by Dian Hymer, Inman News
In a perfect world, houses wouldn’t deteriorate over time. In reality, the wear begins as soon as a house is built. Older houses tend to have more maintenance issues. But, even new homes can develop problems within a few years if they were poorly constructed.
Most homes are inspected for damage caused by wood pests — such as dry rot, termites, fungus, decay and wood-boring beetles — before they are sold. Who pays to correct the damage — buyer or seller — is often subject to negotiation.
In a hot seller’s market with a high percentage of multiple offers, buyers frequently buy “as is” regarding known defects to better their chances. This was common several years ago when home prices were rising rapidly. At that time, owning a home was more important than the condition of the property.
One problem with buying “as is” with respect to pest work is that it’s easy to overlook the fact that the work needs to be done. Many buyers who bought “as is” in recent years have not taken care of the pest repairs.
These buyers who are trying to sell in today’s market may find they have less equity than they thought they had. Not only have home prices declined in many areas recently, but today’s home buyers are unlikely to buy “as is” regarding a large pest bill that was passed on from the previous owner.
HOUSE HUNTING TIP: In soft markets, buyers are more prone to factor in the cost of curing deferred maintenance into their price. Ideally, sellers should have pest work done before they put their homes on the market. This removes the need for negotiation over pest repairs. Plus, the houses in the best condition that are priced right for the market are the ones that sell.
It’s not always possible for sellers to have pest work done before marketing their homes, either due to shortage of time or funds. In this case, make sure that you have presale inspection reports done before you market the property and price it to take into account the cost of the repair work.
Also, you should make every effort to have the house looking as good as possible. In a soft market, sellers have a lot of competition from other sellers. Even if you can’t replace a shower or a rotted mudsill before you market the property, at least have it showing at its best. This will get buyers interested in the property, particularly if the list price reflects the work that needs to be done.
There is nothing wrong with buying a property in its “as is” condition as long as you have complete knowledge of the work that needs to be done. But, it is essential that you factor in the cost of the necessary work and ongoing maintenance. Many buyers overlook this and later discover that they can’t afford to continue to own their home.
It’s rare that every item on a pest report needs to be done immediately. But, at some point the deferred maintenance needs to be corrected.
Ask your inspector to prioritize the items on the report in terms of urgency level. A deck that’s rotted to the point that it’s unsafe should be replaced as soon as possible. However, if the bathroom floor needs replacing, but poses no danger, you might want to hold off having this work done until you remodel the entire bathroom, if that is in your game plan.
THE CLOSING: In fact, in this case, replacing the floor would be a waste of money.
Dian Hymer is author of “House Hunting, The Take-Along Workbook for Home Buyers” and “Starting Out, The Complete Home Buyer’s Guide,” Chronicle Books.
What’s your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story. Copyright 2008 Dian Hymer
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