Put House on Market, Discovered Roof Leak, Now What?

[Robert Fisher]

My wife and I just bought a new personal home - one we can finally house hack!  We're going to sell our current home and use the equity to pay off my student loans (and because we wouldn't come close to even the 1% rule).  Here's our dilemma:

We found water damage on the ceiling as we were painting.  We call a roofer that is a friend of a friend, he comes the next day and "fixes it" at no charge.  We celebrate for about 4 hours until it rains and I got up to the attic to check on it - still leaking.  We get somebody else out to take a look and they recommend at least repair the last 2' of the roof and re-flashing the chimney - about $800.  I go ahead and get a quote on a full replacement - $6,180.  They both seem like a risk to me, but do we roll the dice and go high or low?

We're currently listed at $189,900.  If we do the $800 fix, I'm afraid we turn off buyers because it will be (and look like) a band aid on a roof that has 5-10 years left on it.  Even in our super hot market, I wouldn't surprise me if we had to accept $180,000 because we turned too many people off.  Am I thinking too worst case scenario?  Our agent has suggested biting the bullet, putting on the new roof and raise to list to $192,900.  This obviously handicapped our net to $186,000 before closing costs, even with a full price offer.  We have to spend $6,000 up front, but we still potentially come out ahead of the patch repair route.

We had originally thought to offer a $4,000 credit but are too afraid of the bank not loaning on the house if the roof is leaking.

What would you all do?  Which lesser of two evils is going to let us keep more of our equity in the end?

[Matthew Olszak]

Issues like this scare many buyers. Enough that they many won't even offer on a property with a leak, foundation issue, or electrical problem, no matter how minor. People hear "roof leak" and think $20k+ having never replaced a roof before. 

The other issue is the buyer might not have the cash to be able to fix it themselves, even if they are ok doing so. At $189k, their down payment could be as low as $6,615. @ $193k, that down payment would only increase $140, and monthly payment increase about $25. So they could either come out of pocket almost double, or they could add a negligible amount to their payment, both options with a new roof. Most will choose the later.

Consider also if you will be able to even get anything extra by putting on a new roof or if $189k was from comps with OK roofs. The home might only be worth $175k now with this issue.

Lastly - the roof has probably experienced hail damage. If so, your insurance could likely replace it for you and you pay just the deductible.