We have an interesting transaction going on right now. Its a pending offer but the inspections are interesting. This is the first time that we have come across a property with not one but two oil tanks. PortlandMaps showed no record of either tank but the tax record does show oil as the heat source even though it is currently heated by an electric furnace.
Alpha Environmental did the tank inspections by drilling into the concrete patio where the tanks are located. You’d never know after the holes were patched. The samples are analysed and both tanks have some contamination around them. They’ll need to be cleaned up and decommissioned by the owner of record within 90 days. The current owner is a bank. The offer included an eight page addendum that stated “as-is-where-is” in about seven different paragraphs.
A seller, under a normal real estate contract in Oregon, has no obligations to make repairs of any sort that aren’t in the original contract. There is as-is wording in the default contract. The buyer has a take-it-or-leave-it option with the inspection contingency if the seller refuses to make repairs or credit the cost of what is being asked for. If the buyer doesn’t ask, the buyer has no chance of getting. Just because you ask, doesn’t mean you’ll get.
We’ll see if the bank will relent and make a concession or not.
If this is true: “They’ll need to be cleaned up and decommissioned by the owner of record within 90 days,” then the bank will make an adjustment. I’ll assume that the current buyer don’t highly value the property. If the buyer values the property enough, then the tank issue doesn’t really matter. I also assume that the necessary repair is quite expensive–often environmental work runs above initial estimates.
First of all once the issue is known, don’t they have to disclose it? If so, then the bank cannot simply sell it to an unsuspecting buyer. Second, this will kill the deal with the current buyer, as he will just wait until day 91 and make essentially the same offer.
Oh, and just like unknown sewer problems that are repaired, I also assume that offers made with unknown oil tank problems overvalue the property by the cleanup cost. In other words, the offer was made with the assumption that the tanks did not exist, so the tank cleanup will not add further value to the property. We have discussed this in the past.
And a bit of humor:
Next New Poll:
What’s the least sexy repair:
1. Party Sewer Lines
2. Oil Tanks and contaminated soil
3. Other: _______
So this is an REO?
It sounds like the buyer should just walk away from the offer if the bank doesn’t fix the problem. Like JP says, these kinds of things usually end up costing more than estimated.
Banks are getting more and more REOs and these kinds of problems are becoming a big headache for them to deal with. The bank wants a nice clean transaction – they want the property off their books ASAP. Given that, why not go out and get a few estimates on how much it would cost to fix and then add 30% to that for cost overruns, then approach the bank with the information and reduce the offer by this amount. If the bank says no, then walk. Somehow I suspect that banks are very motivated right now.
Stand firm! Banks and servicers (that still have cash) can and do put money into REOs to make them more saleable. Sometimes you will see entire kitchen remodels. Also keep in mind that many banks have a policy to never accept an offer without a counteroffer. If I were buying the house I would try to move forward with the purchase with the bank taking on responsibility for the clean up in the contract.
This issue once again brings up the issue of agency. Charles is probably acting as a seller’s agent, and he probably would act differently if he were a buyer’s agent.
JP’s wrong: I am the buyer’s agent.
Field work was wrong too: not two oil tanks but one oil tank and one gas tank! Both contaminated.
Fixing dryrot is pretty non-sexy too.
I played the odds, as I would guess about 80% of the time real estate professionals act as seller’s agents. In any event, your relationship with the buyer is much different than as a seller’s agent.
Additions to the non-sexy list:
1. termites, and other not so obvious infestations
2. Survey problems. Especially when a structure is on another person’s property.
3. Title problems that are not easy to fix (like the one you previously discussed)
4. Flooding (as previously discussed)
About 75% of our transactions in 2007 were on the buyer’s side.
On the “buyer’s side” as a buyer’s agent? So often the professional is on the buyer’s side as a seller’s agent. I am surprised that 75% of your clients as for a signed buyer’s agent agreement.
75% of our closed transactions are representing the buyer in a co-op transaction where the listing agent represents only the seller. Buyer/Broker Agreements don’t figure into the stat.
I certainly appreciate that you work with buyers, but we both know: All agents are seller’s agents unless there is a signed buyer’s agent agreement.
That’s so ’90s.
First 19 lines of the Oregon Residential Real Estate Agreement (sorry it doesn’t cut and paste well):
FINAL AGENCY ACKNOWLEDGMENT
Both Buyer and Seller acknowledge having received the Oregon Real Estate Agency Disclosure Pamphlet, and hereby acknowledge and consent to the following agency relationships in this transaction: (1) Charles Turner (Name of Selling Licensee) of Prudential NW Properties (Name of Real Estate Firm) is the agent of (check one): X Buyer exclusively (“Buyer Agency”). _Seller exclusively (“Seller Agency”). _ Both Buyer and Seller (“Disclosed Limited Agency”).
(2) Joe Realtor (Name of Listing Licensee) of Reator’s R Us (Name of Real Estate Firm) is the agent of (check one): X Seller exclusively (“Seller Agency”). _ Both Buyer and Seller (“Disclosed Limited Agency”).
(3) If both parties are each represented by one or more Licensees in the same Real Estate Firm, and Licensees are supervised by the same principal broker in that Real Estate Firm, Buyer and Seller acknowledge that said principal broker shall become the disclosed limited agent for both Buyer and Seller as more fully explained in the Disclosed Limited Agency Agreements that have been reviewed and signed by Buyer, Seller and Licensee(s).
Buyer shall sign this acknowledgment at the time of signing this Agreement before submission to Seller. Seller shall sign this acknowledgment at the time this Agreement is first submitted to Seller, even if this Agreement will be rejected or a counter offer will be made. Seller’s signature to this Final Agency Acknowledgment shall not constitute acceptance of this Agreement or any terms therein.
Buyer Print JP Date
Buyer Print Date
Seller Print Owner Joe Date
Seller Print Date
I have only lived in the Portland area for about a year, and I have not purchased property in Oregon–I guess I need to get with the times.
Found a cool new sit http://www.beekast.com
In regards to the poll, I found this interesting site:
“Housing Predictor provides independent real estate market forecasts for more than 250 cities in all 50 U.S. States and housing news. Find out whether your area is appreciating or depreciating.
Forecasts are updated as local conditions demand. All markets are reassessed on an on-going basis. More than 20 factors are considered issuing each forecast, including economics, regional political influences, business development, employment levels and other socioeconomic issues. ”
Portland is in the bottom of the list with a 2008 predicted appreciation of negative 8.9 percent (or, alternatively, a depreciation by positive 8.9 percent).
With that said, I found it extra interesting that Yakima, Washington was in the top good spot, and Salem, Oregon was number three. Seattle is among the top 25 too.
I thought this report was interesting but their methodology was really opaque.
I predicted an 8-12% C-S haircut by the end of ’08 on another blog. This was based on extrapolation of data from Boston and DC which had similar albeit time-shifted bubbles.
It will be interesting to see what the RMLS does. I think it will become harder and harder to tweak things to hide large declines.