claim which your broker can enforce in court.
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