While no new homeowner wants to be in possession of a money pit, sometimes, the price and location of a home for sale are just too good to pass up.
It’s the buyer’s burden to discover what needs to be done before putting in an offer, to build the renovation costs into their home purchase. This might mean asking a few specific questions, and asking for the answers in writing.
It is the seller’s duty to disclose fully all the home’s needs (new roof; new windows; new weeping tile; updated electrical panel to get rid of existing knob and tube wiring, etc.) and previous troubles (kitchen fire; flood in the basement; tree fell on roof in a storm; insect or rodent infestation; hoarder situation, etc.), so the buyer will have a very good idea what they are dealing with.
Our team at Newbigging-Pearson wants to share one story that illustrates the “money pit” problem. Sadly, the couple in this story did not have an expert real estate team to help them with their purchase; neither did the seller.
Bob and Susan Stewart (names changed) recently purchased a home in the perfect Niagara location. It was wintertime, and the snow lay heavy on the ground. Although their home inspection report didn’t indicate a specific problem, they knew the basement had previously seen water damage from an unknown source.
Expecting they would need to renovate something, Bob and Susan dropped the price on their offer and the sellers signed back … and about a month later, the home was theirs.
Later that first year, the basement became a major problem. A few days of steady rain occurred, and Bob and Susan discovered the foundation had multiple cracks, where water could flow in freely as the ground became saturated.
Serious foundation work was required, since the weeping tile was no longer capable of weeping, and some cracks needed to be repaired. Also, this minor ground water “flood” was not covered by insurance. It was obvious to Bob and Susan that this seepage of water had been happening for years, based on the amount of silt underneath the family room carpet.
The couple had a few options: Go back to the sellers via their lawyer and seek half the funds to repair the basement from them (which might involve waiting for a court date); get a legal representative to mediate a discussion with the sellers regarding sharing repair costs without going to court, or go it alone and just pay for the fix.
After weighing the pros and cons of each option, Bob and Susan decided to go it alone, to save the funds they had set aside for renovations for those renovations, instead of incurring hefty legal fees.
Had the home’s seller disclosed the need for new weeping tile and foundation work, the Stewarts would have had a better idea of the repairs they were facing, and built those specific costs into their offer.
Instead, they were surprised by the damage in the worst way – with a flood that necessitated emptying and demolishing the basement completely. Most of the money the Stewarts saved on the home’s purchase went into fixing the basement. Other renovations had to wait until the family could afford them.
So, let’s talk a bit about disclosure: Disclosure is a seller’s legal obligation to disclose facts about properties for sale. The buyers will need to know material facts about the property; that is, anything that could materially affect the sale price or influence a buyer’s decision to buy it.
A major cause of post-sale disputes and legal difficulties relates to defects and the lack of disclosure. Most disputes can be avoided if proper disclosures are made during the purchase process.
Intentionally withholding information about a property when selling it can have serious legal consequences. If Bob and Susan had pursued their home’s sellers through the courts, a judge might have awarded them half or even full repair costs. The sellers got lucky, since Bob and Susan decided not to seek compensation through the courts.
When you are the seller of a home that falls under the “fixer-upper” category, full disclosure may mean you’ll get a lower sale price than other homes in your neighbourhood. It may also mean a faster sale and closing date, since potential buyers might be planning to renovate first, before moving in. This could work to the seller’s advantage, if indeed they are seeking a quick closing.
One way a seller can disclose issues with the home is to offer potential buyers a recent home inspection report. Having an inspection report done helps the seller’s team market the home as a fixer-upper, attracting potential buyers who are already interested in renovating a property.
Full disclosure may mean the seller loses a little off his or her asking price, but it also means they won’t get taken to court by buyers who were unaware of a home’s defects.
Are you getting ready to sell a fixer-upper? Our Newbigging-Pearson Real Estate Team will guide you through the disclosure process, helping you market your home so the buyer’s questions are fully answered, and there are no “money pit” surprises later on.
We have just one piece of advice: Full disclosure is good for the sale!
To get serious help selling your fixer-upper, call the Newbigging-Pearson office at 289-686-1552, or send us a message HERE, on our website’s contact page.