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Started By
Message
Buying a House. Inspection shows costly repairs. Concession / Price reduction strategy?
Posted on 9/14/23 at 5:04 pm
Posted on 9/14/23 at 5:04 pm
We just got an inspection and it shows that there may be some foundation issues. I'm having a structural engineer look at it soon to get an estimate. Also, the roof needs to be replaced. Some aluminum wiring will need an update, and lots of little to moderate fixes.
Overall, we are looking at asking for probably $35K-$50K in sale price reduction / concessions.
I'm not looking for advice on whether or not it is worth it to move forward. I'm more looking for advice on how to decide on how much to ask for in concessions vs price reduction? Right now, I am locked in at a 6.75 rate on the loan, with $10K in loan costs. I can go up to $20K in loan costs and get a 5.875 rate if I want.
Given the market and potential for rate reductions (hopefully) in the near future, should I try to get a better rate and have the seller pay for it in concessions, or should I just go for a straight sale price reduction and keep the rate I'm at? Or a combination of both? With rates expected to come down, it seems to me that I should keep my current rate, have the seller pay for my closing costs of $10K, then ask for the remainder in concessions.
Any advice would be greatly appreciated!
Overall, we are looking at asking for probably $35K-$50K in sale price reduction / concessions.
I'm not looking for advice on whether or not it is worth it to move forward. I'm more looking for advice on how to decide on how much to ask for in concessions vs price reduction? Right now, I am locked in at a 6.75 rate on the loan, with $10K in loan costs. I can go up to $20K in loan costs and get a 5.875 rate if I want.
Given the market and potential for rate reductions (hopefully) in the near future, should I try to get a better rate and have the seller pay for it in concessions, or should I just go for a straight sale price reduction and keep the rate I'm at? Or a combination of both? With rates expected to come down, it seems to me that I should keep my current rate, have the seller pay for my closing costs of $10K, then ask for the remainder in concessions.
Any advice would be greatly appreciated!
This post was edited on 9/14/23 at 5:05 pm
13
Posted on 9/14/23 at 5:14 pm to SUB
It depends on how long you want to stay in the house.
Take the money off the principal if you don’t plan to settle there long. A smaller loan is better than a smaller note in the short term. The longer you stay it may be beneficial to buy down the rate more.
For foundation issues I would completely stay away myself but ask for $50K plus and see what happens. Make sure your engineer knows what he is doing or it could cost you way more than that.
Its going to be a lot harder for then to sell now
Take the money off the principal if you don’t plan to settle there long. A smaller loan is better than a smaller note in the short term. The longer you stay it may be beneficial to buy down the rate more.
For foundation issues I would completely stay away myself but ask for $50K plus and see what happens. Make sure your engineer knows what he is doing or it could cost you way more than that.
Its going to be a lot harder for then to sell now
Posted on 9/14/23 at 5:59 pm to SUB
Just curious what came up in inspection that pointed to foundation issues?
Posted on 9/14/23 at 6:37 pm to tigersint
quote:
For foundation issues I would completely stay away myself
Posted on 9/14/23 at 7:19 pm to LAwolf
quote:
Just curious what came up in inspection that pointed to foundation issues?
Slightly Sloped floor in part of the house.
I’m planning on keeping the place for a long time.
This post was edited on 9/14/23 at 7:22 pm
Posted on 9/14/23 at 7:57 pm to SUB
(no message)
This post was edited on 2/1/24 at 7:08 pm
Posted on 9/14/23 at 7:58 pm to SUB
quote:
Slightly Sloped floor in part of the house.
It is noticeable and problematic? If the house is older, whatever settlement that occurred should be played out by now. I’d let it be if it isn’t that noticeable, but no harm in trying to get a price reduction.
Posted on 9/14/23 at 8:07 pm to SUB
I wouldn’t expect rates to come down anytime soon, you think Biden and co care? Rates aren’t high they are closer to historical averages, we just got very lucky with historically very low rates for a long time.
I’d walk away from foundation issues unless this house is dirt cheap or you are a contractor, and I own multiple rental properties I put considerable work to make them C rated at best properties.
I’d walk away from foundation issues unless this house is dirt cheap or you are a contractor, and I own multiple rental properties I put considerable work to make them C rated at best properties.
Posted on 9/14/23 at 8:10 pm to tigersint
quote:^ This
For foundation issues I would completely stay away myself but ask for $50K plus and see what happens. Make sure your engineer knows what he is doing or it could cost you way more than that.
Foundation repair can get expensive quick and make it more difficult for you to sell down the line
Posted on 9/14/23 at 9:06 pm to SUB
How old is the house?
What kind of market (buyer/sellers) are you in?
What type of concession you can gain depends on how motivated the seller is.
What kind of market (buyer/sellers) are you in?
What type of concession you can gain depends on how motivated the seller is.
Posted on 9/15/23 at 7:32 am to SUB
I think in order to give you an accurate answer on which route is better to go, we need to know the purchase price and/or nominal interest+principal payment between the 6.75 and 5.875 rate offerings.
How long will it take to recover the $10k difference in rate buy down is what you're looking for. If it's over 5-8 years, you could take the gamble that in that amount of time, rates will come down at some point and you can refinance. If it's only 3-4 years, the rate buydown may be more beneficial.
As far as the advice you didn't ask for, curious if the house is on a concrete foundation or pier and beam. Sounds like concrete, but if it's pier and beam, the leveling process becomes much easier and less costly. Also, depending on the purchase price, there may be WAY more to negotiate than $50k. Don't ask for simply the estimate amount. You're having to go through a headache to get it back to market value and that comes with a price. I'd almost take the structural engineer's estimate and multiply it by 1.5 or 2 and ask for that. I have a buddy that was flipping houses like crazy between 08 and 20. He said the more jacked up the house is, the better the margins were. He'd buy them dirt cheap and flip them for market value because most people wouldn't want to touch the house. A house you're living in is a bit stickier though.
Are windows sticking or doors not closing properly?
How long will it take to recover the $10k difference in rate buy down is what you're looking for. If it's over 5-8 years, you could take the gamble that in that amount of time, rates will come down at some point and you can refinance. If it's only 3-4 years, the rate buydown may be more beneficial.
As far as the advice you didn't ask for, curious if the house is on a concrete foundation or pier and beam. Sounds like concrete, but if it's pier and beam, the leveling process becomes much easier and less costly. Also, depending on the purchase price, there may be WAY more to negotiate than $50k. Don't ask for simply the estimate amount. You're having to go through a headache to get it back to market value and that comes with a price. I'd almost take the structural engineer's estimate and multiply it by 1.5 or 2 and ask for that. I have a buddy that was flipping houses like crazy between 08 and 20. He said the more jacked up the house is, the better the margins were. He'd buy them dirt cheap and flip them for market value because most people wouldn't want to touch the house. A house you're living in is a bit stickier though.
Are windows sticking or doors not closing properly?
Posted on 9/15/23 at 8:34 am to SUB
I’m an agent and honestly if you were my client I’d likely advise you to just walk away. This house sounds like it will be MUCH more trouble than it’s worth.
A lot of how you proceed will also depend on how much cash you out have on hand to make necessary repairs, because a lot of this doesn’t sound like it can be deferred.
Could always ask for $10k closing, and the seller write you a check at closing for the cost of the repairs (to be taken out of the sale amount).
This I’d very concerned about as not all insurance companies will write a policy for a home with this in it, and if they do it will be more expensive. There are some fixes for it, but you’ll need to consult an electrician/your insurance company to see what the ramifications are on their end.
A lot of how you proceed will also depend on how much cash you out have on hand to make necessary repairs, because a lot of this doesn’t sound like it can be deferred.
Could always ask for $10k closing, and the seller write you a check at closing for the cost of the repairs (to be taken out of the sale amount).
quote:
Some aluminum wiring will need an update,
This I’d very concerned about as not all insurance companies will write a policy for a home with this in it, and if they do it will be more expensive. There are some fixes for it, but you’ll need to consult an electrician/your insurance company to see what the ramifications are on their end.
Posted on 9/15/23 at 8:40 am to SUB
quote:
Slightly Sloped floor in part of the house.
What is “slightly”? Anything over 6” can also be problematic for insurance companies.
Posted on 9/15/23 at 9:08 am to SUB
quote:
Given the market and potential for rate reductions (hopefully) in the near future
Where are you seeing this?
Posted on 9/15/23 at 9:36 am to ItzMe1972
I'm going to answer questions from multiple replies. Thank you all so much for your input!
125 years. It is in a historic area. Given its age, it's not surprising that the house has foundation issues. The inside and outside of the house is in good condition overall though.
Buyers market. It seems like many houses are sitting for a month or longer.
Noticeable? Yes. Problematic? It wouldn't bother me much if I had to live with it.
$434K
Pier and beam with basement
All the windows are sticking. 1 is cracked. I think the doors are ok. It's unclear if the windows are sticking because of the house settling or because they painted all the window sills and frames and the paint dried between the sill and the window.
By "near future", I mean 2024-2025.
quote:
How old is the house?
125 years. It is in a historic area. Given its age, it's not surprising that the house has foundation issues. The inside and outside of the house is in good condition overall though.
quote:
What kind of market (buyer/sellers) are you in?
Buyers market. It seems like many houses are sitting for a month or longer.
quote:
Is [the sloped floor] noticeable and problematic?
Noticeable? Yes. Problematic? It wouldn't bother me much if I had to live with it.
quote:
we need to know the purchase price
$434K
quote:
curious if the house is on a concrete foundation or pier and beam
Pier and beam with basement
quote:
Are windows sticking or doors not closing properly?
All the windows are sticking. 1 is cracked. I think the doors are ok. It's unclear if the windows are sticking because of the house settling or because they painted all the window sills and frames and the paint dried between the sill and the window.
quote:
Where are you seeing [rate reductions in near future]?
By "near future", I mean 2024-2025.
This post was edited on 9/15/23 at 9:38 am
Posted on 9/15/23 at 9:54 am to SUB
(no message)
This post was edited on 1/18/25 at 1:18 pm
Posted on 9/15/23 at 10:10 am to lnomm34
quote:
A 125 year old house is going to be super poorly insulated and expensive to heat/cool.
This sounds like a super fixer upper. You’re in for a LOT of money to make this house modern or efficient. Take it from someone who’s gone down this path.
Kind of doing this now (trying to fix up my mom's house she's giving to me and my brother).
Do not recommend.
Can't wait to live in a modern house where replacing a door doesn't require a carpenter.
Posted on 9/15/23 at 10:21 am to SUB
Why dont you have them pay for a 3/1 buydown so you can be paying at a 3.75 for the first yr
Posted on 9/15/23 at 10:24 am to SlowFlowPro
quote:
Kind of doing this now (trying to fix up my mom's house she's giving to me and my brother).
How old is your mom's house? Any idea how much you'll end up spending to get it up to date?
This post was edited on 9/15/23 at 10:25 am
Posted on 9/15/23 at 11:06 am to SUB
quote:
Slightly Sloped floor in part of the house.
Is this a slab? What area? Here in Metairie it's almost every house. Mine is a little. Structural engineer looked at it and said it likely happened after first building the house. Only reason to fix it is if it bothers us. I can't even notice the problem and it's not worsening. Cost was $80k which would have been pretty much for no reason other then to say it was level.
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