Profile picture for keharty

Who pays for suggested repairs?

My mom passed away in May and had a reverse mortgage. We put her house up for sale and worked hard on getting it sold. No offers until the lender filed a Notice of Default and then we received a couple of low ball offers. As the reverse mortgage company has us over a barrel we went with one of the offers that was a local buyer and would be all cash. At the time we were told that the buyers wouldn't "beat us up on the inspections." The house is a country property and it was built in 1985. My parents were elderly but did their best keeping things in good repair. Now that inspections are being done they are coming back with thousands of dollars of suggested repairs. The buyers are already getting the house for $69K less than our lowest price. I really don't want to have to pay for all the repairs they think they need. I am the executor of the estate and there are other financial obligations that must be paid off with the proceeds of the sale. I am being represented by a Realtor but it seems like the ball is totally in the buyers court. If they back out the reverse mortgage company can foreclose and put the house up for auction. Am I being unreasonable to expect that with such a drastic price reduction that the buyer should pay for the repairs they feel they need to have?
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October 31 2013 - Sebastopol
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Profile picture for wetdawgs
Sincere condolences. 

Work with your agent for negotiation points for pushing back on repair requests.   Of course a buyer may ask for the moon, you don't have to give the moon but you do have to recognize the potential consequences.   (Hopefully they don't know you have a deadline, if that has leaked out you may be in hot water.)

For example, if they ask for a new roof and the roof inspection suggests there is less than 5 years remaining on the roof life, ask to see the inspection report and suggest paying a percentage of a new roof.  (They may not be able to get insurance if roof is < 5 years predicted life).   If they buy a 30 year roof, suggest 5/30 (17%) of the costs to be paid at closing.   If they wish to replace the entire electrical system and the current one works, push back.  

Or, simply offer a sum at closing towards repairs. 

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October 31 2013
Profile picture for keharty
The reverse mortgage company gave me 6 months to sell the house and that will be up in November. They can choose to give me an extension or not as the loan becomes due and payable when the last borrow dies.

There is equity in the house that I would like to be able to keep.

I have seen the written estimates. Some of the things they want to do such as a new roof aren't things I feel need to be done.

According to my Realtor the buyer may not ask for anything so I'm just waiting to see what, if anything, the buyers ask for.

This offer was really the only serious one. One was a shady hard money loan with a 65 day close and the other was also hard money but at over $100k below our asking price so those offers aren't an option. No other offers have come in. This is a country property with acreage so it's not for everyone.

Just keeping my fingers crossed...
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October 31 2013
I am very sorry for your lose.  Dealing with buyers who are looking to scalp you must be very stressful.

You really need to get some legal advice regarding the terms of the reverse mortgage.  I'm not an expert but I suspect the mortgage document has a clause which gives the bank a short cut instead of a traditional foreclosure. You may not have as much time as a regular foreclosure.

An attorney may be able to get an extension from the bank for you to allow you some more time.  Let the attorney tell the bank all the repairs the property needs so they are more inclined to let you get rid of it rather than them.

I agree with Tim that the buyers are aware of the distressed situation and are trying to capitalize on it.  $69,000 lower than your lowest price is huge.  What is the estimated value of the home?

Thousands of dollars in repairs - by whose estimate?  If you are going to negotiate the amount they are asking for you need to cut it down.  Buyers go in low to offer and high for the cost of repairs.

You can have your Realtor get an extension to the inspection contingency period and get your own contractor to quote.  Decide how much you will allow based on that quote.

You can terminate the contract now and try to go back to one of the other buyers who submitted an offer.  You can continue to market and look for another buyer.

The notice to terminate is a powerful document.  You may get the buyer to relent knowing they are about to lose the deal.  It's a crap shoot but one you should consider with your Realtor.  Your Realtor can inform the buyers agent you are ready to throw your hands up and terminate.  Sometimes that spurs folks to wake up and rethink their position.

You are not personally responsible for any of the debts which can't be cleared.  If the house does not yield enough they go unpaid.
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October 31 2013
It all comes down to what can be agreed upon.  Let the buyer know what you are willing to do and let it play out.  
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October 31 2013
This is a Seller's market. So, if you didn't get any offers on your property within the first 3 weeks, its value in the market may not be what you expected. But, if you got into contract quickly, that is different.

Without second guessing your agent...what is the exact timeline you have with the bank?  Would you have enough time to get another buyer; someone who is willing to sign off on the inspection reports you have? If you can get a back up offer, it would put you in a stronger position.

Once a notice of default is recorded it still takes any where from 90-120 days for the bank to foreclose. I have never worked with a reverse mortgage, so I do not know if there would be a difference here, but it is worth finding out.

Also, estimates for repairs from pest companies are notoriously high because their main business is not repair work. I would ask the buyers for estimates from at least two independent contractors. 

Good luck and I am sorry for your loss.
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October 31 2013
You unfortunately don't have a good position from which to bargain. If the buyer knows the spot you are in they will smell blood and make things worse. It sounds like you need to take the road that gets you the best deal without losing the whole thing. I have never been involved in a sale of a reversed mortgage (luckily) but they sound like a sour deal and I guess why they have to pitch them so hard in those commercials. Good luck.
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October 31 2013
 
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