Question:
I want to purchase a home for 79,000 (it's a decent price), but the inspection shows the eltrical is not up to code and will cost about 2000 - 4000 to bring up to code. My agent told me that the seller probably won't pay since the house is a reasonable price; but I told her that others will come across the same things over and over. What is normal; do I ask for cash to have my person do it? or do I allow the home owner a chance to repair it and then have it inspected. How much should I expect without insulting the seller? Thanks!
Answers:
This house will not qualify for financing unless the electrical system passes inspection. The seller is going to have to deal with it one way or another if they want it sold.
The electricla system will have to be updated prior to your loan closing which means that the seller HAS to deal with it or the lender has to agree to an escrow holdback so that you can do it and have it reinspected before they will authorize complete disbursement of the proceeds of sale.
$2,000 - $4,000 is quite a price range to expect the seller to pay for. I would suggest that you word the offer "seller to pay up to $2,500 towards electrical service upgrade" - that way the seller has a top dollar amount that they are going to spend.
The price is reasonable, but everything is subject to negotiation. The seller is going to have to deal with this issue on every offer unless he gets a cash buyer.
There are alot of factors that will complicate this situation, the seller's financial status (motivation to sell) is the big one.
An inspection report, once completed and delivered can not be ignored by a seller or real estate agents. Once this electrical condition has been revealed, it must be disclosed to all future buyers by law. It is a problem with the home to be sure. Who should pay for it? It depends on how the sales price was reached.
If the home appraises for 83,000, then they already lowered the price and are selling "as-is." If the home appraises for 79,000, then the seller better get an electrician over or lower that sales price, or give you a credit for repairs at closing.
Both agents just want the deal to close - period. So, who do you ask? Call the woman or man who did the home inspection and ask them. They see homes in every neighborhood in every condition. Ask this professional if they think that 79,000 is a good value for the home in the current condition.
Another approach would be to look at other homes in the area with the same number of beds/baths and square feet and see if your house is priced 2000-4000 less.
Also, if the lender finds out that there is an electrical deficiency, they may require the work be done before they will lend on the home. Ask your financial source about that.
In the end if this is the home for you, you'll go for it regardless. Just get some information before you decide. Good luck!
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