Today, I just wanted to share the story of a recent closing that I was honored to be a part of. My client was a lady who had inherited a home that she knew very little about. In fact, once we got inside the property and started looking at things, it quickly became evident that she knew even less about the home than she thought she did. For instance, the property had a concrete tile roof that was leaking. According to roofing industry experts, concrete tile roofs are designed to last for around 100 years. The subject property was only around 50 years old and was already leaking badly. Obviously, since the roof had been put on five decades ago, we had no way of knowing if the materials used were faulty or if the installation process wasn’t handled right. Ultimately, none of that mattered. We reached out to a local roofer and got an estimate on the cost of replacing the roof, which was obviously going to need to be done.
In addition to checking on the roof, I helped the client through the process of making some upgrades to the property. We painted the inside of the home and installed some luxury vinyl plank flooring to bring the property up to date. I suggested the upgrades, and the seller quickly agreed that we needed to make some improvements to the property. Investing in a property before selling often seems counterintuitive, but it can have a major impact on the process of selling a home. When potential buyers look at pictures online or come to check out a property, they will immediately notice things like the paint on the walls or the quality of the floors.
However, the client started getting nervous when I made some other suggestions. We had put the plan in place to sell the property as-is. In the state of California, that means that buyers would be allowed to ask for concessions, but the seller is not required to give any concessions. During an as-is sale, the buyers can have their own inspections performed, and depending on the results of those inspections, the buyer can either try to negotiate some concessions or decide to walk away from the transaction completely.
The termite inspection revealed multiple issues, including significant termite damage. In addition to the damage caused by the termites over the years, the inspection also revealed that there were significant rotting issues in the subfloors of the home. Unfortunately, the subfloor rot wasn’t confined to a single area. The inspection revealed major rotting around the kitchen sink, the sink in the guest bathroom, and the shower in the master bathroom. Obviously, there had been some longstanding plumbing issues in the property which had resulted in the subfloors suffering immense damage.
The cost of replacing subfloors throughout a home the size of the subject property was astronomical. Instead, we brought in a contractor to brace the subfloors and help reinforce the structure of the home. However, we made sure to include all the findings on the seller’s disclosure form. Not only is disclosing all known defects the legal and ethical thing to do, it’s also been my experience that doing so makes the buyer much more likely to continue with their plans to purchase the property.
How Did the Story End?
The disclosure forms for this property certainly weren’t pretty. Not only did we attach the findings from the inspector who discovered the termites, but we also provided written proof of the rotting that had impacted the subfloors, as well as the fact that the contractor we hired had simply braced the damaged areas. Moreover, we provided written proof of the roof leak and the written estimate provided by the roofer.
The seller was apprehensive, but she did trust me. Soon, her trust paid off. Within 8 days of officially listing the property after the upgrades and inspections were completed, we received three offers on the property, and my client wound up accepting one that was $30,000 higher than the asking price!
The Moral of the Story
Obviously, no two real estate transactions are exactly the same. However, the lessons that this story taught can certainly apply to any other transaction.
First of all, it proves the importance of the seller paying for some inspections on the frontend of the transaction. When you’re selling a home and you have some inspections performed, it puts you in more control of the situation. When your inspections reveal issues with a property that you’re selling as-is, the buyer doesn’t have any real reason to try to negotiate the repairs with you. Instead, you can point to the paperwork because they knew about the issues before they ever made an offer on the property.
This story also proves that properties do not have to be in mint condition to get a great, competitive offer, especially in the Bay Area. When people make an offer on an older home, they assume that there is going to be some issues. While you should certainly invest in the property before selling, don’t assume that everything has to be pristine to get a great offer.
Finally, this story proves the importance of disclosing defects as soon as possible. Upon our first look at the property, we immediately knew that we either needed to fix the roof or disclose the leak. Since the property was sold during California’s rainy season, we opted for disclosure. It paid off, as the offers came in, and my client wasn’t responsible for any of the costs associated with repairing the issues.