Protect yourself when buying home 'as is'

Bob Bruss says: Don't be afraid of contingencies

Whether you are a home buyer or seller during the peak 2007 spring home sales season of April through June, you will probably encounter the term "as-is" sale. Just as used-car dealers sell thousands of automobiles "as is" without any warranty or representations, houses and condominiums are sold using the same term.

But an "as is" home sale is different. Thanks to state laws and court decisions, a real estate "as is" sale is far more complicated than the sale of an "as is" used car.

An automobile "as is" sale means "buyer beware." However, the best way to describe a real estate "as is" sale means "trust, but verify," as the late President Reagan said many times when referring to political situations.

WHAT IS AN "AS IS" HOME SALE? Simply stated, an "as is" home sale means the seller must disclose to the buyer all known defects, but the seller will not pay for any repairs.

Does an "as is" home sale mean the seller doesn't have to disclose known defects and can conceal them, as the seller of a used car might do? The answer is "definitely not."

Although two or three states still seem to follow the old common-law rule of "caveat emptor" (let the buyer beware), the modern law today in most states has evolved to "Let the home seller beware of the buyer and the buyer's lawyer."

In other words, even "as is" home sellers must reveal to the buyer all material defects of which they are aware. But "as is" sellers do not have to make any warranties or representations, and need not pay for any repairs to correct material defects.

WHY MANY HOMES ARE SOLD "AS IS." The reason many older homes are sold "as is" is because the seller doesn't want to pay for any repairs.

For example, if I were selling my house "as is" today, I would have to disclose the wood garage door is slightly warped and doesn't close tightly. As an astute buyer, you would surely observe this 1-inch gap at one corner. But the automatic door opener functions well and does its job. I would leave it up to the buyer to decide if he or she wants to install an expensive new garage door, but I'm not going to waste money repairing or replacing the still-good existing door.

There are at least four major reasons some home sellers want to sell "as is": (1) the seller doesn't have the money to correct the disclosed defects and prefers to let the buyer fix the problems; (2) the buyer is likely to renovate an older "fix up" house so the seller would be wasting money on minor repairs; (3) the seller has owned the house many years and doesn't insist on earning top dollar; and (4) the seller doesn't want the hassle and inconvenience of fixing the problem.

Possible additional reasons for "as is" home sales include the seller (1) recently acquired the residence by inheritance or purchase and is reselling for a quick profit; (2) hasn't lived in the property and is not aware of its problems; and (3) doesn't want any responsibility for fixing problems that might occur after the sale closes.

HOME WARRANTY POLICIES OFFER LITTLE PROTECTION. When purchasing an "as is" house, buyers should not be lulled into a sense of security if the seller offers a one-year home warranty policy as a sales incentive. Such policies have many exclusions and offer little real protection against serious home defects.

Home warranty companies are "pros" at using the pre-existing-condition exclusion. Although they are eager to accept the seller's or realty agent's policy cost of $400 or more, these companies are notorious for refusing to repair or replace items by claiming the defect existed at the time of the home sale but was not yet manifest. Buyers who collect anything from a home warranty company should consider themselves very fortunate.

HOW "AS IS" HOME BUYERS CAN PROTECT THEMSELVES. Knowing the key reasons many home sellers elect to sell "as is," home buyers can benefit from such sales if they know how to protect themselves. Rather than reject such a home sale, usually advertised "as is" in the local MLS (multiple listing service), savvy buyers welcome such profit opportunities.

The best way for a buyer to protect against an unscrupulous seller who "forgot" to disclose a serious but known home defect is for the buyer to include a professional inspection contingency clause in the purchase offer.

Buyers of every house and condominium should include such an inspection clause making the purchase offer contingent on the buyer's approval of their professional home inspector's report. That means, after the home seller accepts the buyer's purchase offer, the buyer hires a professional inspector and then approves or disapproves their written report.

Home buyers should be wary of inspectors recommended by the real estate agent. Such an inspector might be known as "easy" and not a "deal killer." Ask such inspectors recommended by a realty agent about their experience, background and professional memberships.

An excellent credential is an experienced independent inspector who belongs to one of the professional home inspections organizations. Personally, I recommend members of the American Society of Home Inspectors (ASHI) because of their tough membership requirements. Local ASHI members can be found at http://www.ashi.com/ or 1-800-743-ASHI.

WHEN "AS IS" MEANS A BARGAIN PURCHASE. As explained, there are many legitimate reasons for selling a house or condo "as is" after all known defects are disclosed so the buyer can consider them when making a purchase offer.

Many home sellers are not fully aware of their home's defects. For example, years ago I bought a run-down, fixer-upper, "as is" house that obviously needed work. It had been listed for sale at least six months. The seller was an estate. Noticing many defects, I made a very "lowball" purchase offer, thinking it would be rejected. To my shock, it was accepted.

But my offer included a professional inspection contingency clause. I accompanied my professional inspector, as home buyers should always do. He discovered several problems of which I was not aware. We discussed them and he estimated the approximate repair costs (ethical home inspectors are not in the repair business but they usually know if a problem is expensive or inexpensive to fix).

When I received the complete written inspection report a few days later, I showed it to the listing agent. He asked me point blank "OK. How much of a repair credit do you want?" Based on my inspector's very rough estimate, I said $25,000. Later that day, the estate representative agreed to a $25,000 repair credit, which more than covered my fix-up costs.

"AS IS" HOME-BUYER ALTERNATIVES. Even when buying an "as is" home where the seller fully discloses all known defects, as in my home purchase explained above, a professional inspector will often discover unexpected serious defects. When that happens, the buyer has several alternatives.

One is to cancel the purchase and obtain an immediate full refund of the buyer's good faith deposit. But a better alternative is to use the professional home inspector's written report to re-open negotiations to obtain a repair credit for the estimated cost of correcting the unexpected problems.

Especially in a slow "buyer's market," many home sellers are so glad to receive any purchase offer they will gladly agree to credit the buyer with the estimated repair cost.
A repair credit is usually better than a price reduction because the mortgage amount is usually not affected. Another advantage of a repair credit is the buyer can shop around after the sale closes and often reduce the actual repair cost.

SUMMARY: Just because a house or condo is offered for sale "as is" does not mean it should automatically be rejected. But buyers should be very cautious of "as is" sales, realizing the seller might not have disclosed all known defects.

However, savvy buyers insist on a written disclosure of all known defects and a purchase offer contingency clause for the buyer's approval of a professional home inspector's written report. For more details on "as is" home sales, please contact a local real estate attorney.

Read more Bob Bruss Inman News at Citywide Services

:: Barrie Town Houses - A good first step ::

It makes good financial sense for first time buyers to consider a town home as the first home they own.

As average home prices in Ontario increase the percentage of first time home buyers who financially qualify to purchase a detached home in good liveable condition decreases leaving townhouses and condos as the feasible option for those who want to enter into home ownership.

On the plus side, a townhouse typically requires less maintenance cost and effort, less energy to run and taxes take a smaller chunk out of the wallet than a detached home of equal square footage. Be prepared to lay out a minimum of $50,000 more for a detached home as well.

Homes above the $300,000 mark in the current Barrie market are taking longer to sell and owners are experiencing a growing discrepancy between list price, and the eventual sale price. Townhouses on the other hand are continuing to increase in value and in demand.

Town home values should continue along this trend for some time and it’s a safe bet that a town home purchased in Barrie today will witness higher percentage value increases in each of the next few years than homes in the higher end of the price range in Barrie.

That equity gain puts you in better stead with lenders down the road when the time is right to trade up to a bigger home. Realizing the dream of being able to own and comfortably carry the perfect home is a more likely possibility for those who recognize the steps to get there.

Many who skip those steps find the dream short lived when they have left themselves no financial buffer zone to ride out economic fluctuation. The first step is to get into the market today at a price that doesn't put you in a financial strait jacket and let that investment move you closer to the home you really see yourself in.

Barrie has a large assortment of townhouse developments dispersed throughout town.

If you want to learn more about Barrie Town homes and or receive updates on townhouses for sale in Barrie, give me a call I’d be glad to help you out.

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:: Driving in Barrie takes some getting used to ::

I think the Barrie vs. Toronto theme in my last post carries over into this one. I just came in from running around every corner of Barrie this afternoon and what I notice is not only are the roads just a little bit busier in town on the weekend, the driving style tends to be a little more aggressive as well. I think much of the extra weekend volume can be attributed to commuters who make their way to Toronto Monday to Friday and today they are out doing their weekend routines.
To them I want to offer some encouraging words.

• Relax, that light that is turning orange a hundred yards up ahead will be green again in about a minute and a half, hit the peddle on the left. I know you watched the light turn red then green then red again and again before you got through on Friday but that was at Bloor and Bathurst and there were twenty cars between you and the clogged intersection.
  
• It's not the winning 6/49 ticket, it's just a Wal/Mart parking space!, you won't run out of gas looking for the next one like that time at Fairview mall, there are dozens more spots just like it in the next two isles. Save your horn for parade day.
  
• That person driving 40km/hour ahead of you likely knows something you don't about the latest speed trap locations in town. I know. scared turtles can bolt for short distances at a faster pace than the community safety zone speed but take a breather and back off the bumper a bit. I'll bet you are less than ten minutes from your destination just like everyone else on the road in town right now, you spent more time at that intersection on Friday remember?
• You and I both know you have just enough time to make that left before that oncoming car hits you, you see that kind of physics in action every week day south of Hwy 7. but there's a pretty good chance the guy coming home from the curling rink in the other direction isn't as confident as you and might just spill his fresh Tim Horton's coffee in his lap out of shock.
• Careful on your choice of hand gestures, the middle finger pointed strait up is the signal for geese overhead to some local hunters. He needs to be focused on the road ahead, not gazing skyward for V formations of waterfowl. A simple wave or nod is the best and safest form of communication between Barrie drivers.

Relax, enjoy the weekend, it's one of the reasons you moved to Barrie to begin with remember? Before you know it, it will be Monday all over again.

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:: Barrie vs. Toronto ::

Barrie, a city of just over 125000 people situated around a clean swim-able bay just under 60 minutes north of Toronto and within 20 minutes of dozens of golf courses, ski hills and parks has long been a popular lifestyle alternative for Toronto residents who wish to escape the smog, crime and congestion that is part and parcel with a metropolis of over 3 million people. It comes at a price though, an affordable price.

Have a look at these pictures of listings in Barrie available for sale on this day and priced between $200k and $210k. When you're done, click on the link to a story in the Toronto Star a friend emailed to me from his 18th floor perch overlooking the concrete and flashing lights of Hog Town this morning.

http://www.thestar.com/Business/article/194213

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:: Barrie News -Barrie one of two best investment regions in Canada ::

More and more experts point to the Barrie area as being a region of Canada most likely to see a prosperous future ahead of it. Here are some stories I read this week in the news that support this prediction.

:: Ontario is best place to invest
Rakshande Italia, National Post
Published: Wednesday, March 14, 2007

Even as Alberta leads Canada's growth, analysts predict that Ontario is the place for long-term investment, with its up-and-coming cities predicted to break real estate records.
"If I were to invest in the country, I'd say Barrie and the Kitchener- Waterloo region would be my two top choices," said Don R. Campbell, president of the Real Estate Investment Network and author of several books.
Mr. Campbell, who has studied Canadian markets for 15 years, said, "There is a short term slowdown in the [Ontario] economy but the fundamentals are strong and investors should invest today so they can benefit from good returns in 2008." click to continue


:: Families flock ever faster to vital cities on the edge
DAWN WALTON , RACHEL DE LAZZER and JAMES RUSK
Click to continue


:: Growth figures released by nation's number crunchers
Author: Julie DeBruin
Date: Mar 13, 2007

Barrie still has what it takes to bring in new residents, lots of them.
In fact, according to the latest Statistics Canada numbers released Tuesday, the city and its immediate surrounding area are the fastest growing click to continue


:: Canadian census sees cities surging
TENILLE BONOGUORE
Globe and Mail Update

Canadians are officially city folk, with four out of five people living in urban centres.
The first data from the 2006 Census puts Canada's national population at 31.6 million, a rise of 5.4 per cent since the 2001 census.
And most people are living in a metropolis. click to continue

:: Fear of Commitment leads to weak relationships ::

Am I now giving couples advice on my Real Estate blog?

No, but I got your attention didn't I?

This post is directed at the thousands of people who will
be retaining the services of a Realtor to purchase a house this year.

Get a Buyer Agency Agreement Signed at the earliest opportunity!

What is the benefit to a buyer?

Well consider this. Suppose you walked into a busy TV store and like the dozens of others that day, when asked "Can I help you?" You reply "I'm just looking thanks"

The sales person will offer a few words on what you are looking at, become distracted by the next person to walk in the door and leave you to figure out the difference between digital ready and high def all by your self.

Imagine if you told that same sales rep who asks if you need help "Yes I want to know everything you can tell me about your Plasma TVs, and before I leave I am going to buy one and I am going to buy it from you".

That sales rep is going to trip over him or herself to provide you service and not likely even notice the other customers coming into the store. He/she is going to give you the information you need to make an informed decision and likely be more receptive when you try to negotiate the price that you want to pay.

In Real Estate, agents deal daily with inquiries from potential home buyers by email, by telephone, from people walking into the office or coming into an open house. The good agents treat everyone as a potential client even though most have a contact manager list as long as their arm of potential buyers with question marks beside their name that they cant bring them self to remove from the list, just in-case.

The reality is many buyers will jump around from agent to agent until they are ready to make an offer on a property. Most agents will try to divide their time and efforts evenly amongst the more recent of "potential buyers" on the list.

If you find an agent who has earned your trust why not tell them you want to sign an agency agreement and work exclusively with them?

How will this benefit you?

You have effectively told the Realtor "I am serious about buying and any time effort and expense you commit to me should eventually result in a home purchase".

You have just separated yourself from 99.9% of the other people who are vying for time with a Realtor and he/she is going to go out of their way to accommodate your needs, your schedule, and provide you all the information you need to make an informed decision and insure a smooth and rewarding purchase.

By blending with the masses and not forming a good business relationship with one Realtor or by waiting until you think you have found a home you want to put an offer on to settle on a Realtor, you only deny yourself the advantage of having the knowledge and input of a professional negotiator and facilitator on your team who may end up saving you thousands of dollars.

Someone who knows the ropes and the neighborhood, who can provide you with timely information on market conditions, all listings and their sales history and often give you a heads up on homes that are not even listed yet.

Buying a home is the biggest financial decision in most peoples lives. Make a sound business decision and commit to using the services of one Realtor from the start of your home buying journey.

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:: Barrie Mayor Dave Aspden calls for Action ::

The Inter-Governmental Action Plan (IGAP) is a study developed by a think tank formed in 2004 and made up of municipal and regional representatives from within Simcoe County along with representatives from the Province.

This group was set up to study and develop a growth/action plan for the area that will best accomodate the inevitable urban growth the region will see over the coming years. Consideration for density management, infrastructure requirements and ecological impact are the cornerstones of the study.

As far as Barrie Mayor Dave Aspden is concerned, enough study has been done and what is needed now is action. He believes that conclusions have been drawn and any further study will only rehash that which we know and at further expense to the taxpayers.

Mayor Aspen agrees with many of the conclusions and recommendations of the IGAP study but not the idea of a two tier governing system between the City of Barrie and the County as recommended by the study.

In a release from City Hall Mayor Aspden said, “The City of Barrie strongly believes that the time to act on the IGAP recommendations is now. We support the principle of long-range land use and infrastructure planning for the region but reject any further consideration of two-tier service delivery involving the City. We do not support more government, additional taxation, and red tape. As a separated City, Barrie operates the most efficient and effective type of government for our residents.”

Barrie currently has the physical space to accommodate another 45,000 residents but the IGAP research forecasts the need to accommodate a further seventy thousand beyond that by the year 2031. Additional land resources will be needed to meet these numbers not just for residential growth but to provide economic opportunity to support the increased population.

Attracting and implementing opportunities for existing commercial and industrial lands are concerns for present day Barrie. Hopefully action is what we do in fact see from Mayor Aspden and his council in the coming months.
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:: Younger Canadian Mortgage holders sited as most fiscally aware ::

Results from a survey conducted by CMHC in the latter part of 06 revealed that 75% of Canadian home owners put paying off the mortgage as soon as possible to the head of the to do list. At least half of those surveyed said the cash surplus when available was put toward paying down the mortgage. Younger home owners were sited as being the most fiscally aware when it came to the mortgage.

Also revealed was that 86% of Canadians prefer their lender to be a Canadian Institution and that 84% were satisfied with the mortgage product they had chosen. This is reflected by the fact that the majority of mortgage holders who have renewed recently stayed with the same lender although the number of people making use of a mortgage brokerage when renewing and refinancing continues to rise.

71% of Canadian mortgage holders who refinanced, did so prior to the scheduled renewal time mainly to free capitol for home renovation and debt management.

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