I'm under contract on a home. There's some active termites and a water leak in the water main in the front yard. I'm very worried these repairs will cost far more than expected, I am considering backing out of the deal.
What do you recommend as the best approach for these issues? I'm worried if they credit me some money towards closing the termite or water damage will be far more extensive than expected and I'm out thousands of dollars.
I'm looking for contractual advice or just overall strategy on how to protect myself.
The house is a fixer upper with a long list of repairs. Perhaps I can use some of the other repairs to inflate the credit amount, assuming they won't provide the full credit asked for. The other issue is that the closing costs are $5k and I think this warrants more than $5k off.
@Charlie Anne Is this going to be your primary home? Are you planning to live-in and flip or just live-in and improve? You stated it's a fixer upper so we know there are issues which brings us to the termite and water leak.
How did you determine cost for the other repairs? The same approach would apply to the termites and water repair.
Strategies:
1. Get 3 estimates to fix the termite issue and water issue. Ask the owner to put the money for the highest estimate in escrow, but as long as your comfortable use the middle estimate. Refund the owner the difference if the cost is less than escrow amount. Anything over you cover the cost.
2. Get termites treated and purchase an ongoing service plan. Depending on how bad the damage is, ask for repair money.
3. Do the pipes need replacing or repair? Depending on the type of pipe you may want to replace it vs. repair i.e. clay pipes should be replaced in my opinion.
4. What if any contingencies did you and your agent put into the contract? If you present a list of repairs and the owner decides not to fix the issues can you back out?
What is the house worth once repairs are made? Is the purchase price and repair cost going to exceed After Repair Value (ARV)? If so you may want to walk or renegotiate the purchase price / repair allowance.