Homebuyer Tips in a Tight Market

Taking the risk to forego, inspection contingency on an offer is a strategy many buyers are using now, due to low inventory, and more buyers competing for the small amount of listings available.  Because this market is ridiculously competitive, with 20+ offers on many properties, many offers have been written to exclude an inspection contingency and buyers are offering well over list price as well as meeting any appraisal gap.

Typically all offers occur within 48-72 hours once a listing goes active, giving the Buyer very little time to make decisions.  Sometimes the Sellers Disclosure form is only updated to the listing shortly prior to it going active so Buyers have little time to assess a home in advance of writing an offer.

Cash is still king if your offer is high enough, and, you make inspection non-contingent or forego one altogether.  So, how can buyers have some peace of mind regarding the homes they are viewing?

Some buyers have chosen to use an inspector’s walk-through consultation.  Many inspection companies offer them, they typically charge a fee for each home but decrease the cost after the first one as long as homes are close together and driving distances in not an issue.  A walk-through consultation typically lasts 30 minutes, and, the only tool the inspector will bring is a flashlight.

The realtor and clients must be present during this consultation which occurs during their 30 minute showing, and, is typically the maximum amount of time for each consultation.  No report is sent afterward, no photos are taken, but, as much of the home as possible is covered in that 30 minute period.

Items that the consulting inspector will look for include: foundation issues, wet basement, evidence of water in ceiling or under/around baths and kitchens, plumbing, neglected furnace/boiler, electrical hazards, old knob and tube wiring, potential water-intrusion rot near windows/doors, proper drainage – gutters & downspouts, an exterior review, and much more.

It is typically not possible to do a thorough investigation of all components, and, during Winter, the roof may not be visible enough to gauge remaining life expectancy of roof, but, a non-contingent home inspection can be accepted by sellers, offering a more detailed inspection once a Purchase Agreement has been accepted by the seller.

In this fast-moving market, inspectors try to stay flexible to accommodate these showings, although they may not always be able to do so.  Pricing may start at $200 for the first walk-through and might decrease depending on how close the next listings are in the showing tour.  Every company has different rates and you will need to schedule showings in advance.

We try to help our Clients strategize their search in such markets as we are experiencing currently, it is definitely a Sellers Market, so, buyers need to take advantage of any tools available to make this market work for them.

Despite offers of as much as $90,000 over list price, some clients still are losing to offers with no inspection contingency.  So, at some point, it might prove wiser to forego inspection contingency at least until the market shifts or more inventory comes on the market to lessen the amount of competition.

Buyers without deep pockets are being priced out of the market at this time if they don’t have sufficient cash to bring to the closing table, especially if the appraisal comes in low and seller refuses to negotiate price.

Many sellers are asking for confirmation by buyers of their ability to meet an appraisal gap.  Sellers have most of the leverage at this time and they are taking full advantage of this market.


Written by Claire Bastien for www.BuyersRealEstateGroup.com

Helping Buyers Identify Possible Foundation Issues

When viewing properties, the foundation is the key issue to check to ensure that the home is well maintained and unlikely to fail due to structural problems.  If possible, the foundation should be viewed from both the interior and the exterior to assess any potential for necessary repairs.  Foundation repairs can be costly if left unaddressed.

Some homes have critical damage and the repairs could reach tens of thousands of dollars.  Often the exterior of the foundation has been covered by landscaping or other patching that is intended to hide previous repairs from view.  It’s important to keep an eye out for the signs of issues.

When checking the landscaping and foundation of a home, look for whether or not a home has a 10-degree drop away from the foundation in the landscaping to allow for appropriate water runoff and ensure that gutters and appropriate downspouts and drain extensions are directing water away from the foundation.  Water is not the friend of your foundation, and, repeated water damage can seep into the lower level causing degradation to the foundation and potential water-related issues in the basement level such as mold.

Signs of this might include foundation mineral efflorescence on exterior or interior of basement foundation brick, cracking or degradation of brick, and stains from previous water intrusion.  This is easiest to view on an unfinished basement.

If you purchase a home where the landscaping is flat, you may want to improve this by adding soil to create the 10-degree water drop away from foundation, ensure you always have clean gutters and appropriate downspouts and extensions draining water sufficiently far away from the home.  These fixes are cheap in comparison to the bill for foundation repair, so, it’s important to keep those maintained.

You want to avoid diverting your water runoff toward a neighbor’s home and ensure that the runoff is being directed to a garden away from the foundation or to the city clean water sewer.  Some people create water gardens to allow some plants to thrive if you have areas where water typically collects.

Check for potential cracks, either lateral, especially bulges or separations, or step-cracking in the foundation brick or any covering such as stucco or paint on the exterior foundation. On the inside of the home, any hairline cracks should be monitored, you want to make repairs to those if you could slide a credit card or something larger into the crack. If they get larger you should consult an engineer.

Any lateral issues, especially bulging, diagonal or step cracking issues should be examined by a foundation expert, like a structural engineer, to make sure there is no issue acting on the foundation that will degrade further over time.

Because land can move over time, if the foundation is not stable the entire home could see potential for destabilization.  Look for large cracks in the basement floor, garage foundation or floor – as they are typically exposed more than some basement foundations.  A telltale sign of potential issues could be that a former or current owner set up temporary supports in the basement.

Foundation engineering firms and structural engineers should be called in to assess the situation and determine the best fix to stop further progress of the issue and make permanent repairs.  Our brokerage has access to some excellent companies for this.

Waterproofing a foundation is another way to prevent water intrusion and avoid potential issues in future.  You can waterproof both interior and exterior of foundation.

Another issue to watch for, because it can also affect the exterior of the home as well is to keep large trees and bushes from touching the house, both near the foundation and the siding.  At the foundation level, roots can cause actual cracking if pressure on the foundation is not relieved.

Roots of trees and bushes grow toward water and can not only destabilize but also penetrate foundations.  You may need to remove or move trees or bushes to ensure your foundation is safe from this issue.  The best time to remove trees is in Winter when they are dormant.  A good arborist would be able to tell you if this is potentially necessary.

Make sure that sidewalks, landscaping and patios, that butt up against the foundation, are tilted or pitched away from the foundation so that 10-degree runoff is working to keep your foundation free of water intrusion.

Unfinished basements will reveal any potential issues, and, many water intrusion problems can often be solved just by ensuring you have clean gutters with appropriate downspouts and leader extensions to funnel water away correctly. Also, it is a good idea to cover the window box to a foundation with a plastic cover to keep rain and snow from accumulating there.

You can easily find any cracks or water intrusion or evidence of past water intrusion unless the basement is finished off.  If that is the case, look for rust colored water stains as evidence of previous or current moisture issues.  These rust-colored stains typically will show through painted walls or ceilings.

As you view the property, if you notice unusual structural offsetting, such as windows and doors that appear to be crooked, or floors that pitch down and are no longer level, that could also be a sign of structural issues, potentially brought on by failure of the foundation.  A structural engineer is your best bet to discover what the issue is, whether it’s typical settling or something else, and, how to correct it.

Keeping your eyes open when viewing homes will help you assess whether or not a home is a good investment, and, let you know if a seller is caring for the home or if it is being neglected.

Written by Claire Bastien for www.FindYourMinnesotaHome.com

What Clients Find Out During a Home Inspection

Buyers have an opportunity to inspect their home right after their offer is accepted, and during that short inspection period, Buyers can get an idea of whether or not the seller maintained the home well. The best home inspectors review the entire property, commenting on and photographing all exterior and interior issues starting with the roof, gutters, downspouts, chimney, siding and the exterior grading of the property. Also, any concerns on the driveway, sidewalks and condition of landscaping will be covered, pointing out any flaws or needed repairs or updates.

In a seller’s market, especially where multiple offers are present, contingent inspections are less likely to be considered by sellers, however, offers made with a non-contingent inspection do get consideration, and, sellers appear to be willing to make some repairs in some cases. In multiple offers, where my clients have paid well over list price, with a non-contingent inspection, the sellers did agree to make some repairs.

In a market where neither Buyer or Seller dominates, or, in a true Buyers’ market, where Buyers have stronger negotiating power, sellers may be more willing to give back funds to the buyer in lieu of doing repairs. Alternatively, if there is time, and you can get some estimates, it pays to find out what the work will cost to complete, and get an escrow set up by the lender or title company to pay contractors after closing, especially if repairs cannot be completed by the time you close.

One of my 2020 clients received a name brand new window and some extensive exterior stucco repairs, amounting to $25,000, paid for by the seller after closing. An escrow fund was created for one and a half times the amount of the anticipated repairs, and the funds were held in escrow by the lender until the work was satisfactorily completed. Only when the Buyer was satisfied was the contractor paid and Seller reimbursed the unused portion of their funds from the escrow.

Sellers sometimes look at repairs needed, such as chimney, roof, siding, etc., and have taken the cost of that into consideration by listing their property at a lower price point than like-kind housing. Even in this low inventory market, however, buyers are often overpaying for a property in need of expensive repairs, and, they get no real price break for the repairs because of non-contingent offers. Unless buyers have big cash reserves, I encourage my clients to pass on these types of properties and to be careful when writing non-contingent offers. Don’t overpay unless you can afford it.

Especially for first-time buyers, it’s very important to consider your cash flow and reserves in those situations. You don’t want to have to spend all your cash reserves doing the sellers’ deferred maintenance. You might need that money for other things, as, often furnishings you own no longer work in the new spaces and you have other new expenses.

On the interior, the ceilings and walls are inspected for cracks that might be more than naturally occurring hairline cracks which happen with settling over time. If windows and doors are not level, that could be an indicator of potential structural issues. When a home inspector finds issues that indicate settling, and you want to get to the source of this issue, the basement foundation and structural supports are to be inspected for issues.

Because many homes in the twin cities can be up to or over 100 years old, checking for structural foundation issues, temporary structural supports or repairs to the foundation is important, provided the basement walls haven’t been finished, which would hide any potential issues. Non-level flooring, crooked doorways and window frames could be evidence of unrepaired structural issues, allowing the home to settle inappropriately. Hiring a structural engineer to examine the home for structural issues is smart if you are still considering buying the home, or, if you wish to add onto the structure, and need to know if it will bear the additional weight.

This structural inspection can cost up to or over $500, depending on how extensive a report is needed, but, if the Buyer intends to purchase, it is worth the additional expense to discover if the house needs costly repairs or not. Better safe than sorry.

A client spent funds on a structural report to find out if building a second floor onto a garage was possible, and to verify that a structure was stable. Another Buyer was purchasing on a creek, and, as the house was on an elevation, and showing a fracture in the basement flooring, the stability was in question. A structural engineer confirmed the crack in flooring was a torsion stress fracture from a 1964 tornado and not a structural flaw.

No home inspector can see through walls to check the condition of the plumbing and wiring. A visual inspection will show if all sinks and drains are leak proof or not. All outlets should be checked for reverse polarity issues and point out whether some outlets are updated to GFCI or ‘ground fault interrupter circuits’ allowing the breaker to trip if the circuit is overloaded. Since these need to be installed within 6 feet of water, they should be installed in the kitchen, bathrooms, laundry and sometimes in the garage as well. An efficient inspector will check every outlet in the house and let you know if there are any issues.

Attics often can show signs of past or current issues, like moisture problems, bathroom vents not connected to the roof when roofs were redone, snow or rain water leakage, condensation issues, or pest intrusion as well as low insulation levels. It will be smart of the Buyer to get an accurate idea of what corrections might need to be done in the attic. Best case scenario you do nothing, or can add some more insulation. Worst case the attic is improperly vented or you have pest intrusion or insufficient insulation.

It is best to know what is going on though and get any potential issues fixed.

Buyers want to know the age and life expectancy of their HVAC and water heater. How old is the system, how much potential useful life does it have? Any Buyer would love to have new HVAC and water heater and new roof in their home, saving the cost of replacing those bigger ticket items for years to come, however, you will compete in multiple offers with other Buyers for homes that have those updates.

One client was told during inspection that the furnace was not working properly and might need replacement, so asked the seller to provide a furnace repair. Initially, a contractor told seller he’d need to replace the furnace, however, a subsequent estimate from another contractor found the repair was possible and would cost one third of replacing the furnace. Of course, the seller opted for the repair, and, the Buyer had to be happy with that instead. So, although the outcome is that the furnace worked at closing, there is no guarantee of how long it will keep working, and, it is wise to save some funds in case old systems stop working after you own the property. Also, be sure the furnace filters are changed regularly, sometimes that has been the only reason a furnace was cycling on and off a lot, and, changing the filter out made all the difference.

Another Client had the water heater fail a month after they purchased. However, the seller had purchased a home warranty for the buyers, so, for $150 in fees, they received a new water heater. The Buyers saved the $1200-$1600 price they might otherwise have had to pay.

Having a sewer line camera is also essential, unless the home is relatively new. Older sewer lines can be clogged by tree roots which can cause sewer backups. If there are other issues, like breaks or drop offs, a sewer camera will point them out. It is worth the expense to ensure the sewer is functioning well and needs no repairs.

One of my clients found their home had no internal access to the sewer line, so, the seller had to establish one, and in performing the sewer camera it was shown that the sewer line was not connected to the city sewer line. This repair needed to be done in Winter and cost over $10,000 in total repairs, however, the expense was on the seller side.

Some cities require sellers to ensure the sewer line is clear and in good condition, and, in those cities some sellers like to pay the buyers closing costs in lieu of doing those repairs, if the city doesn’t mandate that the seller must perform that fix. Many sellers have paid via escrow for the sewer repairs and buyers scheduled the work once they moved in with no additional expense.

Radon gas inspections are also very common, Radon being a colorless odorless gas which causes lung cancer. Radon remediation is recommended if the gas levels exceed 4 pci/l and this must be tested in a 48hr test if you are going to complete it during inspection. There are other tests which last longer and you can get them from the EPA, State of Minnesota Health Department or purchase at some hardware stores, but, those take longer to get results. During inspection you don’t have the luxury of time.

High Radon in the home above 4pci/l is a Material Fact to be disclosed, and, can be a negotiation point with the seller, since they would have to share with subsequent buyers if the current buyer backed out of the sale. Most sellers would likely wish to cover the cost of remediation, if there are no other issues coming from inspection, or possibly at least contribute something to buyer’s closing costs.

The home inspection is where the buyer learns as much as possible about what is happening at the property and everything taken altogether will let you know how well a seller has kept up the home maintenance as well as what you will need to do when you are the homeowner. Smaller items or issues you wish to control can be done once you move in, and the report can be a future resource reminding you to do regular maintenance annually.

The home inspector I currently use also provides a comprehensive report with photos and a home maintenance workbook with explanations of all the home systems. It is a great way to get to know your new home better before you buy, and information in the report is a great tool to help sellers understand needed repairs during the negotiation period.

Written By Claire Bastien for FindYourMinnesotaHome.com