Back to the Negotiation Table...

16 Replies

I am currently in the process of purchasing a Duplex with an FHA 203k limited loan. I am house hacking the property, and I am less than two weeks out from the closing date. When purchasing the property I decided to use the listing agent as a dual agent in the hopes of getting a better deal. I have gotten all of my bids in and I am at the top of my rehab budget in regards to the loan. Everything had seemed to be in order with the house. Until today... I was allowed to enter the property to take some photos for my rental listing. When I got walked through the dining room I noticed a LARGE water stain that had not been there previously. I would like to note that when I did my initial walk through I did notice that the seller had recently painted the ceilings, but didn't think much of it at the time... Well, after investigating, there are some drawers recessed into the wall on the second floor that I was able to remove and look behind the wall. That is when I found a very prominent leak in the roof. Not only was the roof leaking, but there were trash barrel lids under the spot that was leaking, apparently in the hopes of catching the water.

My question is how do I handle this?  It was never listed as a disclosed item.  I had explicitly asked about the age and health of the roof, and I was told that it was fully replaced 9 years ago and in good condition.  To be fair, from the outside you can't tell that there is anything wrong.  Do I have any recourse here?  I was thinking about getting cash back at close.  I'm not sure how much yet, since there is a fair amount of work to be done to the roof and fixing all of the water damage.  Also, I am not even sure that this is allowed with the 203k loan...  Do I ask for more than it will cost to fix incase there is more damage than I can see currently, holding costs, etc...??  Any advice/opinions are more than appreciated!

I have attached the picture of the lids as well.

@Matthew Porcaro

No it was not either. It was an as is offer, but they took efforts to hide the issue. They even painted the water stain. I also explicitly asked about the roof and was told it was in good condition and only 9 years old. I have told my attorney, and he is working on it now.

It’s tough, you are buying “as is” however it’s blatantly obvious the seller is purposely hiding structural issues. 

I’m glad you have your lawyer in the loop. This is something that your lawyer needs to counsel you on, and should work out to your favor to some degree, whether it be a concession or return of down payment if you feel it’s a deal killer. 

Time to get serious. The sellers are not acting in good faith. Purposely hiding a defect like that! I'd play hardball and be prepared to walk.

Originally posted by @Matthew Porcaro :

It’s tough, you are buying “as is” however it’s blatantly obvious the seller is purposely hiding structural issues. 

I’m glad you have your lawyer in the loop. This is something that your lawyer needs to counsel you on, and should work out to your favor to some degree, whether it be a concession or return of down payment if you feel it’s a deal killer. 

 just curious what is a lawyer going to do about hidden defects.. is there not a real estate broker involved that's the one who should be walking you through this.. 

I mean really you have a few options U found it but you did not close .. refuse to close and or renegotiate.. its not like you have a bunch of damages.. if you are using an agent an they are standard MLS forms you probably have a mandatory mediation clause that U can invoke if you want to spend money.. at that point you can have lawyer.. but the closing lawyers what are they going to do about this other than tell you . if you don't like it don't buy it LOL

Another question is if the AVR was calculated correctly then should have x% built in. So in your buildout either concede something to fix the water/roof issue, eat into your profit, or ask for better deal.

I don't really understand how a broker is allowed to represent both sides of a transaction. I feel like there can be a serious conflict of interest especially when it comes to things like this. 

I'm sorry to have this happen to you! Good to know that you have an attorney that is looking out for your best interest. Typically in the normal set up of a deal, you also have a buyer's agent to help fight for your side but it looks like you're doing a great self advocacy job also. 

You certainly  are in a position for renegotiation. The home that is sold to you should be presented in the exact way that you saw it initially. Even if the owners made capital IMPROVEMENTS on the property but it was not requested by you, they're still in the wrong. 

Leverage this position and do not be afraid to walk away because you're in this too "deep". The home is only worth it to you for that price and condition and your attorney is going to protect your deposit. At this point you don't even know what other things they're trying to hide throughout the house that is not as blatant as a leak. Be weary of these dishonest seller and potentially agent. 

@Pratik P. This is not 'technically' dual agency as Dual Agency would be saying that the selling agent already had a relationship with the buyer PRIOR to having the listing and brought them in. In this situation, the selling agent still represents the seller's best interest and is simply acting as a facilitator to the buyer by submitting the offer. 

In most cases, the net number that the seller pockets is the same no matter what because it is already stated in the contract of what is owed to selling agent and buying agent (Listing agent gets both sides in this deal - more $$$$ more him and same $$$ for seller). 

It is definitely a very common misconception and I am glad you asked the question so I can clarify. It is legal by the way - at least in MA where this deal is conducted but prohibited in other states. 

I've been there with a client with a very similar situation, but not a 203k loan. I ended up negotiating a separate escrow agreement with the Seller's attorney in which the Seller fixed the roof and the water damage to the attic to the Buyer's satisfaction (inspected by Buyer's home inspector) and therefore Buyer paid the originally negotiated price - but, my Buyer client was pretty close to walking away.

I framed it quite simply - that Seller had failed to act in good faith in failing to disclose the leak and that Buyer was going to cancel the transaction if Seller did not fix the problem.

Sorry to hear about the issues.

In light of the broker acting in a dual capacity, I am glad to hear that you have an attorney representing your best interests in this transaction.

@Lien Vuong I see, thanks for explaining that. I believe it's allowed here although I wish it wasn't. Buyers will pass on having proper representation just to make the seller's agent happy with more money. When something like this happens, they have to go pay an attorney or someone for help. 

@Jay Hinrichs That has more or less been the case with the closing attorneys.  

I wish I could say that this has progressed some, but we seem to be at a somewhat of a stalemate.  The seller is claiming to never have known of the issue, and that it "must have been the previous tenant."  I am SUPER skeptical of this since there appears to have been some attempts at reflashing that area of the roof; along with the above photo.  They are also saying that they will not pay to have it fixed or do anything towards it, and they have now gone to the house and removed the keys from the lock box.  This just seems like strange behavior to me.  

So, at this point I am not quite sure what is happening.  I still want the property, and this isn't going to kill my profits.  This just leaves me feeling very uneasy as to whatever else could be potentially wrong with the property.

I appreciate everybody's feedback on this!  It has definitely helped me.  This is all a learning process.

@Leroy Wallace Jr : I hate to say it (maybe this is my attorney experience speaking), but I think it comes down to how badly you want the property.

Do you want it badly enough that you'll buy it needing a new roof and possible water damage repair in the attic?

Is it is a good enough deal that it makes the money part of it not a factor?

These are the questions you've got to ask yourself.

Personally, the situation would give me pause and quite possibly make me walk unless I was getting a very good deal.

You are doing this to make profit. If the roof issues remove your profit, walk away and find something else.

But these are personal decisions, they come down to your money and your deal.

Good luck!

This is a good example of why to always get a professional inspection, even if you're buying a property as-is.  You want to know what you're getting yourself into before closing.

I still can't get over the sellers going to that length to hide the problem.

Hopefully you can drop your price quite a bit.  Drop is for the needed roof repair and add an additional Karma charge.  Good luck.  

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@Sean Lambert I did get a professional inspection done, but it was still missed...  I thought I had crossed my Ts and dotted my I's..

@Leroy Wallace Jr It's a latent defect. The seller know about it and took attempts to hide it, knowing you would not find it until after you bought the house. In my opinion they committed fraud.

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