House problems get worse with time
Originally appeared in Hills Publications, May 13, 2005 and ANG Newspapers, May 7, 2005
When competing in this ultra-hot market, buyers generally have little choice but to purchase “As Is.” During the excitement and heat of battle, many buyers do not fully consider the possible ramifications of buying a house with problems. Years later, when it is too late, it may become painfully apparent.
Sometimes, the issues can be relatively minor and inexpensive. In another instance, the repair cost, especially if put off to a future date, could be way more than you ever imagined.
Knowing how to read and interpret various types of disclosures and reports takes both experience and common sense.
Termite reports
Most listings come on the market with a recent pest control report. Make sure it is complete. If it recommends “further inspections,” insist they be done as part of your inspection contingency.
Not long ago, I sold a property that came with an approximately $6000 termite report. After I suggested that my buyer ask for further inspections, as recommended, the bid exceeded $30,000. The seller agreed to share the extra cost.
Too often, houses come back on the market some years later without any of the termite repairs having been completed. Active infestation (usually subterranean termites or powder post beetles) should be handled immediately because of the risk of extensive additional damage.
Fungus damage (water attacking wood) can also worsen if not treated and repaired. About five years ago, a home sold As Is with a $4000 termite report. The work was never done. Recently, the property came on the market with a new termite report covering the same items, but a bid of over $12,000. This seller took a big chance by not doing a relatively inexpensive job. Had he remained in the house, the damage, and its cost, would have continued to increase.
Other systems in a house
A general home inspection will tell you whether there are significant problems in major systems: foundation, drainage, roof, electrical, heating, plumbing, and framing. Of these, the first three tend to be the most costly, but all deserve attention.
Drainage inadequacies are often not well understood by buyers, sellers and some agents. They are less obvious in dry weather. Constant water entry in and/or around a house can lead to termite infestation, fungus and possible undermining or rotation of the foundation. In addition, water intrusion could cause health issues with allergens, mold or mildew.
Ameliorating drainage problems tends to be expensive because it is labor intensive. Put this at the forefront when doing inspections.
Bear in mind that a roof at the end of its natural life needs to be replaced in a timely fashion. If not, leaks could lead to some of the problems mentioned above.
Electrical inadequacies are a safety concern. For example, indoor wiring used outside could cause a fire. Improperly spliced wires, especially without a junction box, may also lead to fire. Outlets near a sink or tub that are not GFIs (ground-fault interrupters) might cause shock or electrocution. These, too, must be at the head of your repair list, with the cost factored into your offer.
A furnace with a cracked heat exchanger should not be used. If a licensed heating contractor recommends a new furnace, plan on spending approximately $2000-$3000. Poisonous gases are deadly. Do not put this off.
Knowing the inspector
As in every business, certain inspectors, contractors and engineers have a better reputation and greater credibility than others. Your Realtor can be invaluable in pointing out who the good ones are and which to avoid. In particular, you will want to know the reports you can trust and which may be suspect.
Connecting the dots
The best agents alert their buyers to clues of potential trouble. As an example, if the Transfer Disclosure Statement declares there was a roof leak three years ago, before the roof was replaced, relevant questions need to be asked.
Where was the leak? How long did it last? What damage was done at the time? Was it repaired? If so, by whom? This kind of information could help you to guide your pest control and general home inspectors to look for signs of water damage inside ceilings and walls.
Final Thoughts
After you have out-dueled other buyers and emerged victorious, take a close look at the condition of the house you are buying. Make sure you have a clear picture of the defects as well as your resources and willingness to address the more serious drawbacks. A good inspector can help you prioritize them.
Work with a top-notch agent, who will point out the potential pitfalls and recommend competent inspectors and contractors. If ignored, problems do not go away and could multiply in severity and cost many times. Taking a responsible approach to the home’s deficiencies can be the difference between years of enjoyment or distress.
Related Articles:
As Is Pointers, Part 1
As Is Pointers, Part 2
Check Drainage
Not Just Termites, Part 1
Not Just Termites, Part 2