Orange County

[lost-angels]

Hello,

Would really like some advice from home owners who have been around the block a few times regarding repair & credit negotiations.

We're FTHB. We've been keeping track of a beach-adjacent property that has been listed for almost a year. The house itself is an odd beach cottage with bad "upgrades" made to it that are incongruous with the style of the house. It has been on the market for a long time, as the asking price was simply too high for the comps in the area. It finally went down in price to a point where we were interested.

Even with the oddity of the house, we like it is because it's 8 blocks to the beach, has a decent yard for the area, is safe and quiet, gives us access to a more active lifestyle, and we do see potential for it to be decent if we put some work into it. It's also the cheapest property in a neighborhood where if you go up the hill 1 block away, you would find properties selling for at least 200K - 1 mil more. Lastly, it's in a small neighborhood where not that many properties within our price range go for sale often.

We put in an offer a week and a half ago that was 20K less than listing price. Our offer was countered at 10K less than listing and we accepted.

We've been through the house inspection and our agent submitted an informal list of repairs and credits we would like. We only have 3 repairs we're requesting, but we do have about 7K in credits we're asking. After we submitted it, our agent relayed that the listing agent was unhappy with the list, as the seller was already close to their bottom in price. We took that info with a grain of salt.

We just learned that a back up offer came through that was higher than our accepted offer. Up to this point, we've been calm and unattached to the house. However, the knowledge of a higher back-up offer than ours is having the desired affect of making us sweat a bit. We'd like to keep our cool during the negotiations on repairs & credits. As an aside, we also learned that the listing agent purposely fished for other offers after ours was accepted - they didn't update the status of the house on the MLS. Really peeves us, but I guess that's how it rolls in real estate.

I would really like to hear how others home buyers have dealt with repair & credit negotiations in a situation like this - knowing that a higher back up offer came through and that you're asking for repairs and credits. Should we initiate by backing off on requested amount of credit immediately? Do we wait it out until we hear back from the seller first?

Thanks for reading.

[BobPhillips-RE]

Hi lost-angels,  Well, you SHOULD be in the driver's seat, assuming you're actually IN escrow, which it sounds like you are.

First, the seller and their agent cannot ACCEPT the backup offer as anything but that - a backup offer.  As long as your transaction stays intact, they should be "stuck" with you and your transaction.

The fly in the ointments are two fold.  First, your attempt to negotiate repairs found through an inspection.  Quite simply, the seller doesn't have to make ANY repairs that you request, UNLESS the issues are safety, or code related, in which case, those will be issues for a subsequent buyer, as well.

I would make sure, with your agent, that any list of repairs you request, are based on those factors - safety or code - and dispense with anything of a cosmetic nature.

These issues need to be resolved, for your transaction to continue to completion.  You MAY have to eat anything of a cosmetic nature that you were hoping to get fixed.  If not, you might give the seller grounds to cancel his transaction with you - which has to be signed off, by you - before he can switch to another buyer.

Your agent should also be making sure the other agent knows that a subsequent buyer might eventually come up with more repair requests than you did.

The other fly in the ointment?  The other agent.  No matter what you do, short of completely dropping your repair requests, he might sabotage your transaction, in an effort to "double-end" the deal - some agents are just like that.  

If THAT happens, despite your best efforts to complete your transaction, YOUR agent should be making sure you and he/she have grounds for suit against either the seller, or the agent, or both.  Please do NOT construe any of this as legal advice, because it isn't.  Good luck sorting things out.

[cdcrezz]

Hey lost,

I grew up in a beach community and it seems to me that the prices of beach properties have little to do with the improvements and are more indicative of the attractiveness of the lot; location, location, amplified.

If I am selling a house and a potential buyer "asks" for repair credits, my instinct is to call BS, maybe not out loud, but at least in my mind.  I can't imagine making an offer on a house with the presuposition that everything is perfect and the house will need nothing.  So why am I gonna change my offer when I find out that it needs some repairs.

If you were talking about a foundation that needs repair, or a falling slope, or something else major, then ...

[lost-angels]

@ Bob: Thanks for spelling out the importance of safety and code repairs vs. cosmetic. Our agent glossed over everything on the inspection list as an easy fix without really breaking down the difference between safety/code vs. cosmetic concerns.

Looking back at our inspection report, the bulk of it is cosmetic. We have small concerns about an unpermitted carport and patio area, as we want to do some remodeling in a few years and aren't sure these areas would be a can of worms. But right now, our primary area of concern is a large 4' x 2' hole hand-dug into the soil of the crawl space under the master bath. Water from the drain lines is leaking into this hole quite a bit. The seller is having a plumber come up with an estimate on the hole and leakage, so we will wait and see. Lastly, the home needs GFCI outlets throughout, but I understand that this isn't a huge cost.

You mentioned that the other agent could "double end" the deal. I'm not sure I understand the scenario, so would appreciate if you could explain more on this. Thanks again, Bob, for the solid advice.

[lost-angels]

@ cdcrezz: No kidding about location, location, amplified. The land value for this particular property was assessed at 4 times what the cottage itself is worth in 2010. Crazy when I think about land value vs. house value. That's probably the difficulty I'm having and probably why I'm fixated more than I should be on getting some money back in credits. Everybody wants a good deal and to walk away from buying a home feeling as if a responsible financial decision has been made.

[BobPhillips-RE]

"You mentioned that the other agent could "double end" the deal. I'm not sure I understand the scenario, so would appreciate if you could explain more on this."

If the listing agent is the one who has found the backup buyer, ( as opposed to a different agent submitting the second offer.) and he successfully ejects you from your transaction, he stands to make both halves of the commission.  This would not be easy, or simple, with you in first position, as you would have to sign off on a seller's request to cancel your mutual transaction, using your request for repairs, as his reason.

Such negotiations frequently become complicated, and perhaps testy, but if you negotiate in good faith, and keep the seller in your camp, as a better alternative, you should prevail.

[cdcrezz]

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lost-angels wrote:

@ cdcrezz: No kidding about location, location, amplified. The land value for this particular property was assessed at 4 times what the cottage itself is worth in 2010. Crazy when I think about land value vs. house value. That's probably the difficulty I'm having and probably why I'm fixated more than I should be on getting some money back in credits. Everybody wants a good deal and to walk away from buying a home feeling as if a responsible financial decision has been made.

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Yeah, I hear you on wanting to feel as if a responsible financial decision has been made.

Personally, I dunno if buying a home in the next few years is a good financial decision as much as a lifestyle decision.  Is buying a beamer or a Mercedes a good financial decision when you can buy a Honda for 1/3 the cost?  But, if you can afford to live at the beach, why shouldn't you?  And if you want to own and can afford it, why shouldn't you?  Do our lifestyle choices have to rely so much on "good financial" moves?

Personally, I think there is nothing like living at the beach.  I thank God and my father constantly for the environment I grew up in.  I remember when my dad bought his home two houses from the strand the price seemed astronomical and interest rates were about 15%.  It was a duplex, so of course he rented out the apartment above the garage, but he also rented out two rooms in our home so he could make the payments.  Talk about a bold move.  That and one or two other moves set him up for life, and he and I had a heck of a time living there; emphasis on the living.

[BethCat]

It sounds like you are already getting a good deal on this house.  Are you?  That is something for you to decide.  The thing about fixer-uppers is that they are priced less because they need repairs and a lot of people would rather not repair them.  If you have them make all the repairs, then why the lower price?  You can't have it both ways.  I think in this situation you need to decide if this is the house for you.  Are you willing to make the repairs yourself?  If so, drop your requests and buy the house.  If you are not totally attached, try to get what you want.  Hey, maybe it might work.  Maybe you will sabotage the deal.  How often do houses like this actually come along where you are looking?  

My husband and I just had our 1 year anniversary of moving into our fixer-upper.  Its our first house, and we were scared with the repairs that it needed.  Now living here, I don't know what we were afraid of.  We got the house for 100,000-150,000 less than others in the neighborhood.  It will not take near that much money to fix up our house.  I think if our house was a few blocks from the beach, it would be even sweeter. 

[lost-angels]

@ Beth: It's hard to gauge whether or not we're getting a good deal on this house. The property isn't priced as a fixer upper, and there will be a lot of things about it that need to be re-done, both for the house and the yard itself. The house itself is tiny at 1150 sf, but it sits on a nice lot for the beach area, 6500 sf. It's also the cheapest one for sale right now, and with many reasons why.

In regards to the house, there's a huge hole in the crawlspace with master bath leaking into it that we're awaiting estimates on and have asked the seller to repair. It's an unknown cost to us right now. Generally, though, there were recent DIY remodels made to the house. Unfortunately, the DIY improvements made only 5 years ago are showing signs of the poor quality of workmanship. In addition to that, the owners made ill-advised design choices for the improvements (black marble flooring, green marble flooring, plus wood laminate flooring all together in a 1150 sf beach cottage) It's not a situation where we would tear things out right away, as for the most part it's habitable. But we know we will have to re-do some areas of the house soon despite it's recent remodeling because the quality of the work is quite bad.

As for the yard, it needs quite a lot of work, as well. Fence is rotting with missing boards; carport and patio area area all un-permitted; an old shed that's falling apart that needs to be demo-ed; termite-infested tree stumps that are butted up against a concrete slab.

Again, hard to say if we're getting a "good" deal. We won't know for sure until we get estimates on some of the fixes. Thanks for your input. It's truly appreciated.

[BethCat]

Wow, this house sounds like it has a lot of the same type of issues that our house has.  Our back yard literally had weeds that were taller than my nephew.  We are still working on that.  Although, our house still has the original hardwood floors.  I'm guessing from the size and the fact that the house has a crawl space that it was built sometime before the 50's.  Our house was built in 1924, so I understand wanting to keep the integrity of the house.  

As far as getting a "good" deal, I really think that Orange County is still way over priced and there really are not any good deals out there.  I don't think that our house was a good deal, but it was at a price that we could live with.  I think that buying a house right now is a lifestyle choice, not really for investment purposes.  That being said, I think it is great to own a home, as long as you can afford it.

So it seems like the appeal of this house for you is that it is actually in your price range.  Like you mentioned before, houses by the beach work a little bit differently because location and land are worth a ton more than the actual house.  This house does have a large lot, especially for a beach area.  Just something to keep in mind.  I think that the leak really is the only thing that you mentioned that you can fight for.  And still, because of the back up offer situation you may have to bite the bullet and fix it yourself.  I hope that it is not too pricey of a repair. 

I know that you are probably thinking, she is a first time home buyer too, what does she know.  Well, it seems that my husband and I were in the same type of situation as you.  That is, buying at the low end of your particular market.  It took us 3 years of looking and putting in offers and waiting for houses in our price range before we actually bought our house.  We had many offers and escrows fall through because of the same type of stuff that you are describing.  It came to the point where we had to make the decision, do we want the house or not.  With our house, there were things in the inspection that seemed like a big deal that really were not.  There were also things that the inspector missed.  

I guess you really don't know if this house is right for you until you get some estimates back.  But, let me tell you.  When you are at the lower end price wise, people really do not want to make repairs.  This has been the same story for so many people I know who have bought a house recently.  It sucks.  But, you need to make the decision that makes financial sense to you.  Are you ready to walk away? How long before another property will come along in your price range?  Another thing to remember is that smaller houses have a higher price/sqft and larger houses have a smaller price/sqft.  Just out of curiosity, what beach?  

Sorry for rambling. Your post just really struck a cord with me because I feel like you are going through a lot of the same hassles that my husband and I went through.

Beth