Ask Brian: Home Buyer Beware



Ask Brian is a weekly column by Real Estate Expert Brian Kline. If you have questions on real estate investing, DIY, home buying/selling, or other housing inquiries please email your questions to askbrian@realtybiznews.com.

Question from Sally in WI: Hi Brian. I’m in the market to buy my first house. I’m not sure if it is wise but I’m looking for a “fixer” that would otherwise be out of my price range. Because I’ll be taking on a neglected or damaged home, I’m trying to be extra cautious. I recently heard a story about a “diamond in the rough” with two bedrooms and one bathroom, plus a garage that was converted to a one-bedroom, one-bathroom apartment. The big part of the story was that the garage may not be converted legally. When the new owner started making some cosmetic changes to the garage-apartment, he ran into some serious problems that resulted from the conversion. It seems as if the conversion wasn’t entirely up to code although the property shows in the county assessor’s database as a three-bedroom, two-bathroom. The sales listing had described the garage as converted into a one-bedroom, one-bath, with a large family room and private entry. Now, the new owner is suing the real estate agent and seller for fraud by questioning if the garage was legally converted into a living space because it is not up to code. Obviously, I don’t want to get into this kind of nightmare. What can I do to better protect myself when buying a house that has problems?

Answer: Hello Sally. This is not a favorite subject of mine because I don’t like to be doom and gloom. Your note sounds as if a lawsuit has already been filed. That implies the seller, agent, and buyer don’t agree on the facts. I’m certain there are a lot more details that neither you nor I are aware of. With that said, the sales contract is generally intended to control what both parties agree to, not the listing. But laws vary significantly from state to state. My primary thought is that this situation requires advice from a competent Wisconsin real estate attorney. As a general rule, the obligation is on the buyer to do their due diligence before closing on the purchase of a property.

Sally let’s consider this more from your perspective of wanting to buy a “fixer” that you can make repairs to that will improve the livability and increase the value. Inevitably, you’re going to be looking at older houses that are listed for sale “As-Is.” The first thing you want to do is fully understand the seller disclosure laws that apply to any house that you are looking at. Although the seller lists a house “As-Is,” they still have a legal obligation to disclose all known defects to you. What it is supposed to mean is that the seller doesn’t intend to make any repairs to the known defects. I suggest that you be extra skeptical that all defects have been disclosed. If the seller hasn’t been doing regular maintenance, he/she very likely isn’t aware of all the defects and may not be qualified to recognize all of the defects. It’s going to be up to you, with the help of a professional home inspector, to perform a thorough due diligence. You don’t want to skimp on the inspection. You should be present when it is conducted to have any discrepancies explained to you in detail and so that you can ask detailed questions. It would be best if you have a good understanding about house construction, what can go wrong, and the codes. Don’t hesitate to bring in an expert if a complicated problem is found – like a damaged foundation or damaged roof. Some damage that appears to be minor can become very costly to repair.

Take something as simple as a garage door that has a one-inch gap where the closed door meets the garage floor. The garage door opener still works fine and the seller doesn’t care about the draft that the gap lets in. But you don’t know what the real cause of the gap is. It could be that the door itself is warped that could cost less the $1,000 to repair. It could be that the doorframe is out of alignment and the repair cost will be relatively inexpensive. It could be that the garage floor is sinking or that the roof rafters (where the garage door hangs from) are damaged and the repair costs are going to be much more costly. It could be a combination of all of these or something else entirely. It’s up to you to understand what you are getting into.

There are many reasons why a seller doesn’t want to make the repairs. It could be they just don’t have the money. It could be that an old house needs a remodel and the seller is leaving it to the buyer to do it the way they want the house refinished. It could be that the seller has owned the house for a long time, the value has increased big time, and they don’t care about getting top dollar. Maybe the seller just doesn’t want the hassle of making the repairs or any of a dozen other reasons. Sally, it’s up to you to do your due diligence to figure out what and when you want to make some or all of the needed repairs.

Please add your comments about buying a “fixer” and what buyers should be aware of.

Our weekly Ask Brian column welcomes questions from readers of all experience levels with residential real estate. Please email your questions or inquiries to askbrian@realtybiznews.com.

Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for 12 years. He also draws upon 30 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, near a national and the Pacific Ocean.

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