Hello there! Welcome to the fifth installment of my blog series, ‘Diary of a First Time Homebuyer’. In this series, I am documenting my journey as my husband and I purchase our first home. For those of you just tuning in, you can click on the link above, or search in the drop menu in the sidebar for the category and catch up.
Today I am going get into what happened after the inspections on the house were complete.
Thursday, the inspectors came in and gave the house a thorough going over. The inspections performed were a Whole House inspection, a Sewer System inspection, Termite inspection and finally, a Radon inspection. These are common inspections that must be done on any home in conjunction with an appraisal before a lending institution will sign off on a mortgage loan. The payment for these inspections is the responsibility of the buyer, as I mentioned in a past post, and the cost of these came out of our pocket to the tune of around $750.
How this goes is, the inspectors come in, do their thing, and then, if there are issues, we go back to the table with the seller, and ask for what we want to be fixed before we buy the property. As long as an agreement can be reached, we can move forward. Here is where it gets tricky. On one hand, fixes are expensive, and in some cases, problems can make the property appraise for less than what the seller is asking for it. Banks will not loan more than the house appraises for on a Mortgage, so unless a buyer has a lot of extra capital to throw down on their home, the seller really needs to fix these things before they will be able to sell. Either that or come down a lot on their asking price.
Really at this point though, it’s a negotiation game. If both parties cannot come to an agreement, then the whole contract can fall through, and as buyers, we would be back at square one.
In total there were 98 issues on the inspector’s report. Yeah, it shocked me too. When I heard that number, my heart sank. That seemed like such a high number and I immediately assumed the worst and readied myself to start looking at houses again.
It wasn’t until everything was explained to me that I learned that most of these are small, inconsequential things. Things EVERY home is going to have. For instance. The deck was a DIY project by the owner. As such, there are some flaws that wouldn’t be present had it been done by a professional contractor, but overall, the job is solid and safe and doesn’t violate any code law, so it can be left as is, as long as we are happy with it, and we are. It was actually one of the things that sold us on the house. There is some sort of issue with the dryer hookup in the utility room. It’s a $20 fix. The list goes on and on. One small or long term future issue after another. Out of all 98 issues on the list, there are only 2 major things that we need to bring to the seller.
The sewer pipe is still the old clay pipes that preceded the sewer upgrades throughout the city. In addition to this, there are some cracks in said pipe. The inspector said at some point this pipe WILL collapse, and its only a matter of time. It could happen years from now or next week. So that has to be fixed. The other thing is there is some rot on a portion of the siding that we missed when we initially looked at the house. This could make the house appraise below the asking price, along with the sewer pipe, so these things need to be addressed before we continue. If the seller agrees to fix these issues, then we should have no problems, but if he doesn’t, in addition to the major expense to us to fix these things, it is a very good possibility that we wouldn’t be able to get our loan for the amount we would need to buy the house.
Now it’s a waiting game. Our realtor needs to put the issues to the seller’s agent and after the seller is made aware of the situation, he will need to decide if he is willing to make the repairs to the home in order to get the price we have agreed to in the initial contract. In reality, he has two options, he can fix these and take the money agreed upon, or he can reduce his asking price to accommodate the fixes.
The difference between those two options for us is huge. If he fixes the issues, we can move forward, but it will likely push back our closing date, as it is winter here in Missouri, and some of this likely cannot be done until the snow melts. I’m ok with this though because this means we still get our house. If he opts to lower his asking price though, that gets tricky for us. Yes, we, in theory, could still get our mortgage, and buy the house, but, these problems would still exist, and without any current equity and little other assets or freed up capital, we would not be able to make these fixes in a timely manner on our own. It would probably mean that we would need to go back to the drawing board and look for a new house. Starting this whole process over again from the beginning.
We will see what way the wind takes us I guess. Send your positive energies, we are going to need it!
Thanks for reading, and as always, I would love to hear about your home buying adventures and advice in the comments!