“The Decision”: The bank accepted our offer at $84,048 with a close date of 3/29/11.
The 10 day inspection period began upon acceptance of our offer. Within the first day, we were quick to schedule out an independent third party inspection company. As per their findings, the inspector noted that there were two main issues:
1. Electrical wiring was completed illegally and was a huge safety concern. (There was actually a sub-panel underneath the kitchen sink! You could also see incorrectly installed wire splices that were causing sparks to fly as you walked around in the attic)
2. The roof was significantly damaged by hail. (Needed a complete roof replacement)
We were a little concerned because a new roof and new wiring was not called for in our initial budget. Additionally, we knew that the home was sold “as-is” so the bank would not make any repairs. At this point, we could do one of two things. 1. We could immediately cancel the contract or 2. Find a creative workaround solution that would still fall within our budget. I think by now you know the answer to our options. We obviously decided to versutia (latin for ingenuity, which I just transformed into a verb ) our way out of the situation. If the bank doesn’t make any repairs, why don’t we warn them of the potential liabilities due to the safety hazards in the home? Given all these concerns, we would still be willing to purchase the property (they of course had to meet some of our conditions). We wrote an email to the bank referencing the inspection report followed by two bids each for electrical and roofing. With this information, we requested the bank to reduce the purchase price by $10,000. They ended up countering us with a $5,000 price reduction so we were pretty happy with that. With the new purchase price of $79,000, we were ready to start our new project….
On the last day of our inspection period, we were out at the site taking cabinet measurements when the previous homeowner happened to stop in. He confidently stated that this home contains asbestos insulation and is also involved in an ongoing national lawsuit. Sean and I looked at each other with the following look:
Could this really be happening?!? We immediately rushed back to the office to submit a request for an extension of the inspection period so that we could conduct some further analysis. Over the course of the extension, we tested samples of the insulation and found that it was in fact vermiculite. Not only that, we also learned that the home contained asbestos in the flooring, windows, roof, drywall, wiring etc. In order to remove the asbestos from the home, we received a bid for over $14,000. This would definitely be a deal killer and we knew that there was a slim chance the bank would be willing to go for a second price reduction. Furthermore, the price for demolition of all the items that contain asbestos did not factor in replacement costs. As a result, we requested a $20,000 price reduction from $79,000 (this request included the official air quality test and bid for abatement) otherwise we would be forced to walk away from the deal.
The bank quickly informed us that they would not reduce the price of the home any further and would be willing to take their chances on the open market with full disclosure of asbestos insulation. After all the time spent planning for the construction of the home, this deal was officially dead. At this juncture, one would normally start looking for the next deal. However, Sean and I decided that we would submit a new offer that reflected the price for abatement at $66,000 as soon as it came back on the market. We had nothing to lose and everything to gain. We knew that we had the upper hand because we’ve already been through the inspection process and to the bank, we were a for sure deal. A couple of days later, the bank countered us back at $70,000 (why they did not do this initially I have no idea). During our fourth round of negotiations when we were so close to a new agreement, multiple offers came in and of course the bank requested another highest and best! We were now back at square 1 but decided to meet the banks counter in the middle at $68,000 with no inspection period, $68,000 earnest money, and a next day close.
Fast forward to today and we are now set to close on 4/8/11! With this story I think there are a two main takeaway points:
1. Back up your requests with data – If you are looking for price reductions or concessions, do not just simply ask, prove to the seller why it is in their best interest to comply with your request. Prove this by showing bids and reports as to how you arrived at said numbers. Do your homework!
2. Tenacity – In real estate and in life, you are going to be hit with obstacle after obstacle. It’s important that you continue to persevere and never give up. Not only does this build character, it also leads to great outcomes!
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