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Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: katstache92 on October 11, 2018, 08:54:05 PM

Title: Response to Inspection?
Post by: katstache92 on October 11, 2018, 08:54:05 PM
Hi All,

I need help figuring out how to respond to an inspection.  I am getting overwhelmed by this and need someone to give me some additional options or ways to look at the situation, reassurances that I'm thinking the right way, or face punches for being whiny.

The house hunting has continued, I'm currently under contract to purchase a 2/2.5.  The market here is a seller's market, but I believe it's cooling somewhat.  I am looking to buy a condo.  In this neighborhood there are currently 4 units for sale (including mine, so I guess it's not technically still for sale.)

- 1 unit at 160k is almost completely remodeled, except for the floor on the first floor - brand new kitchen, bathrooms, carpet upstairs, appliances - highest recent appraisal is $155
- 1 unit is listed at 137k but needs to be replumbed and the seller is unwilling to drop the price low enough to make it worth it to me as it needs substantial work prior to moving in - however the kitchen is mostly updated in this unit and has some newer appliances
- 1 unit listed at 145k which has an enclosed porch which I do not want, this is not a viable option and has a lot of odd diy fails that would need to be corrected
- the unit I am under contract to buy - listed at 135k and stupidly under contract at 135k

The inspection was this morning - I knew I was going to have to update the unit - new flooring and painting asap and then eventually new kitchen and new bathrooms.  This is the most extensive work I will ever have done in a house and it is a lot, but seemed manageable.

It turns out the fridge, stove, dishwasher, and hot water heater are all 16 years old and past end of life expectancy.  Of these items only the dishwasher is technically broken.  The stove needs new stove top elements.  The hot water heater shows no signs of rust.  The fridge is in completely different condition than when I saw the unit.

The owner (rented for 15 years, never occupied) decided not to turn the power on in the unit so the fridge has been sitting for several weeks now with no airflow.  The ice maker was full when the fridge lost power.  There's now a giant puddle in the drawer at the bottom of the fridge and TONS of mold/mildew in both the fridge and the freezer.  It's absolutely disgusting.  My agent is supremely unconcerned by this and told me to just bleach it.  I have allergies to mold and there is absolutely no way I will be cleaning this fridge.

There are also 3 electrical panels that are federal pacific (stab-lok) and must be replaced asap.  This is a non-negotiable item as this is a safety item.  If the seller will not cover the cost to replace them (I would like to do it) then I will walk away.

What else should I ask for?  I have about $48k cash on hand - 33,750 of it is going to the down payment (25% - needed to get the limited condo review) and about $4k is going to closing costs.

I'll want (need?) to put tile down before I move in as the entire home smells like dog, it's super gross.  So that's another what, $4k?

That leaves me with $6k, which is why I'm feeling a bit nervous about having a house full of 16 year old appliances.

My agent, who is being absolutely useless, is telling me that since we have the cheapest unit in the plan that I should basically be feeling thankful and that the base price included the "non-updatedness" of the unit, for her, this includes the appliances.  She pushed me to go in at list price (I'm an idiot) because "we can renegotiate during inspection" and is now telling me we can only go for the panel replacement and nothing else.

I just can't think straight.  I don't think it's excessive to ask for the panels+dishwasher+at an absolute minimum a thorough fridge cleaning.  I don't think I can realistically ask for more, although it really grinds my gears and I want a few hundred for the fridge and hot water heater.

Then I have to figure out valuation and bidding strategy.  I got a quote from someone today for about $2,200 for the panel replacement.  Hot water heater replcacement, due to size (40 gal low boy) and location (wedged under stairs) was quoted between $1,034 and $12,85.  No one would quote a dishwasher, they said just buy it from Lowes/HD and have them install it - so $500?  So for the panels and dishwasher plus some extra for fridge cleaning $3k?  Does that seem reasonable?  Where do I start the renegotiation? $4k?  $3.5k?  Double it like the agent says to $6k?  That seems like an awful lot.

There is also a home warranty in place, but that comes with a $75 service fee for each call.

What say you smart people?  Can you help put this into persepctive?

Title: Re: Response to Inspection?
Post by: lhamo on October 11, 2018, 09:18:47 PM
I would stick to your guns.  Markets have softened considerably all over the country in the past few weeks/months as interest rates have been rising.  Here in formerly hot Seattle inventory is WAAAY up and Redfin says at least 25% of units have seen price reductions since initial listing.  I think it is actually more than that -- very few houses are getting list price offers anymore, and that isn't just because people are listing too high -- the offer prices are just dropping faster than the listing prices are.

I would:

1)  Insist on the electrical updates, since as you note that is a safety concern
2)  Ask for at LEAST a 3k reduction in price to account for replacing the broken dishwasher ($500), the now health-hazard fridge ($1000 -- seller's fault for not supplying electricity on that one), the past life-expectancy stove ($500) and the water heater ($1000).  You will probably get pushback, but probably can get at least $2-2.5k for these items. Since you were planning on the other renos anyway, this seems reasonable.

Watch your back with your agent -- they are not working in your interests.

There will be other units, especially if the market is softening.  In fact, the recent stock market turmoil may lead to a spike.
Title: Re: Response to Inspection?
Post by: katstache92 on October 11, 2018, 09:27:50 PM
Thanks lhamo!

I keep seeing the market is getting cooler, the agent insists it isn't.  But previously in this neighborhood, a unit not as nice as the $160k unit was gone in a day or two and this one has been sitting for 2 weeks.

I am just really ticked off about the fridge.  It's ridiculous and I shouldn't be the one who has to pay for their stupidity/cheapness/whatever you want to call it.

The challenge with what you have outlined is that I would like to replace the panels to make sure it is done properly, rather than having them hire the cheapest contractor they can find.  So that adds a few $k in addition to the $3k you have outlined for the appliances.  I just got a quote in writing for $2.3k for the 3 panels.  My realtor keeps insiting that she can get it for something like $1k.  But that's 2 quotes I've received now within a few hundred dollars of each other.

I dunno, she (my agent) is driving me bonkers.  I worked with an agent previously (I moved far away from her so she isn't an option anymore) that I could rely on to at least help me to a good decision.  This agent changes her tune to suit the situation and it's maddening.
Title: Re: Response to Inspection?
Post by: lhamo on October 11, 2018, 09:46:44 PM
OK, I'd ask for a $5k discount, plus they remove the old appliances.  Then you can just pop the new ones in once the floors and electrical upgrades are done.  And if they aren't there, you can look for used options on CL, etc. (most retailers will take away old appliances, but anyone selling used probably wouldn't).

Stick to your guns.  You don't HAVE to buy this condo.  There will be others.

If it doesn't go through, get another agent.
Title: Re: Response to Inspection?
Post by: Jon Bon on October 12, 2018, 06:54:50 AM
A few things jump out at me.

1. Are you being penny smart pound foolish? The one you are in contract in kind of sounds a little dumpy. Any time utilities are off that is a huge red flag for me. It means the house was not being heated or cooled, or they want to hide some bigger issue. Like an electrical panel that likes to catch on fire! Lord  knows what else is wrong with this place. A 15 year rental sounds like lots of band-aid fixes and root problems never addressed. If the owner left a big issue like an electrical panel untouched for so long I am sure there are other lurking issues as well. SO I would consider grabbing one of the more expensive updated units. 160k is not a bunch of money, but I dont know your situation.

2. Your realtor - Yes definitely not working in your interests. Everything you have quoted them could be rephrased as  "Lets hurry to close so I can get paid"  In my state nothing says you have to have a realtor.

3. The request to remedy - Yes ask for all that stuff and more, from your description you are going to be spending a bunch of money to get this place up to snuff if you end up buying it.  I would probably ask for 5k but be willing to negotiate down to 2500 or so.

The dishwasher, and fridge should be replaced. Both on the seller.

The stove and hot water tank I would not negotiate on if I was the seller. They work, that is good enough. I dont think I own a single water tank younger then 16 years old, and they all keep ticking.

In closing - you are new at this, and are noticing many things that are broken, unsafe, gross etc. Imagine what you might notice if you were or a pro, or when you open up a wall. So this makes me think that this house is a lemon. Just a death by a thousand cut if you will.  I would probably walk away. LOTS of condos out there.
Title: Re: Response to Inspection?
Post by: Gary123 on October 12, 2018, 07:49:40 AM
When investing in properties (to live in or rent) donít get emotionally involved.  Communicate honestly with the sellers about what it will take for you to close and walk away if they donít do it.

Here are my observations as a longtime real estate investor with over a dozen properties,

1. Old appliances last longer than new ones.  I removed many dated appliances to put in Home Depot garbage that only lasted 10 years.  If they are dated but working, no need to replace immediately.

2.  I purchased a mountain property with a Federal Pacific Panel.  We took about 1 year to get it replaced when a master electrician gave us a bid of $900 to do the work.  If you can wait you will have time to find better bids.

3.  Anyone who bids high and tries to renegotiate price after the inspection (as a strategy) is a dishonest jerk.  When you get this close to the closing both real estate agents are working for the seller because they want their commissions.  Donít rely on the realtor to advise you about investing - her money is only in the transaction.

It sounds like you are trying to pass on or quantify the risks down to the penny.  Buying a older unit has risks you should be willing to accept even if not entirely understood.  Replacing the coils on the stove takes less time than posting a message on this blog. 
Title: Re: Response to Inspection?
Post by: jc4 on October 12, 2018, 08:10:40 AM
Pre-purchase advice:

First, this is stressful. But it's all ok. You have to make a lot of fast decisions, but you can do it.

Second, I'd ask for $5k-$6k. If the place is good for you, you're just making it a bit sweeter. $135k vs. $132k vs $129k is really trivial differences to you or the seller.  And $30k is plenty of room for upgrades even paying contractors instead of DIY.
So you can relax it's yours if you want it.

Tactic: list several issues that are more than $6k total as reasons even if you're not going to swap them. Saw you're willing to compromise at $6k. Only list high cost items. Petty things will lose credibility.

Any place you inspect is going to have problems. This one's not that bad. I think you can relax a bit. I'm also sorry your realtor isn't really helping.

Post-purchase advice:
Your estimated costs are very accurate.

Old appliances are common, expecially in rentals. But they can work for a long time. Leave the water heater. It could last another 5 years trouble free. Same with the stove. DON'T replace the fridge or let the seller. You can hire a maid service that will make it clean as new for $100-$200. You don't even have to deal with it. Bleach will extrmemely kill mold, and the plastic surface is very hard for mold to hold to (comes off easily). Also situations where a fridge fills with mold are not that uncommon.

Anyways, it sounds like you're in good shape to get the place you want and make it the way you like. Congrats and good luck.

Title: Re: Response to Inspection?
Post by: katstache92 on October 12, 2018, 08:32:03 AM
Thanks for the advice everyone!  It's helpful to hear a variety of view points and see what I might be missing or building up too much in my mind.  I appreciate you all taking the time to respond.

I asked for $4k this morning, so we'll see how that goes.  I figure I can come down to $3k ($2.2 for the panel, $500 for the dishwasher, and the rest for having someone else clean the fridge.)

Jon Bon - thanks, the $160k option would leave me with virtually no cash on hand, I don't even know if the mortgage company would let me do that.  Based on the rest of the inspection I don't think this house is a lemon, the appliances really just were a surprise to me and I hadn't been mentally planning to replace them.

Gary123 - thanks, that's good to know about the older appliances vs. newer.  (1) I need to remember that just because something is old, doesn't mean it's not acceptable, especially around this price point.  (2) For my peace of mind, I would like to get the panels changed out asap.  (3) Yeah, I don't think my communication with this agent has been good and it's unfortunately showing now.

jc4 - thank you - it is really stressful!  I've purchased 2 other homes in the past and I don't remember it being nearly as stressful as it feels right now.  I think the difference might be that I don't like where I'm living now so that has added some unanticipated pressure to this whole house hunting saga.  I'm trying to stay away from the petty things in my response.  The realtor said the discussion with the listing agent went well, so I guess we'll see.

Current plans: agree somewhere between $3-4k, yippee, move forward, otherwise cancel and take a break to figure out finances at 25% down vs. 20% down.  If move forward, once we close: replace panels and flooring - dishwasher if the money is available - prior to move in.

Title: Re: Response to Inspection?
Post by: lhamo on October 12, 2018, 08:37:30 AM
Oh, forgot to mention -- our water heater was also quite old.  So we asked for (and got) a $1200 allowance to replace it.  We haven't yet -- it's old, but still working fine. 

Do keep an eye on CL, etc. for dishwasher options -- you'd be amazed at what people just give away when they are remodeling....

Good luck!
Title: Re: Response to Inspection?
Post by: katstache92 on October 14, 2018, 11:58:59 AM
Hi All - update for you.

I asked for $4k from the seller, with the intention to settle at $3k.

The seller responded back at $2k, my realtor said she would be tough and push for the $3k.  That didn't work.

However, she offered up $1k from her commission to get the deal done.  Which puts us at the $3k.  So we're moving forward with the deal.

This will be in the contract as closing cost assistance - so it'll just be $3k less I need to bring to the table.

I'm pretty happy with this.

I did have a moment of pause when the 'pretty' unit at $160k dropped to $154,900.  However, after looking at the unit online again - I realized it wasn't necessarily ideal for me.  There is carpet in the bedrooms - I have allergies to my cat (I'm not getting another cat after she passes, but I love her and she's family, so with me she stays) so I do not want carpet in the house at all.  There are some questionable decisions on the remodel in the bathrooms (no drawers?) and the driving entrance to the unit is off the busy main road and not a side road like the unit I'm currently under contract to buy.  It's also farther away from the pool.

So I'm sticking with the current unit. Up next, appraisal.  Dun Dun DUN.
Title: Re: Response to Inspection?
Post by: lhamo on October 14, 2018, 12:05:00 PM
Congratulations!  So glad you were able to get the 3k!  You never know unless you ask.

You've probably started looking already, but just FYI looks like you can probably get most of what you need used off CL -- even an almost new water heater listed:
Title: Re: Response to Inspection?
Post by: katstache92 on October 14, 2018, 12:18:58 PM
Thank lhamo!  I haven't started looking yet, but I hadn't considered CL.  Which is silly - I should totally consider it, and now I will!

I may try to sit on things for a while, as long as they keep working.  The dishwasher though will probably happen shortly after I take possession.  And the floors will definitely be redone before I move in.
Title: Re: Response to Inspection?
Post by: lhamo on October 14, 2018, 12:24:34 PM
The main challenge with appliances and furniture on CL is finding people who will deliver and also take away the old stuff.  But there are people who do that as a business -- you might pay a bit more to get both services, but it will still be less than retail.
Title: Re: Response to Inspection?
Post by: Jon Bon on October 14, 2018, 01:43:40 PM
The main challenge with appliances and furniture on CL is finding people who will deliver and also take away the old stuff.  But there are people who do that as a business -- you might pay a bit more to get both services, but it will still be less than retail.

Lots of my CL guys tend to do repair on appliances as well. So they will take away the old model for parts or scrap metal or something like that. Half the time I throw the old appliance in the alley and the scrappers get it.