Seller switches to "as-is" midway through negotiations

31 Replies

@Natalie Landry Some of this just boils down to how attached you are to a property.  If you're willing to walk away, walk away.  Don't pay for an appraisal.  As @Joe Splitrock points out, they'll have to disclose to any buyer in the future so that proverbial cat is out of the bag. The seller (in theory) is now in a weaker position for a future sale. They can't really rent out the unit with no heating so they're just going to eat the cost. Very few people buy things in the middle of winter anyway, relative to summer, so the seller probably knows they're in for a couple of months of eating the PITI. So I guess my questions is...

Why not just walk away and see what happens?  

On another note, there is a reasonable that the seller accepted a lower offer than they would have liked to because they knew (impossible to prove) that they had an ol' busted heating/cooling system.  They accept, you sink money into a home inspection, you get emotionally (and small scale financially) invested in the deal, and they have the leverage to say "as-is" and they hope you're so deep in the process you pull the trigger and eat the cost.

@Natalie Landry , I would try to renegotiate the price based on new information found in the inspection. I would ask for MORE than full repair price, since you have to now live with the repair while you own the property.

Having the HVAC disconnected is a HUGE red flag. No one just walks into someone else's house, disconnects the HVAC, then leaves. This guy definitely knew there was a problem. Of course, you can't prove this. Like someone else said, he covered up this, what else is he covering up?

If this is a hot market, someone else will come along and take the property off his hands. If it's a slow market, he'd be best to renegotiate. Just because he says he won't fix anything doesn't mean he won't cave eventually. There is always another house.

Originally posted by @Natalie Landry :

@Joe Splitrock We haven't tried asking for less than full replacement cost yet. It is definitely a direction we are considering. Thank you!

One way to look at this is the expected life is 25 years, so his system installed 1992 was expected to last until 2017. Even if it was working, you could expect maybe 5 years at best, putting it at 30 year life. Now look at the replacement cost, say it was $5000. Divide that by 30 and the value of a furnace per year is $166. Even if you got five more years out of it, that would be $833. In this example it would be more reasonable to ask for $1000 than it would be to ask for $5000. Hope that makes sense.

Good luck.

@Andrew Johnson We offered listing price because it is a bit of a hot market here in the neighborhood we are looking in. Very few homes that are 4 bedrooms have gone on the market and we are looking for an rental property. I'm willing to walk away. I think there is still space for negotiation at this point though. Thank you! 

Conventional financing should be fine. It's when you get into FHA that it would create an issue. The FHA appraiser has to verify that it is habitable, which would include working HVAC.

So, now that you know it won't impact your ability to obtain your loan, you have to decide whether it is still a deal for you knowing you have just added this expense.  If the Seller says NO to making the repair, you could ask them for a discount in price, or even split it with them.  Now that they are aware of the issue, they HAVE to disclose it to the next buyer, who undoubtedly will reflect that in their price.  So, I would remind the agent about that when you present the discounted purchase price.

My concern for you is that you may have gone beyond the option period during which you have the unrestricted right to cancel the contract and get your earnest money back. If you've gone beyond the option period, you've lost a lot of leverage because if you walk away, the seller gets to keep the earnest money. There are some other points during closing where you could walk away, like if you have a financing contingency. But the option period is the cleanest and surest way to get out of a deal with little fuss.

The problem with disclosures, at least in Texas, is that the seller is only required to disclose KNOWN defects. You can't disclose something you don't know. And even if they knew and didn't disclose, that's very hard to prove.

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