After Home Inspection Can I ask for Cash Back upon Closing?

[project240]

We've just completed a home inspection on a house we're buying. The inspector has found a few issues, including roof needing immediate replacement as well as the furnaces needing replacement in the near future.

We're comfortable with the closing price, however, with potentially $20,000 in repairs needed in the next 2 years (roof- $10000, 2 furnaces $10000) it would be much more beneficial for us to have items replaced before taking possession or receive the money as cash back after closing rather than renegotiating a purchase price.

Can we do this? I asked my realtor and he quickly said no to cash back, but I thought otherwise...?

[shynepho]

I belive the options you have include:

1) Go ahead with the purchase at the negotiated terms.
2) Cancel the sale of the house and receive your deposit back.

I might be wrong but I have not heard of cash back at closing even if the house needs repairs.

[extm88]

Just try to re negotiate the price. It will be much easier and there wont be any red flags.
Depending on which of the 3 options you took in the property inspection schedule you may have full negotiating powers. Its worth a shot.
When you see FSBO offering 10k bonus cash to buy their house you might as well walk away. This is a type of mtg fraud as the house which is 400k and you are being lent 400k - your deposit when in reality you only needed 400k - deposit - 10k cash bonus.

[project240]

Ok,

Thanks for the input. I figured there was a good chance I was incorrect in thinking this.


:closed:

[leftwing]

The seller should have no problem renegotiating the purhcase price, seeing as they have a buyer (you) and any new buyer would most likely find these issues after an inspection as well and they would have to go through all this again.

good luck.

EDIT: Not to mention, now the homeowner is knowledgeable of the two problems (if they werent already) and will now have to fully disclose both problems to any new seller.

[extm88]

^^^ This is not true one bit and they do not have to tell future buyers of the issues.
Unless your 100% positive on something of this matter I wouldnt post. Kinda a big deal with the $$$ involved.

[leftwing]

Um, yes they do.

let me find it for you

EDIT:

There you go.

http://www.reca.ca/industry/content/legislation-bulletins/information-bulletins/material-latent-defects.html

So extm88.....what am I not 100% sure about??????

[Cos]

Very basic, the sale is conditional upon the home inspection (hopefully you wrote that in) and since the inspection wasn't clean you can walk away.

You realtor can do this easily, this is a normal occurrence.

[leftwing]

Originally posted by Cos
Very basic, the sale is conditional upon the home inspection (hopefully you wrote that in) and since the inspection wasn't clean you can walk away.

You realtor can do this easily, this is a normal occurrence.

This is also true, but since the buyer wants the house, im sure he would want to try and re-negotiate the deal before walking away.

[barmanjay]

Originally posted by leftwing
Um, yes they do.

let me find it for you

EDIT:

There you go.

http://www.reca.ca/industry/content/legislation-bulletins/information-bulletins/material-latent-defects.html

So extm88.....what am I not 100% sure about??????

hey Lefty,.. you are partially right

Reca defines differences between:

Material Latent Defect and Latent Defect.

the roof would've been considered a Latent Defect.

Furnace is debatable (if the heat exchanger is cracked and could not be known without tearing the unit apart) - likely be a Material Latent Defect.

But anyways,.. since those problems are now known by the seller, and if the sale collapses due to the inspection. I would expect some kind of due diligence at least in private realtor remarks notifying the deficiencies - however with the roof being just a latent defect and the furnace in the 'gray zone', I wouldn't hold my breath.

@project240

I'm going to assume on your home inspection schedule you had "1%" checked - so you have good grounds to negotiate some more $$ off.

pending size of roof,.. the average is 6-10k and for replacement furnace is about 35-4500 ea.

[Cos]

Originally posted by leftwing


This is also true, but since the buyer wants the house, im sure he would want to try and re-negotiate the deal before walking away.

I meant that essentially that contract is void (if he so chooses) and you present another one.

[InRich]

If you really like the house, negotiate the price man, at least now you know exactly whats wrong....

oh and, if you need a new roof, please let me give you a quote, you can take that number back to the current owners as a the exact price reduction you'll need in order for you to go ahead with the purchase. I have one of the best roofing systems in calgary. give me a shout, PM me!

[broken_legs]

Originally posted by barmanjay


hey Lefty,.. you are partially right



Oh gray areas - how I love you.

barman - This is why I hate realtors so much. Because I bought a house where there were known defects and both the Realtor and the owners knew, but I didn't find out until after the fact - as it had been disclosed to others who had looked at the same property (i know after speaking with them later)

it was so painfully obvious that the realtor was just trying to close the deal. - He left town after that one and set up shop in Sylvan Lake.

Luckily my insurance covered me.


OH and to the OP - Can you not just put a clause int eh contract or renegotiate? Im sure you must have something in there about 'pending approval of home inspection' to protect your right to walk away.

[barmanjay]

Originally posted by broken_legs


Oh gray areas - how I love you.



I feel your love!
Gray because - would that 'broken heat exchanger' been known to the owner? is replacing a furnace a great expense or a relatively inexpensive one? I have not seen a firm definition of 'great expense' - but that's what reca is for to determine.




barman - This is why I hate realtors so much. Because I bought a house where there were known defects and both the Realtor and the owners knew, but I didn't find out until after the fact - as it had been disclosed to others who had looked at the same property (i know after speaking with them later)



No shit!

I knew there was a reason why you were so jaded by the whole industry!

That sucks,..
Did you go directly to the selling realtor? were you represented by your own realtor? Did you not have an inspector?
you can report this to reca and they will investigate. I don't know how long ago this happened to you, but I think you may have up to 1 year,.. possibly 2.
Reca (believe it or not) works for the consumer and keeps the real estate associates/brokerages in-line by fines (big and small) and suspending licenses (temporary to permanently).



OH and to the OP - Can you not just put a clause int eh contract or renegotiate? Im sure you must have something in there about 'pending approval of home inspection' to protect your right to walk away.

He absolutely can renegotiate. - that's what the property inspection condition along with the property inspection schedule is for.
If he renegotiates in lieu of a poor home inspection,.. he must provide a copy of the inspection to the seller.

[extm88]

I think that everyone is mis understanding everyone. Based on what the OP has to say he doesnt have much of a leg to stand on.
Because I buy a house and my inspector says that in x amount of years ill need a new roof and furnace and in another x amount ill need a new driveway it doesnt mean dick. If it is in NEED of replacement right now then yes the OP has a leg to stand on and the sellers will have to disclose however because 1 inspector says a new roof is needed years down the road it doesnt mean ANYTHING has to be disclosed.
Not to mention (as jay covered) a roof doesnt have to be disclosed if its normal wear. Yes if there is a hidden hole somewhere but if its worn shingles you dont have to say anything.
So I stand by what I said Leftwing and No, no disclosure is needed and depending on how the inspection is written up the sellers can tell the buyer to pound sand.

[broken_legs]

Originally posted by barmanjay


No shit!

I knew there was a reason why you were so jaded by the whole industry!

That sucks,..
Did you go directly to the selling realtor? were you represented by your own realtor? Did you not have an inspector?
you can report this to reca and they will investigate. I don't know how long ago this happened to you, but I think you may have up to 1 year,.. possibly 2.
Reca (believe it or not) works for the consumer and keeps the real estate associates/brokerages in-line by fines (big and small) and suspending licenses (temporary to permanently).



Well lets just say this was the 'Big One'. up until now, I've had many dealings with realtors. Some went quite well. Others... well do you notice a theme in my realtor bashing?

Misrepresenting
No value Added
Conflict of Interest
etc...

You're not all bad, I'm sure. Just 80% of the ones I've run into were far from good. :)

[R-Audi]

I walked away from a potential purchase after a home inspection, and it was due to no insulation in the walls. (Older house) There was nothing 'failing' but I thought it was unacceptable for a house with that level of reno's to not have done that.

I would think you should say 'no thanks' based on the quality of the roof and furnace, and most likely the sellers will come back to you, as they will have the exact same problem with everyone down the road.

[Cos]

Originally posted by R-Audi
I walked away from a potential purchase after a home inspection, and it was due to no insulation in the walls. (Older house) There was nothing 'failing' but I thought it was unacceptable for a house with that level of reno's to not have done that.

I would think you should say 'no thanks' based on the quality of the roof and furnace, and most likely the sellers will come back to you, as they will have the exact same problem with everyone down the road.

With the market the way it is, so many houses and not very many sales, this could be very good advice.

[GTi-RS]

I would focus on the roof and have someone very qualified to check on the furnace and repair if needed.

I was in a similar situation and needed a roof on the property I bought. Since I have already negotiated 5% off the asking price, the seller was not willing to drop the price by another $5000 after the inspection but eventually agreed to replace the roof. Final price of the roof was $5900 and I have inspected it myself with receipt in hand upon possession.

[Kloubek]

Just let the sale fall through, and get your deposit back. Then re-negotiate, based on the new information. The thing is that the current contract is already set and signed. While it is possible it could be changed, it is probably better to start fresh, with the issues out in the open during the negotiations.

I'm going to guess they will refuse a much lower offer, and will probably try to keep this quiet - and attempt to sell to some unknowing party. But that's just a guess....

[masoncgy]

You can re-negotiate the purchase price based on the outcome of a home inspection. I just did such a process myself with the home I am trying to purchase on the Island.

We found out the rear deck has a bunch of rotted 2x8s underneath that have to be replaced. I had a contractor come over and give an estimate of $5,000 to replace the deck (it's a huge ass deck) and I asked the homeowners to deduct half of that cost from the purchase price, which they agreed to.

If they would have said no, I wouldn't have removed the condition and just let the deal fall.

Of course, I wanted to re-do the deck anyway and build it about half it's current size as it's too big and takes too much of the backyard. As well, I'd be doing the work myself, so $2,500 will easily cover all of my materials... ;)

Worked out okay... now I just need to sell my place here at some point soon to move ahead and take the house.

[project240]

Thanks for all the comments everyone.

Basically, our realtor told us they have another offer on the table (which I think is BS) and it's going to be tough to get anything back because the house was a foreclosure and we got a good price.

I knew going in the roof was going to need immediate repair and we put in our offer accordingly. The furnaces however, while still in working order are original and show signs the may need replacement in the very near future.

Basically, the problem we're running into is that we both love the house, feel like we got a very good price and while I do want to renegotiate a price based on the inspectors findings we're very attached to it already and would very likely not find something else comparable anytime soon. (FYI, the house isn't in Calgary and not one house has sold in the area for within 100K of the price we paid)

My worry is "losing" the house and if it's worth the "risk" to try renegotiate for a few thousand dollars.

[R-Audi]

If its a few grand.. and you think you got a good deal and dont want to risk it.. just do it.

[lint]

we were in a similar, but not identical situation when we bought our house. We had looked at 80+ places, and the sellers didn't move much on the price. The inspection report indicated that the furnaces were original to the house (30+ years) and essentially could go at any time. Sellers wouldn't budge. In the end, finding the right house out outweighed the few $$$ that we could have saved, and last year we replaced both furnaces anyways with the eco rebate program. Sometimes it's not just about the $$$, as we couldn't see ourselves living anywhere else. We bought a home, not just a house.

Good luck

[broken_legs]

Originally posted by project240
Thanks for all the comments everyone.

Basically, our realtor told us they have another offer on the table (which I think is BS) and it's going to be tough to get anything back because the house was a foreclosure and we got a good price.



There go those ethical Realtors again. I'm sure the other offer is only -20k of what you're offering and a real competitor. :rolleyes:

I don't see why it would hurt to ask for a clause that states if the furnace dies within 1 year, they will buy a new one. that at least gives you 1 year of worry free living.

If they don't want that clause you are already in an agreement are you not? how would you lose the house?

[extm88]

OP- The sellers realtor has to provide you whom the other realtor is with the offer, you can then contact them to verify that you are in a competing situation so the comments about ethical realtors is BS because if his realtor was doing his or her job they would have already followed up to verify such a statement.
As for the people who keep saying get your deposit back it doesnt work like that. If the roof needed repairs NOW then it is easy. The fact some guy tells you for $500 that the roof will need repairs in the future means diddly squat.
OP pm me if you have any detailed questions or want some advice

[project240]

Originally posted by extm88
OP- The sellers realtor has to provide you whom the other realtor is with the offer, you can then contact them to verify that you are in a competing situation so the comments about ethical realtors is BS because if his realtor was doing his or her job they would have already followed up to verify such a statement.
As for the people who keep saying get your deposit back it doesnt work like that. If the roof needed repairs NOW then it is easy. The fact some guy tells you for $500 that the roof will need repairs in the future means diddly squat.
OP pm me if you have any detailed questions or want some advice

I knew before buying it the roof needed to be replaced right away. The inspector just confirmed how quickly...

I can ask my realtor to provide me with the other realtors name who supposedly had brought in an offer? I think I will do that if I am understanding what you're saying correctly.

[project240]

Also, we weren't competing... our offer has already been accepted, but he is telling us we have to remove conditions right away (tomorrow) and if we try to renegotiate they may choose to ignore us and accept the other offer.

[barmanjay]

hmmm,.. which realtor is telling you to remove conditions? yours or theirs?

The property being a foreclosed property will likely have a schedule A attached which basically means the financial institution/lender (or whoever currently owns the property) holds no warranties in the property - basically as-is, where-is - and the likelyhood of them willing to renegotiate is extremely slim as usually you get a slightly better price on a foreclosure anyways.

Thats past experience talking and in no way am I giving you advice as I am not your realtor.

[leftwing]

Originally posted by extm88
I think that everyone is mis understanding everyone. Based on what the OP has to say he doesnt have much of a leg to stand on.
Because I buy a house and my inspector says that in x amount of years ill need a new roof and furnace and in another x amount ill need a new driveway it doesnt mean dick. If it is in NEED of replacement right now then yes the OP has a leg to stand on and the sellers will have to disclose however because 1 inspector says a new roof is needed years down the road it doesnt mean ANYTHING has to be disclosed.
Not to mention (as jay covered) a roof doesnt have to be disclosed if its normal wear. Yes if there is a hidden hole somewhere but if its worn shingles you dont have to say anything.
So I stand by what I said Leftwing and No, no disclosure is needed and depending on how the inspection is written up the sellers can tell the buyer to pound sand.


So if you bought a new house, moved in, 2 weeks later your furnace crapped out in mid winter. Then a week later your roof started leaking, you would be completely fine? Ya I would be fine too, I would be pissed at my home inspector but I wouldnt blame the realtor or seller. But if I found out that a previous sale collapsed due to the fact a home inspector said the roof needed immediate replacement and the furnaces would also need replacement soon. Then I would be pissed that the knowing seller and realtor never mentioned it, and I know you would too. I dont get what your defending, you originally said that, these two things dont need to be disclosed, to me the absoleutly do. And I think anyone who hides somthing like that would be considered shady.
-I really hope you are not a realtor extm88

And to Barmanjay, who I believe is a realtor also. Reca defines a material latent defect, among other things, as somthing that would be substantial in value to fix, I feel that a 10k roof and 10k for furnace is pretty substantial. At least to most people, especially after they dropped 400k on a new house, last thing they want to do is drop 20 more thousand into it.

[barmanjay]

Originally posted by leftwing

.....

And to Barmanjay, who I believe is a realtor also. Reca defines a material latent defect, among other things, as somthing that would be substantial in value to fix, I feel that a 10k roof and 10k for furnace is pretty substantial. At least to most people, especially after they dropped 400k on a new house, last thing they want to do is drop 20 more thousand into it.


Hi Lefty

You are correct that I am a realtor, haven't always been. I was in construction years ago and prior to that many other blue collar and rough neck jobs.

"great expense" or "substantial in value" is subjective to everyones individual financial situation. If there was a problem and this was being investigated by RECA,.. they would determine if it was a 'great expense'

To me personally and financially a new roof would be a 'great expense'; to someone like bill gates, it would be pennies to him

10k for a roof, pending size 'might' be on the high side, and 10k for 2 furnaces I do think is definitely a high estimate.

If memory serves from my textbook reading during the courses years ago - Material Latent Defects pertains mainly to hidden problems.

ie: basement flooding problem, foundation issues, major mold issues and etc.

If you choose a roof that needs replacement as the example, and it shows obvious signs of excessive wear (curling corners, tar showing) then it would be an obvious defect = latent defect not a material latent defect.

However if it was new shingles (but the actual roof had a 2'x4' hole under the shingles, or the plywood was completely rotten throughout, I would consider that a Material Latent Defect.

From your viewpoint lefty, you seem right about calling the bad shingles on a roof a material latent defect, but iirc: its just a latent defect

Obvious problems in properties; ie: worn shingles or obviously very old furnaces; if the buyer is being diligent (and the realtor representing the buyer) would factor those into the final purchase price as argument points for a price reduction.

Just trying to clarify.

[extm88]

im getting out of this lol, me and barman whom are both in the industry are saying the same thing.
Shitty looking roof because its super old= seller does not have to disclose
nice/new looking roof with holes and it leaks= seller must disclose
based on OP's comments it does not need to be disclosed by the seller to future buyers.
Lefty ill let you think whatever you want from this point on....you can take it up with Jay lol.

[Type_S1]

If it is a forclosure most likely there is no negotiation room. I deal with forclosures and the bank prices at market value or just under so they can make the money they lost back+ costs for fixing/holding the property. There is usually very little margain to move on.

[leftwing]

Originally posted by barmanjay



Hi Lefty

You are correct that I am a realtor, haven't always been. I was in construction years ago and prior to that many other blue collar and rough neck jobs.

"great expense" or "substantial in value" is subjective to everyones individual financial situation. If there was a problem and this was being investigated by RECA,.. they would determine if it was a 'great expense'

To me personally and financially a new roof would be a 'great expense'; to someone like bill gates, it would be pennies to him

10k for a roof, pending size 'might' be on the high side, and 10k for 2 furnaces I do think is definitely a high estimate.

If memory serves from my textbook reading during the courses years ago - Material Latent Defects pertains mainly to hidden problems.

ie: basement flooding problem, foundation issues, major mold issues and etc.

If you choose a roof that needs replacement as the example, and it shows obvious signs of excessive wear (curling corners, tar showing) then it would be an obvious defect = latent defect not a material latent defect.

However if it was new shingles (but the actual roof had a 2'x4' hole under the shingles, or the plywood was completely rotten throughout, I would consider that a Material Latent Defect.

From your viewpoint lefty, you seem right about calling the bad shingles on a roof a material latent defect, but iirc: its just a latent defect

Obvious problems in properties; ie: worn shingles or obviously very old furnaces; if the buyer is being diligent (and the realtor representing the buyer) would factor those into the final purchase price as argument points for a price reduction.

Just trying to clarify.

-What do you mean "from my viewpoint"? What is my viewpoint, and why is it different then anybody else's?
-I dont know if you viewed the link I posted in my 2nd post on the first page, but it tells exactly how reca defines a material latent defect and a latent defect. It is a link to RECA's webiste...


And to extm88 I am in the industry as well.
And you are not saying the same thing as Barman, he is pretty much agreeing with me, but he is saying to him, there is a grey area and he might not decide to disclose such a problem (the furnaces). He already said that the roof is a material latent defect and would be disclosed.

your saying that absolutely no way would a realtor have to disclose anything of this nature to a client. You come off as very ignorant and to me seem like a very unethical and uneducated realtor.

[barmanjay]

Originally posted by leftwing


... it tells exactly how reca defines a material latent defect and a latent defect....



from RECA link you posted lefty

It is not possible to provide a comprehensive list of defects that qualify as “material latent defects,” but they include the following categories of defects:

* defects that render a property dangerous or potentially dangerous to the occupants;
* defects that render a property unfit for habitation;
* defects that render a property unfit for the purpose for which the buyer is acquiring it, at least where the buyer has made this purpose known to his/her industry member representative or the seller’s industry member;
* and may include:
o defects that would involve great expense to remedy;
o local authority and similar notices received by the seller that prejudicially affect a property; and
o lack of appropriate municipal building and other permits for a property.

I see the theme in the above description more towards major building related problems instead of worn shingles,.. but again,.. that is debatable and for clarification on the question of worn shingles should be brought up with RECA.

Anyways,.. we are both on the same page,.. but just reading/interpreting it a little differently.

I would still expect some kind of notification of the issue in the private realtor remarks at the very least; if a previous sale had collapsed due to the poor condition of the roof via a property inspection report.

[leftwing]

Barman, I agree that we are interpreting slightly different. Glad we cleared everything up haha.

Anyways, to the OP how did everything turn out in the end? or is it still ongoing?

[eblend]

if you found a nice place that you love and already got a great deal on, I don't think you should cheap out just to save a few grand. If you are attached to it, buy it, deal with the issues and move on.

[dj_rice]

Sorry to bump this thread. Was searching on Google on my topic and saw this in the results.


On my agreement, "A Property Inspection Schedule is Attached to and Forms Part Of the Contract" is crossed out and in the Yes and No field, it marked No.


What does this mean? I have a House Inspection on the house I am purchasing tomorrow. If I'm reading this correct, because I put no, if they find things wrong with the house, they won't give me cash credits or reduce the purchase price because my realtor marked no?

My realtor did say, that if the inspection comes bad, I can just walk away?

[spikerS]

Originally posted by dj_rice
Sorry to bump this thread. Was searching on Google on my topic and saw this in the results.


On my agreement, "A Property Inspection Schedule is Attached to and Forms Part Of the Contract" is crossed out and in the Yes and No field, it marked No.


What does this mean? I have a House Inspection on the house I am purchasing tomorrow. If I'm reading this correct, because I put no, if they find things wrong with the house, they won't give me cash credits or reduce the purchase price because my realtor marked no?

My realtor did say, that if the inspection comes bad, I can just walk away?

It all depends. Did you state in the contract that one of the conditions is the result of a property inspection.

It sounds to me like an inspection is not a condition of sale there. But even more, it sounds like it is stating that at this point a property inspection has not taken place yet, and as such can not be attached to the offer?

This is one time I need more information.

[dj_rice]

Yes, the only contingency of my purchase agreement was the House Inspection. My realtor said to me not to include the mortgage contingency due to the fact there was 4 other offers on the table.

She only considered 2 offers. Mine which was $5K less but only inspection contingency and 2nd offer was $5K more but mortgage contingency and home inspection contingency. Realtor says my offer was more solid and attractive that way.

On the Property Inspection Condition line, it says The Contract is Subject to The Buyers Approval of a property inspection before 9pm on April 30 , 2013 (The Condition Day) and then I initialed that along with the sellers

[barmanjay]

DJ

It sound to me that you are having a home inspection without an inspection schedule.

When this thread was started,.. Years ago, home inspectors were not federally regulated and were able to give estimated costs for replacement of some things in the home.
3 choices were present on that old form.

That "schedule" would determine how much is acceptable to you.

- $ value you are willing to accept

- 1% of the purchase price you accept as defects

- no $ value, you can walk with anything

Now since home inspector are federally regulated, they cannot give you a value for replacement; many realtors (including myself) stopped using those.

The replacement schedule just states (loosely written here) that you will use a "licensed and registered home inspector" to inspection the home and will provide a copy of the home inspection should the deal collapse, or renegotiate.

*or

Just check "no" on schedule attached and carry on with home inspection condition.

Your realtor just made it easier for you to back out should there be a problem with the home inspection with less paperwork required.

Should you want to renegotiate; you will still want to provide a copy of the inspection report to back up your claims.


You are fine.

Scary going in without a financing clause.
Even though you may be pre-approved and already signed papers with the bank. The scarey part is cmhc or other mortgage insurers if your mortgage is high ratio.
In the past, they have been known to crater a deal because they didn't see the value.

Good luck!

[dj_rice]

Thanks Barmanjay.


Exactly the answer I was looking for. As for the financing clause, I wasn't going to do a high ratio mortgage as I've saved up enough for a 20% DP.

[Rat Fink]

.

[spikerS]

yeah, it is pretty scary going in without a financing clause, just because anything can happen and a bank can refuse funds, yet without the clause, you still have to find that cash on closing day.

I would never recommend not having a financing clause unless you are paying in cash.

[Black Gts]

Hopefully you closed dj rice, I have a question but didn't wanna scare you anymore. What happens if the bamk refuses to finance, without a clause? I'm assuming you lose the deposit, but what if the homeowners offer to carry you at some stupid interest rate? Does something like this happen? Is it legal?

[Cos]

.

[Black Gts]

I guess it would be the same thing, I was thinking the seller would say something like "I'll offer you 10 percent or keep deposit".

[dj_rice]

Correct. I would lose the 10K deposit as that goes to the seller for damages. They can even sue me for costs of re-listing it again or something I believe