Missing information makes all parties miserable
Originally appeared in Bay Area News Group publications on April 8, 2011
Surprises in an escrow almost always turn out badly. This was true for the buyer, seller and agents in a recent, local purchase. In the end, the sale went through, but only after all involved endured much grief.
This is the one
After more than seven months of searching for the right house, the buyer finally found one that met her needs. It was charming, the right location and size and had wonderful indoor-outdoor living. Most importantly, the property was relatively new and seemed to lack serious problems.
This was critical, because the buyer had declined to make offers on a number of other listings when pre-sale reports indicated expensive issues. Expressing relief, she was pleased this was not a “problem” property.
As is common, the buyer was provided with a structural pest control (termite) report and seller disclosures. A pre-sale home inspection report would have been extremely helpful, but was not available.
The termite report indicated that half of the windows had sufficient damage that they needed replacement. Unfortunately, there was no dollar amount for this work, just a bid for two other, small items that totaled under $500.
After the buyer had visited the home several times, she made an offer that was accepted. The contract contained a contingency for buyer inspections and appointments were scheduled with professionals to evaluate condition.
Due to the fact that replacing a large number of windows tends to be expensive, the buyer’s agent (selling agent) arranged for his “window person” to look at all the windows and give his opinion on condition. The pest control inspector was asked to return, measure the windows and give a proposal for replacing those noted in his report.
Feedback from inspections
Windows on the agent’s home had been replaced to his satisfaction by his inspector. This is why he trusted the surprising news at the end of the window examination – all the windows needed replacement, not just those mentioned in the termite report.
Further, it was not only the windows (sashes), but all the frames were also defective. The window man explained that substandard wood had been used in the window installation. He had seen this before and warned that even those few frames that were not currently showing signs of rot would have significant deterioration in as little as another year or two.
Finally, he expressed his opinion that it made no sense to install new windows in flawed frames and advised against doing so. Interestingly, the pest control company’s bid was for placing new windows in the existing frames. With greater perspective from the window specialist, the pest control company was asked to bid on replacing all windows, including sashes and frames. That estimate came in at roughly $2500 per window, a substantial figure when multiplied by all the windows.
In addition to windows, there were also problems with the gutters, the possibility of replacing the main electrical service panel and water entry into the garage.
After digesting all this, the buyer made removal of her inspection contingency dependent on the seller’s agreement to pay for replacement of all windows – like for like. The buyer was willing to be responsible for all other repairs.
Seller refuses, sale crashes
The seller, now upset about problems that had never been on her radar, offered the buyer a “take-it-or-leave-it” token amount, stating that she would put the house back on the market and be able to sell it quickly to someone else. Not surprisingly, the buyer cancelled the contract.
Seller offers to pay more
About ten days later, and with no new contract in hand, the listing agent forwarded the selling agent a note from the seller, offering to pay the replacement window cost. This was based on a new bid the seller received from a window company she had chosen.
As the buyer still wanted the house, both she and her agent called and spoke to the seller’s window specialist. It turns out that this new bid did not include replacement of the frames. Additionally, the windows were not like for like, wood for wood; rather, they were a composite wood/plastic material.
Upon questioning, the seller’s window man agreed with the first window specialist that almost all the frames were shot and that he would not put new windows in them if it was his own house. When asked how much replacement with all wood windows and frames would be, his estimate was the same $2500 per window as the pest control company’s bid.
At this point, the buyer asked the seller to pay for about seventy-five percent of the cost of replacing with all wood windows and frames and the seller agreed. Escrow closed one week later.
The moral of this story is that, before marketing, prudent sellers should have their homes inspected and get bids for any necessary work that will be costly. Not doing so is likely to lead to the type of aggravation encountered by everyone involved in this transaction.
Condition is Critical