I have a listing that is 82 years old, the home for it's age is in good condition minus the foundation on the east side of the home. It has settled significantly to the point of becoming disentigrated in these areas, we had a structural engineer out and he said he's seen much worse for this age and it not as bad as we were thinking before we scheduled him to come out, but nonetheless about $5 to 7k in repairs. My seller has already come off about $10 to 12k in anticipation that the buyer would need to do some repairs, some unknown such as these, some known such as detached garage settlement, upgrade the remaining wiring that was never upgraded, etc. In other words we've come down so much (about 15 to 20% of what the property would be worth otherwise) and the buyer is debating whether she wants it. The thing is, at the price we've come down to, you could do the necessary repairs and be fine, or if she walks she will probably walk into a house that is either significantly smaller to get into this price area OR walk into something much worse. My dilemna as the listing agent is trying to keep the buyer and buyer's agent in on the deal, but not taking another hit on price, one thing I do have to consider is this is an all cash buyer, so no lender is involved. I've never dealt with a house with significant foundation problems, at what point does a lender normally say "we won't lend on this until it's fixed"?

I haven't received a copy of the formal report but talking to the buyer's agent about 10 minutes ago, he didn't seem as concerned as they had been before, but he did bring up the price drop so that is why I'm asking this.

Let me know what you guys think.

Josh

1.Has the cash buyer given you a copy of the verification of funds letter from the bank?

2.Most lenders only loan out on homes that appraise in fair and marketable condition.With foundation problems you are more or less looking at a cash buyer or a rehab loan.

3.I don't know what the sales price is or what the mortgage cost for the seller each month.Example what if your seller is teed off over reducing 8k,so they decline the offer the deal falls through and after making 2 to 3 months worth of mortgage payments and property taxes they end up selling for the same or a lower price.

I would just present options to the seller and let them know the risks of turning down the offer.

1. Yes, their bank sent me a verification of funds letter.

2. That's what I was thinking, after they did all these inspections and revealed these further problems, we're kind of in a catch 22 situation as you state.

3. She's been in this house for a little over 30 years, no mortgage, she's not teed off in having to reduce the 7k or 8k, but she does need all the money she can get out of it, I'm sure that is partly to do with her needing the money to help her live out the remainder of her years. There is urgency to get out on her part because she's tired of the dealings of living in a home, but there's no financial motivation since she owns it outright.

The lender thing is probably the biggest thing to worry about if we do lose the cash buyer and get someone in there wanting a loan.

Thanks for the insight so far.

Josh

Whatever the seller wants or "needs" from the sale has nothing to do with the value or what a buyer is willing to pay.

As far as there being "no financial motivation", that's probably not entirely accurate even though you say she has no mortgage. The foundation and other issues are not going to resolve themselves and could get worse, plus taxes and insurance do go on.

I think a willing cash buyer would be HUGE on a property like this and I believe I would be advising my seller to do whatever it took to convince her to buy the house including fixing the foundation.

You could get your structural engineer to draw up a repair plan and get an estimate from a contractor and then either fix it or offer the buyer that amount in lieu of repairs.

Yeah, what I'm trying to say is the value even with it needing those repairs for what they are getting it at is still fine.... in otherwords, I underpriced it to begin with because she wants to get out as soon as possible and not sit around for 2 or 3 months, and then we came off another 15% from that. And it does come down to what she needs to get when we're at an acceptable level or not, otherwise she would accept $10k for the property and move on down the road.

Taxes and insurance are mute, she pays $20 a year in taxes, and insurance on a property this size/value/area should be in the $25 to 40/month area.

She isn't going to do repairs, so it's definitly going to have to be a credit to the buyer or drop in price, since it's cash it really doesn't matter.

I'll let you guys know what happens.

Josh

We ended up coming a little more off the price, not much, and still get the deal on track. Set to close in about 10 days.

Thanks guys.

Josh