My wife and I found the house of our dreams which is unfortunately a short sale listing. My question is not about this process as we've learned as much as we can and have convinced the seller to use a "short sale expert" to negotiate with the banks.


What I am really trying to understand is regarding the house itself. The seller moved to another state 2+ years ago so the house has been vacant since. Someone (likely the bank) winterized the house but it wasn't done 100% correctly. On one of the walk throughs I did, I found several burst pipes in the hot water baseboard heaters which occurred over one of the last two winters. Fortunately, the water wasn't hooked up so the damage was confined to the copper pipe. It appears whoever winterized the house didn't blow out all the water in the pipes. That leads me to worry about the unseen plumbing and in-floor radiant heat in the two rooms that have it.

This brings me to my question. Even though the house is technically being sold in "as-is" condition, wouldn't the bank at least be responsible for de-winterizing the house for a home inspection? Since there are burst lines, would they also be responsible for fixing those so the house could be inspected? If they didn't de-winterize the house, I'd have absolutely no way of knowing if the house needs $500 worth of plumbing or a complete $15000 replumb.

Since my wife and I really want the house, I want my offer to be competitive so I don't want to count on an entire new plumbing system, but I also don't want to pay full price if it does. How am I supposed to determine an intelligent offer? If I know the bank will fix the pipes, I'd obviously be much more willing to pay a higher price..

I'm also afraid the bank is going to appraise the house as if it's 100% functional and compare it to others that are when the truth is, it needs a lot of work just to live there. Thoughts?

Thanks!

for an REO, the bank is not obligated to do any repairs. you can only ask for it. the responsibility is on you to obtain inspections to determine if problems exist. then make your offer accordingly.

the bank's REO addendum will detail the bank's contingency periods, terms and conditions of sale, which you will not be able to modify upon submission of your offer.

"As-is" is "whatcha' see is whatcha' get."

Not to jump on your case, but it's amazing, in this business, the number of people we come upon, even when a property is priced according to its condition, that a potential buyer wants it for even less. When properties are priced accordingly, repairs are taken into consideration - hence, a lower price than a property that does not need the same repairs.

In a rare case, a bank may make a repair, but it is EXTREMLY rare.

[quote=VABroker]
Not to jump on your case, but it's amazing, in this business, the number of people we come upon, even when a property is priced according to its condition, that a potential buyer wants it for even less. [/quote]

I'm a reasonable person and understand this. However, in a short sale, there has to be some incentive for the buyer to make it worth the risk and enormous hassle, aka the lower price.

The listing agent has already told us it "only" needs $50k to bring it up to spec. While I'm ok with that I need to get a a lot more than $50k off the fixed up price to make it worth my while. We'll see how it goes. It's damn hard to make an intelligent offer without being able to do a full inspection. And by then, the price will already pretty fixed.

If this was an REO property, it would be a lot easier to get any plumbing issues fixed prior to inspections, but it's not. The bank doesn't own the house yet.
The bank probably rekeyed and winterized the house under the terms of the mortgage when they discovered it was vacant.
And no matter which company did the winterization there is always a possibility of frozen pipes, especially if the are buried in exterior walls in an unheated house.

I guess the question to ask would be: When was the property winterized? If it was during the winter, did they perform a pressure test on the system? I usually suspect that there are frozen pipes in our market if the property was vacant and winterized anytime after December 1 and request a pressure test as part of the winterization process.

But you do have to consider that when buying as-is you are buying the proverbial "pig in a poke".

The bank doesn't own the house so they will be reluctant to do the repairs.

The owner is supposed to be broke so that option is out.

I have seen huge discounts given after a home inspection revealed major problems.

The problem with broken hidden pipes is turning the water on will not reveal how extensive the damage is. When the water is turned on it will flow out of the first leak and not the last leak. Unless you just let the water flow until all leaks are active and obvious. This method causes damage to other parts of the house.

The full extent of the problem will not become evident until some of the leaks are fixed. It is a process on turn on the water and find/fix the first leaks. Then turn it on again and find the next leak and fix.

Figure the cost of a total re-plumb of the house into your calculations.

Perhaps you know a good plumber who would be able to pressurize portions of the plumbing and heating system(s) with plain "air" (sequentially, not all at once) and isolate the areas that might be leaking. That would give you a handle on the location and severity of the possible damage, and help you ascertain the extent of the risk you might be taking on in buying it "as is".

Thanks all for the assistance and thoughts, the insight is helpful.

I realize I'm in a tough spot since this isn't an REO. And I've already talked to a few plumbers which I plan on hiring at the home inspection to test what they can and give me an assessment of the extent of damages. I'm going to rely on their expert advice to tell me how to go about understanding the damages and a cost to fix things. If the house needs a complete re-plumb, so be it.............but the bank better be understanding when it comes to price! Otherwise this place will be taken back by mother nature before it ever gets sold.

Offer whatever you want to offer. You're big hurdle is getting the note-holder to agree to a short sale.

I expect then, that you're not using a Realtor? It would be helpful to have YOUR Realtor prepare an adjusted for condition BPO as supportive data to your offer. It could help.

What exactly is a "Short Sale Expert" in Pennsylvania ?

Is that a Licensee of some kind ?

By whom is s/he being paid? Did they already collect a Fee ?

What expertise do they bring to the table to help resolve this plumbing concern ?

We are using a Realtor but she isn't a short sale expert. The listing agent isn't either for that fact.

What we've done is make an offer contingent upon the seller "hiring" a short sale expert which he agreed to do. I've got my fingers crossed that he is our "ace in the hole" so to speak with regards to making this deal happen. I just want to be sure I'm getting a good deal considering the required work and insane process we have to navigate through.

Thanks for the recommendation on the adjusted for condition BPO, I think that would be a good idea. I know the listing agent used the neighbors house as a comp (it was sold recently). Unfortunately for us, the neighbors house has been completely overhauled so it's in tip top shape. I can't say the same for the one we're looking at.

Again, what constitutes a "Short Sale Expert" in Pennsylvania ?

And if it's the Seller who has to hire (and pay) the "Short Sale Expert", why would you say when he's working for the Seller ?

Usually Short Sale Sellers don't have the resources to pay for these 3rd Party Negotiators any more than they can pay for plumbing repairs (personally, I'd vote for the plumbing); but Good Luck.

Since there is no such recognition of a "Short Sale Expert" in the state licensing statutes, I think the OP wants the seller to hire a Short Sale Negotiation company. I've never used one, so I don't don't know if they work on contingency (paid if it closes) or charge an upfront fee.

Most of these companies are set up to handle the transaction details so I really don't know how someone expects them to handle inspections and repairs, but we can always dream.

But do they have to be Licensed in your jurisdiction as a Real Estate Practitioner, a Mortgage Loan Originator . . . . or an Attorney? Something? Anything?

I've had many calls from such people attempting to get me to introduce them to my Shorts or Owners with problem loans, and often saying that because they're "licensed" in California or Florida or Texas, they don't need any further credentials here.

But they all expect to receive some form of cash advance to work their magic . . . . just like the Credit Repair Counselors who make their pitches on late night TV. And they do not expect to wait around to be paid through legitimate or normal channels like at a Closing.

I'd hate to group them all in the Flim-Flam category; but what I've seen to date forces me to make that comparison . . . . and I ask "what credentials or expertise do they bring to the table that will help solve this Seller's problem?" It's usually a set-up to only make them worse.

I had one Seller here where he didn't have a mortgage and owned outright, but he had taken the bait on two (2) Florida properties where he got in trouble and was facing foreclosure. So he still lost the two houses down there, PLUS he lost close to $12,000 additional that he paid for guidance from his Florida "Short Sale Consultant". I can't speak to him much about it, he's too embarrassed.

Again, there are some good points brought up here. The short sale expert that I'm referring to is actually someone our realtor recommended that we use. The company she works for has a short sales department that uses a 3rd party for certain short sale circumstances. Our realtor commented that on her one previous successful short sale, this 3rd party got involved and pushed everything through to a successful closing. Since our agent, and the listing agent were far from experienced in short sales my wife and I decided we had to have someone else in the loop otherwise it would be a waste of everyone's time. In fact, there was a previous offer on this house but it fell apart after 6 months for some reason. We didn't want to go through that same experience. At the risk of embarrassing myself, the expert I keep referring to is http://www.kwikhs.com/Default.aspx

I'm not expert on how Kwik functions, but as I understand it (correct me if I'm being naive) Kwik has a few methods that they can use to negotiate with the banks and earn profit on. For one, they have financing lined which allows them to buy houses for cash and turn them around to the buyer. I believe this gives them good leverage with the note holders to close the deal for a competitive price. This can be extremely helpful in short sale situations and foreclosures. I think what they are doing in our case is negotiating with the banks on the sellers and listing agents behalf. Then they would make a profit over the different between their negotiated price and our offer. Does that sound right? It's a fine line for sure, because they want to get the seller as much as possible while still earning enough to pay the realtors a reasonable fee and making sure we, as the buyers, are happy with the outcome. It's not a job I envy. And I hope I'm not getting fleeced with hidden fees. All I know is what our maximum offer price is on the house and that we're not paying Kwik directly. I firmly believe their profit is based on their ability to negotiate a good price with the banks.

I welcome all comments as usual since this is all new to me and I have no idea what goes on behind the scenes.