Saturday I had the privilege of visiting several homes with a client and we found a home they immediately fell in love with. The asking price is attractive, has a great floor plan, backs to an open area, very close to the neighborhood school and convenient to their workplace.
Sounds like the perfect fit, right? On the surface it is but there is a problem; the dishwasher and built-in microwave have been removed. Now you might be saying to yourself, “Big deal, just reduce the offer price and buy a dishwasher and microwave with the savings”, or “Ask the seller to install appliances before close of escrow”. But there is another wrinkle in the fabric of this deal.
The home is a short sale/pre-foreclosure listing. For those of you not familiar with short sales I will go in to more detail on these in a future post but to put it briefly, a short sale is what a seller does when they owe the bank more than they can sell the home for, which in turn leads me to believe they can’t afford to install a new appliances, never mind the fact that they shouldn’t have been removed in the first place. And since it is not yet a bank owned home (hence pre-foreclosure) the bank will not be willing to put the appliances in at their expense.
Now comes the real meat of the problem for my clients; FHA and VA loan guidelines require the dishwasher and microwave, since they are built in appliances, be in the home for the appraisal, final loan approval and funding. And since my client is using a VA loan to purchase the home there in lies the rub.
So there the house sits waiting for a buyer and the seller has dramatically decreased the chances of a successful sale by removing the dishwasher and microwave thus eliminating buyers who will be using FHA and VA loans to purchase the home from contention; stupid move on the seller’s part if you ask me. If the seller doesn’t get a dishwasher and microwave installed the only buyers who can even consider buying the home are buyers who are using a conventional loan and cash buyers.
So where does this leave my clients? We’ve submitted an offer and in it requested that a new dishwasher and microwave be installed in the hopes that the listing agent can track down the seller and get them to replace the missing appliances or get the bank to agree to do so. Now if only the seller’s agent would return my calls and emails, but that’s another post.
It is standard practice with bank owned homes that you agree to buy the home as is. That does not prohibit you from having a professional inspect the home for defects but does suggest that the bank will not pay for any repairs. In the case of foreclosure homes an inspection is mainly to determine if there are serious enough defects that would be cause for cancelling the purchase.
But recently I have found, at least in one case, “AS IS” may not be the last word.
Here is what happened; my client submitted an offer on a bank owned home in Avondale. After a short negotiation period we came to an agreed upon purchase price for a home with the bank who owned it. An inspection was ordered which turned up a serious problem with the air conditioning units, both of them. Time to cancel?? Not in this case.
What we did was have a licensed A/C contractor check the system out throughly and give us an estimate for repairs and in the case of one of the units replacement. We then submitted the estimates, an addendum requesting credit for the repairs, and a notice of cancellation via the Buyer Inspection Notice (BINSR). We expected the bank to stand behind the As Is addendum signed by the buyer and refuse to pay for the repairs which would have been fine. My client would get their full earnest deposit back and we would then begin the search for another home.
The banks first response was to ask for more time to review the estimate and make their decision, which the buyer granted. Our thinking was “hey, if they didn’t say no right off the bat maybe they will step up and make a concession”. As you may have already guessed the bank agreed to credit the buyer for the repairs; at a cost of $6,000, no less. It appears the bank wanted to sell the house rather then put it back on the market and start the selling process all over again. Not to mention the fact that the next buyer might find the same problem and cancel to deal as well. It just goes to show that even if they say sold “As Is” it doesn’t mean they wont fix things to the buyer’s satisfaction.
It’s still a buyer’s market.
According to ARMLS (Arizona Regional Multiple Listing Service) home sales for the month of April 2008 totaled 4,866 which is an increase of 13% over March 2008. By comparison April 2007 total sales were 5,535.
With 55,871 active lisitngs inventory/supply is running at 11.5 months. What this means is that it would take 11.5 months to sell all of the inventory on the market if we continue at April’s pace. A normal market is generally considered to have a supply of around 5 months inventory.
