Buyer’s Reinspection Day Before Sale Closing Can Avert Problems

QUESTION: My wife and I have purchased three homes over the years, so we are not exactly novice home buyers. On our most recent home purchase we asked the listing agent to arrange for us to reinspect the house we were buying one day before we were to sign the papers to complete our purchase. She became very indignant and said it was not customary for buyers to reinspect homes. I said we had reinspected our two previous homes and I must insist we walk through the house we were buying.

Finally, I called her broker who was most pleasant about arranging a reinspection. It turned out the seller had removed several items which we thought were included, such as the dining room chandelier, fancy hall light fixtures, all the kitchen appliances and even the built-in stereo system.

As a result we refused to close the sale until either of these items were replaced or we were compensated. The seller finally agreed to give us an $8,000 credit, which made us very happy. I recall reading something in your column about reinspections. Did we have a legal right to reinspect the house?

ANSWER: I am not aware of any legal right to reinspect a house shortly before the closing date, but home buyers are very wise to insist on doing so. To be technically correct, you should have included a reinspection clause in your home purchase contract.

Before the closing you had all the leverage over the seller. If the sale had closed without your reinspection you would have had virtually zero leverage and might have been forced to sue the seller.

I am shocked that the real estate agent fought you on the reinspection request. Most agents encourage reinspections to avoid difficulties after the sale has closed. You were right. The agent was wrong.

Beware of Home That’s Billed ‘Just Like New’

Q: About five months ago, we bought a house that was advertised “just like new.” It had been very tastefully remodeled. After looking at so many overpriced, run-down houses we were dazzled by the nice remodeling job and by the reasonable price.

The newspaper classified ad said “new copper pipes.” But that was only partially true. After about three months of enjoying our new home, one night we heard water dripping under our bedroom. It turned out the seller had lied to us. The new copper pipes only included about half the house and a galvanized pipe had burst. We had to spend almost $1,700 to replace the rest of the old pipes. Do you think the seller should pay?

A: Yes. Since you have written proof the seller advertised the house for sale “just like new” with “new copper pipes,” the seller and possibly the real estate agent are liable for misrepresentation damages.

Your situation shows why sellers and their realty agents should be especially careful when representing a house to be certain the facts are correct. If they are wrong, the seller and the realty agent are liable for damages.

Buying Home ‘As Is’? Get Cancellation Clause

Q: I have been reading your articles for many months, but have never seen the issue of “as is” home sales discussed.

My wife and I want to buy a larger house. Following your sage advice and wanting to earn some profits, we have been looking at homes for sale that need fixing up. A realty agent phoned us about a larger older home, built around 1930, which needs considerable work. But it is a genuine bargain. It is being sold by an estate that will carry back the mortgage to benefit the four heirs.

However, we are concerned that the property is being sold “as is.” Does that mean something is seriously wrong?

A: Not necessarily. Most probate properties are sold “as is.” Such a sale means the seller and real estate agent make no warranties or representations about the properties.

However, in most states the seller must disclose to the buyer any known defects in the property.

In other words, “as is” means “buyer beware.” Be sure your purchase offer contains a contingency clause allowing you to have a professional inspection of the property and to cancel the sale if the report is not satisfactory. Personally, I’ve bought many properties “as is.”

But I always include a contingency inspection clause when buying because these properties may have serious problems that the seller may not know about. Don’t necessarily discard “as is” properties, just be careful when buying one.

Seller’s Remorse May Require Legal Action

Q: After bitter negotiation, the seller of a beautiful home finally agreed to the terms of our counter to her counteroffer. About two weeks later, the appraiser for our mortgage company called the seller for an appointment to inspect the house but she refused to let him in.

Our agent then phoned the seller’s agent who said the seller has changed her mind about selling and will refund our $20,000 deposit. But we want the house, not our deposit refunded. Do we have to accept this cancellation?

A: No. It sounds like your seller has a serious case of seller’s remorse. Many sellers catch this disease, but a sharp real estate agent can usually cure the disease by re-emphasizing to the seller all the advantages of selling.

Apparently the listing agent has already counseled the seller but without results. Because you really want the house and have a legally binding contract to buy it, your next step is to take legal action by consulting a real estate attorney.

The attorney will probably recommend filing a specific performance lawsuit. This is a request for the court to enforce your purchase contract. Your attorney can then record a lis pendens against the home’s title so any buyer or lender dealing with the property does so subject to the outcome of your lawsuit.

1-Year Home Warranty Has Many Exclusions

Q: We bought our home about eight months ago. Since then we had trouble with roof leaks, foundation subsidence and a sewer line break. But none of these problems were covered by the one-year home warranty policy we received from the seller.

However, the warranty company did replace the water heater, which blew up, although we had to pay a $50 service fee. Do you think we were swindled by the warranty company?

A: No. If you read the fine print in typical one-year home warranty policies given to many home buyers by sellers or realty agents you will find the exclusions are extensive.

The major inclusions are repairs to built-in appliances, wiring, plumbing within the home perimeter (excluding swimming pool and sewer lines) and furnace. Virtually everything else, including most of the repairs you listed, are excluded.

When Should Agent Reduce a Commission?

Q: I own a small apartment building. After consulting several real estate agents, I listed it for sale with an agent who recommended a $560,000 asking price. But she said it would probably sell for $540,000.

I was shocked when, after four months of no offers, she brought me a purchase offer of only $485,000. I made a counteroffer of $540,000 but the buyer said he would stand by his $485,000 offer. Although I feel this is low, I said I would accept if the realty agent would cut her sales commission from 5% to 4%.

This is a cut from $24,250 to $19,000. But she refused, even though there is no other agent involved so my agent would receive the entire commission. As a result, the sale was lost. Do you think the agent should have cut her sales commission?

A: Yes. When an agent obtains a purchase offer substantially below the recommended sales price, cutting the sales commission is not unusual. Part of a sales commission is better than nothing. Your agent got what she deserved.

Selling a Mortgage for the Best Price

Q: About three years ago, we sold our home and carried back a 10-year second mortgage for about $16,000.

The buyers have paid us every month right on time. But we would like to sell this mortgage to raise cash for improvements to our present home. I talked to a real estate agent but she would only offer me $8,500 for my loan. What is the best way to sell a mortgage for the best price?

A: Every town has individuals who will buy discounted mortgages. But finding these people is not easy. One way to find mortgage brokers who buy discounted second mortgages is to look in the telephone Yellow Pages under “real estate loans.” Call to learn how much they will offer you.

Another way is to run a newspaper classified ad under the heading “loans” or a similar category. Run your ad at least 10 days, including two weekends. You will be amazed at the calls you receive from individual buyers and the interesting purchase offers they will make for your discounted mortgage.

Incidentally, when you are ready to make some big profits, investing in discounted mortgages is extremely profitable. Many investors earn yields of 20% or more. Because individual investors want a high yield on their money, you will have to take a discount if you want to sell your carry-back mortgage.

Use Power of Attorney to Ease Sale of Home

Q: I am a real estate agent with a listing on a home owned by four brothers and sisters.

Although one sister seems to be the leader, it is a real problem getting them together when we have a purchase offer. They lost the last offer because one brother was out of town for two weeks and the buyers couldn’t wait for his return, so they bought another house. Do you know any way to solve this problem?

A: Yes. A power of attorney given to the sister means she can sign any necessary papers on behalf of herself and her siblings.

A power of attorney is a simple form, but the signatures must be notarized. Once the sister has power of attorney from her three relatives, then she can act for them. I presume she will phone them to get their agreement before she signs the acceptance of any offer received.

Realtor Says It’s OK to Cancel Listing

Q: As a realtor, I must compliment you on your suggestion that home sellers insist on a clause in their listing allowing cancellation at any time, without cost to the homeowner. Since I started using that idea, I have had no resistance when I ask for six-month listings. Now I have better control over my listings, but I know I must work hard to please the seller or my listing will be canceled. Many thanks.

A: I greatly appreciate your sharing the successful experience with a cancellation clause in your listings.

As you know, I often say real estate agents work hardest, smartest and fastest just before a listing is to expire. That’s why I like 30- or 60-day listings. But many realty agents want 90-day listings or longer. That’s fine if the agent includes a clause allowing the seller to cancel the listing at any time without cause and without cost.

How Can I Get Started in Real Estate Sales?

Q: Please send me information on how I can become a real estate salesperson. I hear the pay is excellent. How can I get started?

A: I hate to deflate your high esteem for real estate salespeople, but their average annual income is around $24,000. That is barely above the poverty level. However, the top-earning real estate salespeople earn $100,000 to $200,000, and often more.

Your earnings in real estate sales are unlimited. How many jobs have that potential?

You can earn as much or as little as you wish, depending on how hard and smart you work. Another advantage is that you are your own boss.

Although you will probably work in a real estate brokerage office with other salespeople, your hours are your own. But you will pay many of your own expenses, such as your car and promotion costs.

Lest you think being a top real estate salesperson is easy, it is hard work. The top salespeople love the business and enjoy working six or seven days a week. To get started in real estate sales, you must take the necessary preparation courses and pass the state license exam.

For details, write to the state real estate commissioner at the state capitol. But your real estate education is not over when you receive your sales license. Real estate is constantly changing, so you must continually take classes to keep up-to-date and to learn new techniques.

If you want to become a real estate salesperson just for the potential high income, please think again. Do you really enjoy sales work? Do you enjoy helping people? Will you enjoy and thrive working irregular hours, including weekends?

Or do you want to work only 9 to 5 on weekdays? If you answered “yes” to all these questions except the last one, you could be ideal for real estate sales. But if you answered “yes” to the last question, please forget about real estate sales.

Next to my job, real estate sales is the best job in the world. Before you give up a good job, please take some real estate classes at a nearby community college in the evenings.

Learn all you can about real estate before making the switch to this exciting field. But be sure you have at least six months income saved because it often takes that long to start earning substantial real estate sales commissions.

Please read an outstanding new book by Danielle Kennedy, “How to List and Sell Real Estate in the ‘90s,” available from local bookstores, before you decide to enter real estate sales.

How to Find Bargain Investment Property

Q: It seems the real estate agents buy up all the good investments. How can I find the bargains before the agents get them?

A: Real estate agents cannot possibly purchase all the bargain properties available. Most realty agents only own their homes and rarely buy any investment properties.

To find the bargain properties, read the newspaper classified want ads every day, phone the agents advertising properties that interest you, subscribe to a local legal newspaper or privately published newsletter that lists probate sales, tax sales, mortgage defaults and foreclosure sales, get to know many real estate agents and constantly remind them of your interest in buying distress properties. And when you spot a “real steal deal” property, buy it fast before another bargain hunter like me acquires it.