Seller switches to "as-is" midway through negotiations

31 Replies

Looking for advice. We signed a P&S agreement for a 4-bedroom, 2-bath with the contingency to conduct a home inspection. The inspection revealed that the heating/cooling system (heat pump) needed to be replaced because it was not working at all. The Disclosure signed by the Seller did not say anything about this and the Listing did not say anything about this. The house was built in 1971 with heat strips in the ceiling as a means of heating the house, with separate thermostats in each room. Several of these no longer work. This system was upgraded in 1992 with the central heating/cooling system that is now 25-years old and no longer works. We submitted a Repair/Replacement list to the Seller within the allowed time frame asking for a replacement of the heating unit and he said he has decided he wants to sell it as-is and will not be fixing anything. We have applied for conventional financing and are through the steps up to the appraisal. We are concerned we will not get approved if the home does not have an operable heating system for the entire home. Is a rehab loan our only avenue??? Any advice is welcome. Thank you.

In Massachusetts, any time you ad provisions to a contract to purchase, even those found at inspection, results in either party being able to say NO. 

When my clients request repairs I always make certain they understand that doing so opens up the previously signed contract and releases both parties from the obligation to move forward.

There are all sorts of details about 'habitable' rules etc that someone else can respond to as I'm not an expert on that point. Your lender will certainly not give you a standard loan on something that isn't habitable however there are other loans that allow you to repair first, then mortgage and occupy.

Rj

No real advice, other than the seller has every right to do this. When you ask for repairs you have opened up negotiations. His negotiation on your request is, No repairs, as-is. The bad news for you, if you are trying to get conventional financing they probably won't lend on a house without functioning HVAC. I had this happen with broken baseboard in a house. The bank offered to fix, but I didn't trust them and their tactics. 

All depends on the appraiser. Some are very thorough, others walk through a property in 5 mins. Id wait til the appraisal, see if its good to go, and if not then you have more leverage to force repairs, as long as you have an appraisal contingency in place.

I see this as a hugh red flag. It doesn't seem very forth coming from the seller. I would consider waiting for the next deal to come along.

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I don't see this as meaning anything other than the seller doesn't want to outlay that kind of cash to sell the house.  Hopefully you have a contingency for financing/appraisal, and that you negotiate an appropriate price for the house needing the work to be done.

further negotiations are needed.. you can do an repair addendum they can agree or decline then you decide if you want to kill the deal or more forward.. thats about how these deals go.  can't force them to fix it or replace

@Natalie Landry At this point you can get out of the deal.  The other option is to modify your offer.

If the deal is otherwise good and you're not financing with a USDA / FHA / VA loan (which would fail due to condition), ask your lender whether your loan would pass with the house in it's current condition.

If it won't, consider an FHA 203K construction loan.

If it will, reduce your offer to reflect the repairs that are needed.

Otherwise, as @Jay Hinrichs says, NEXT!

Thanks everyone! Very valuable input. Much appreciated.

If the A/C doesn't work and they didn't disclose it, what else is wrong that they didn't disclose? I just got burned a couple of months ago for a $1,700 plumbing issue that wasn't disclosed on a house we purchased in 2017. Most lender won't finance a loan for a house that is not livable. In my town they consider a house condemned if it doesn't have heat.

@Natalie Landry One important thing to figure out is whether the state the property is in is a "caveat emptor" state, like we are here in MA.

In practice, that means that the seller is not required to disclose hidden defects.  An AGENT is required to disclose what they know.

The exception is if the seller's agent has them complete the optional "Seller's Statement of Property Condition" form.  If that form is filled out by the seller and something isn't disclosed, you have recourse.

I'm going after the seller of the home we bought in Plymouth last year because he filled that form out, but failed to disclose that we have "private power poles" that extend 1,500 feet through the forest.  If a tree or limb falls and takes the lines down, we are personally responsible for the repair.  The remedy will cost $25,000.  PS - the seller built the house and had the poles installed, so "I didn't know" won't fly.

This is the reason that I never have sellers fill that form out.  Even an innocent oversight can cost the seller for remediation.

I am not surprised, this is not unusual for lower value properties with large repairs. You can ask him to repair or walk away. The appraiser may not notice the heat issue, but if he does then the bank may not approve the loan. 

@Natalie Landry It's all about the numbers. You are still in your right to renegotiate. If the seller(s) is unwilling to do any repairs, then revalue your offer. If he declines and you know your numbers are solid, walk away. Like they say here in Texas, you got to know when to hold'em and when to fold'em.

I thought the sellers disclosure was a requirement. Not the case, or the 'seller' doesn't have to fill it out?

Figure out what a new system would cost you. Then look at your numbers. If something's a deal and you'd make 30K on it, would you rather walk away, if there's an extra 3 or 4K expense? Wouldn't that be 'cutting off your nose to spite your face'? So, I suggest to look at the big picture. Sometimes you have to give a little in order to get something. 

Now, if this will be your private residence and you're paying full market price, then I'd walk away. 

If you really want it and there's equity in it, then you can always offer to up your price in the amount of the new system, and have the seller install right before closing, with the HVAC guy/gal being paid out of closing. That allows the seller to walk away with the same net proceeds and allows you to buy the house. 

So, look at the big picture and see if it's worth it to you or not. 

@Charlie MacPherson I will look into that. The Seller did sign and give us a Residential Property Condition Disclosure where it was stated that the Seller was not aware of an defects/malfunctions in the central heating. Thank you!

@Michael Rutkowski Yes, the Seller did fill one out and stated that the seller was not aware of any defects/malfunctions in the central heating system.

@Michaela G. We did get a quote from an Air and Heating contractor, so the numbers were easy to run. We will have to go for something other than Conventional financing but that may be ok. It is an investment property for us. Our first one, so we are learning as we go and trying not to make any huge mistakes. Thank you!

Originally posted by @Natalie Landry :

@Michaela G. We did get a quote from an Air and Heating contractor, so the numbers were easy to run. We will have to go for something other than Conventional financing but that may be ok. It is an investment property for us. Our first one, so we are learning as we go and trying not to make any huge mistakes. Thank you!

But I think you can still get a conventional loan, if the system is installed before closing. It would just be a contingency for it to close. If you up the price, you can roll it all into the loan and you'd only come 25% out of pocket and 75% is paid by the mortgage. The vendor would get paid out of closing or the seller pays it before closing

It's just a matter of it being worth the extra money or not.  

I suggest that if you are using a real estate agent you have them handle this.  You should get a price reduction for that original contract or at the very least be able to start over.  Sometimes it is just a good idea to walk away for awhile, esp if the place has been on the market for more than 2 months. Also I found a new vendor for heating that is very good. Carbonic Heat is a very thin flat film that is installed under carpet, wood flooring, tile, concrete and gives off infar red heat so it heats objects not the air.  It has been a wonderful find, my yenants love having warmth from the floors  and the cost is much less than conventional heatin both to install and the electricity to run.  I use thermostats that can be on timers in each major space so that rooms not being used do not get as much heat.   If you end up getting this place, it may be much cheaper to use infar red heating rather than convenional.  Great find!!

@Natalie Landry keep in mind if they failed to disclose the problem, but claim they were not aware, then they completed the form honestly. They don't need to agree to fix anything, but that also means you can walk away from the deal.

The tricky part for the seller is when marketing to the next buyer, they must disclose this problem. They can't say they are not aware. They need to update the disclosure. It might be good to remind the sellers agent that they will need to deal with this problem on the next buyer, so it will be easier for them to just negotiate with you. 

Maybe a compromise instead of full replacement cost is to split the cost as a price concession. A system from 1992 is at the end of it's life, even if it was working you would have been faced with that expense in the next couple years.

Your ability to close depends on the type of loan. Most conventional loans are not contingent on anything besides appraisal. The appraiser doesn't perform mechanical inspections unless it is an FHA loan.

@Joe Splitrock Lots of good things here to consider. Just for your curiosity...the Air and Heating contractor we hired to look at the heating unit said parts of it had been disconnected as if someone tried to work on it but did not follow through with a fix. Our Realtor is working hard to make the point about the next buyer now needing to know about the problem. Will need to think about the appraisal option. It is not an FHA loan.

As an agent in the Knoxville area, I would say that you may still be able to qualify for a conventional loan, depending on which lender you are using. Being that the HVAC has been disconnected, that would send up a huge red flag to me as an agent and/or buyer. As others have said, the seller isn't obligated to make any repairs, but you certainly won't be penalized for walking away if the seller is unwilling to negotiate price with you based on needed repairs. (Assuming you have a home inspection contingency in the PSA) It is true in saying that the seller will no longer be able to "play dumb" in not knowing that the HVAC has issues, so it could be in their best interest to move forward with your contract and help with the repair costs. Have the sellers lived in the home anytime over the last 3 years? If not, they can sign a property condition exemption form saying that they are unaware of the condition of any appliances in the home, including HVAC. If that's the case, you should have received a copy of that exemption with the other Disclosures provided by the seller. Best of luck!

Originally posted by @Natalie Landry :

@Joe Splitrock Lots of good things here to consider. Just for your curiosity...the Air and Heating contractor we hired to look at the heating unit said parts of it had been disconnected as if someone tried to work on it but did not follow through with a fix. Our Realtor is working hard to make the point about the next buyer now needing to know about the problem. Will need to think about the appraisal option. It is not an FHA loan.

They probably knew it wasn't working. Proving it is the hard part. Now they know for sure. I am surprised they are not willing to deal with you on this. Have you tried asking for less than full replacement cost in some type of compromise? This is why it is good to get inspections. Sellers cover up problems all the time. The question for you is if this is still a good deal, even if you have to pay for the repair. 

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