The paper said “Cute Starter Home — Needs a Little TLC”.                                                                            

So, what does a little TLC mean? Usually this means the home needs work, many times a lot of work. Unless your a do-it-yourselfer, you might want to steer clear of these homes; however, if your handy and up for the challenge you might save a lot of money on a home like this.

It is absolutely imperative that you get, in writing, a list of all of the defects the seller knows about. Give this list to the home inspection service you use so they can verify and add to it.  Most home inspection services will tell you what’s wrong, how it can be fixed, and the severity. This isn’t part of the appraisal, it is a separate detail; a home inspection will ensure the overall health of the house that you are about to buy.  

If the problems found are minor, such as the carpet is worn or the house is in need of paint, most likely this will not cause the deal to fall threw. Many times it will just give the buyers more room to negotiate. Unless you’ve done this before, you may find a good agent is invaluable in negotiating for you.   If you want the house painted and the shower head fixed, and it’s in the contract, the seller must perform. If the roof needs repair and you want it fixed, spell it out in the contract. The appraisal may then stipulate that the value is based upon the roof being repaired. This may lead to your lender requiring these repairs are complete before you close, after all, you and the seller agreed upon this repair.

But what if the seller doesn’t agree, the home is “as is” or they want to wait until after the closing?  Let’s say you want new carpet throughout the house and while the seller agrees, he does not have the money to replace the carpet before the deal closes. The seller is also concerned should he replace the carpet the buyers may not qualify for the mortgage. Often at this stage a “seller concession” is made. Using the example above, instead of installing new carpet the seller agrees to a $3,000 carpeting allowance to be settled at closing. No new carpet, just $3,000 to the buyer to go and buy new carpet from the seller’s funds. Makes sense, right? Wrong, the lender will not allow the seller to hand over cash at closing. Paying $3,000 in buyer closing costs is fine, lowering the asking price by $3,000, or installing the new carpet before closing are all fine; however the buyer and seller cannot exchange cash; even if they had agreed to it in writing or in the sales contract. 

Buying a fixer-upper can be a rewarding experience: however, I would advise anyone who is thinking of buying a foreclosure or a home that needs a little “TLC” to hire a real estate agent who can help steer you in the right direction and help construct a sales contract that will cover these issues. If you are not serious and educate yourself about the process you may get burned.

This entry was posted on Monday, August 23rd, 2010 at 4:41 pm and is filed under localnews, plymouth. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.