Ask Judy O.: How do we negotiate for repairs?

Dear Judy O.: Some first-time home-buyers of mine in escrow asked -  How should we handle negotiating a credit for repairs?

Answer: I know that you are looking at a lot of out-of-pocket costs after your purchase to bring this property to where you want it to be. We have discussed this a number of different ways during the past few weeks–if not month. In the bigger picture though, if you did put $30,000 into this property – adding that to the purchase price – you would own a home at $545,000 with an amazing number of pluses you could not find at this price. After more than a year of looking, I think you know: A 3 bedroom 2 bath home with usable attic space, sitting on a 12,000+ sf lot with views, down a semi-private road in a great location is not going to be found for less than $550,000.

My point of reference with respect to inspections and credits is generally this: Anything the parties negotiate as a credit is really “good faith” money. It is not meant to be a dollar-for-dollar compensation for repairs that the buyer intends to make. The buyer can always cancel the transaction if they feel the value is not there or if they feel these costs are beyond their comfort level. That’s why there is an inspection contingency. I think you need to feel that the value is in your location. If you don’t, then I suggest you cancel this escrow and look for something newer and one without so many repairs.

If you have a question, you can even use “snail mail” me.  My office address is 1714 Hillhurst Avenue, Los Angeles, CA 90027.

Ask Judy O.: Did we buy the right house?

Dear Judy O.:  Can you take us off your mailing list for new listings?  It’s funny, my husband and I both find that our blood pressure rises a bit when we see them. His because he’s so happy in this house and doesn’t want to relive the house hunting experience… and mine because, happy though I am here, I live in fear that something in our former neighborhood is going to come up.

That said, we do absolutely love our new place. And we feel like we got a great deal. The house two doors down that was just ‘flipped’ (smaller and with some rather boring choices) is now in escrow and the seller told us he had two offers that were 50k more than our house!

Answer: Yes, of course I’ll take you off our mailing list.  I fully understand.  I hope you aren’t harboring regrets about the house you wrote an offer on and didn’t get.  In the larger picture, you made the better choice… and in the long run I sense you’ll fully embrace the move to your new neighborhood, because it’s so wonderful there.  Additionally, when the home down the street closes escrow you will have increased the ‘equity’ in your own property by $50K – with only a few short months of ownership. Pretty awesome in my book!

Ask Judy O.: Will a bank-owned seller give credits?

Dear Judy O: Should we even bother asking for credits on the bank-owned house we are buying because we heard banks don’t give credits ? The house is old and the garage is pretty rotten, windows painted shut and bad drainage in the back.

Answer:  I think that you until you go through the process of having your own inspections and subsequently approaching the bank for credits, there is no way to know what the bank is going to do in advance.

Unfortunately, when you buy an old house, there are always going to be things to address.  It’s important to distinguish between the things that are desired by you versus those that are actually critical.  There are “upgrades” and there are “necessities”.

With respect to old detached garages and their condition or ability to house a modern car:  I typically tell clients that old garages like this are a “gift with purchase.”  They’re rarely in good shape and really are a bonus if you can get some use out of them structurally.  You likely have a driveway which gives you off-street parking, which is a good thing.

With regard to the windows, I think that in the space of a day you can probably get a handyman to at least chip away at the old paint and get them to open.  New sash cords and making the windows operable may be a wish list item and something you may need to save for.

Regarding drainage issues:  Historically, most homeowners never paid much attention to drainage and runoff until recent years.  But, as homes keep getting older, technologies have improved and access to hands-on ways of dealing with potential problems became more available to the homeowner.  There are ways to deal with drainage that are not expensive.  In a transaction, issues relating to drainage or cracked/failed retaining walls that don’t impact on the house itself are in the realm of  an “upgrade” or improvement to a property.  A seller rarely will pay for this type of request.

If this were an investment property that someone bought for its current price and upgraded, would it be worth approximately 25% more in today’s market?  If you use this formula you can determine if  there’s already equity in the house at its sale price.  But you’re the ones that will ultimately be the arbiter of its value.  I always say, it never hurts to ask for credits, but especially with a bank owned, don’t expect too much -  if anything.

Have a burning Real Estate Question?  Please send your questions to Ask Judy O.