It isn’t just a house, it’s an investment – one that can cost you plenty, if you’re not careful.
That’s what a Chicago couple recently discovered after the inspection of an older home they wanted to buy revealed a number of items that would need to be repaired or replaced.
The amount needed to fix the problems that were uncovered by the inspector amounted to several thousand dollars. What worried the couple is what “new” problems would be uncovered once the dryrot was removed.
“We suspected there would be other problems that could be very expensive to fix,” said the wife. “And, given that we were paying top dollar for the house, we didn’t want to spend anything on fixing structural items in the home.”
After receiving what they considered to be an unacceptable report from their home inspector, the couple backed out of the deal. Although they spent several hundred dollars on the home inspector and the attorney they used, they consider themselves lucky.
“We’re pretty sure the few hundred dollars we spent is a small fraction of what we would have spent had we purchased this home,” the wife added.
When is the right time to back out of a home purchase? And, when should you hang in there, and negotiate for a better deal? The answer depends on the price you’re paying for the home, the condition it’s in, and how hot the market is in your neighborhood.
If you’re paying top dollar for a home, you’d expect it to be in the best condition possible. A home in top condition may be freshly-painted, with new or steam-cleaned carpet. It may have a new or like-new kitchen and baths. And it will certainly have had all of the little annoyances fixed, like creaky, sticking closet hinges, and doors that won’t open.
Buyers who pay list, or nearly list price, for a home also expect the sellers to take care of any problems that come up during the inspection. For the price they’re paying, they feel comfortable walking away from a prospective home rather than risk spending more than they already have.
But it’s an easy situation to avoid. Sellers can hire a professional home inspector to go through their home before they list it. Commonly called a “pre-listing inspection,” it should bring to light any problems or issues a buyer’s inspector would find. Then, a seller can decide whether to fix the problems before they wreck a deal.
Condition is the flip side to price in real estate.
Homes can often appear to be in pristine shape but be structurally problematic. Paint can cover almost everything, including water stains, rotting wood, mold, and failed caulk. If you want to hide a wet spot in your basement, all you have to do is move some heavy furniture in front of it – then pray prospective buyers don’t ask you to move the sofa so they can inspect what’s behind it.
Today’s home buyers prefer homes that are already in excellent shape. Why? After spending so much money to buy a home, homeowners have little cash (or time) left over for sprucing things up. A fixer-upper that’s priced right will sell, but too often, sellers underestimate the amount of work that needs to be done and overprice their property.
Buyers who pay full price often won’t settle for anything less than perfection, no matter how unrealistic it is. Sellers who fail to recognize this principle of real estate, will end up waiting months or years before fielding an offer.
Whether you’re in a buyer’s market or a seller’s market will help determine whether a buyer walks away from a deal.
A buyer’s market occurs when there are more homes for sale than qualified buyers. A seller’s market occurs when demand for homes is stronger than supply.
In a buyer’s market, or even a balanced market (when the number of buyers and homes for sale is roughly equal), buyers are more likely to walk away if there’s a problem with the price or condition of the property. In a seller’s market, a buyer might be more willing to purchase a home – even if there are some problems – rather than risk not finding a home at all.
As for the Chicago couple, their search continues. They’re confident they’ll end up finding the right home, in the right condition, at the right price – someday.