Should we walk away over 5k?

Question

Looking for some thoughts/advice. We're currently nearing the end of Due Diligence on a home & have uncovered a few issues that I consider pretty major & we're trying to get some concessions to bring the price down. Here's some basic background:

-House was for sale for 150k

-Our offer of 135k was accepted

-Appraisal came back at 135k

-Overall, the house needs work, most of which we are prepared to take care of and expected prior to making our offer (has new HVAC which is nice)

-The biggest issues that the inspections uncovered that we want concessions for are:

-Hand dug well, contaminated with E. Coli, likely from the older septic system. Given the age of the septic and the contamination and age of the well, if we were to move forward I would replace the well and septic systems. Based on my previous experience I expect that would likely run between 10-15k for both. There is also asbestos present, though not in the old ceiling tiles as I was expecting, just in a small amount of linoleum flooring that shouldn't take much to remove.

We asked for a 15k concession, they came back with a 5k concession, bringing the price to 130k. My feeling is that the appraisal generally assumes that the house is habitable, meaning that it at least has clean drinking water. Given that I will almost certainly have to install new septic and a well, I'd rather be at 125k at the most. The selling agent tried to tell us that the house is being sold as-is AFTER we were already in DD. That's not listed anywhere in MLS, in the property description or in the contract as my agent pointed out. I feel that 125k is more than fair considering what we know about the condition now. Thoughts? Should I walk away over 5k?

I should also add that we do plan on living in this house as we fix & update it.

Jason Hirko · Answer

I don't know what state you are in but your contract should be very clear on this.

One thing to remember is now that you have given the seller the E. Coli report for their well, they have to disclose it to other potential buyers if you back out. Might be worth reminding them of that to get some leverage

Anthony Wick · Answer

Everybody has great ideas, so I just want to talk about appraisals. They annoy me to no end. I bet if you agreed on a price of 140k, then that's what the appraiser would have said it's worth. I just bought a duplex at 285k. And guess what? It appraised at exactly 285k, which is actually below the county assessed value. Appraisers, what have you to say for yourselves?

Thomas S. · Answer

I would be drawing a line in the sand on this purchase. As mentioned now that you have informed the seller of the E. Coli he is going to have a major problem selling the property. If you back out the value, if he can find a buyer, will be much lower than 125K.

If this is a business decision I would be holding to the 125K and have your realtor spell it out to the seller in black and white. I would definatly be leveraging the inspection results but it all comes down to how you choose to do business. For me I hold to my numbers since there will always be other deals around the corner. I would be telling the seller to take my 125K or take his chances finding another buyer.

Karen Rittenhouse · Answer

Uh, no, all houses in NC are NOT sold as is!!!!!!!

I would definitely NOT work with this agent. She can be reported for saying that houses in NC are sold as-is. Where in the world did she get that?????

Please keep us posted on this deal. Good luck!

JD Martin · Answer

For me it would come down to this: rehabbed, what is the upside on this house? If the upside is $150k, and you aren't desperate for a house (and desperation is always a bad place to start), I would walk. If the upside is $250k, then those look like (relatively, depending on the rest of the house) minor hits.

Where in NC is the house? The market isn't on fire everywhere over here. I have walked over a couple of thousand before. There has to be some limit on what you're willing to pay for something, and once you pass that limit, you walk. Otherwise, you have no limit. If your limit based on repairs is $125k, then you have to walk beyond that. But you have to know what your own, realistic numbers are before you can make that determination.

Braden Leonard · Answer

@Nick Rutkowski Unfortunately no, that is one of the things we asked for & the seller is unwilling to do any work on anything & we don't really have enough time to schedule any more tests.

Russell Brazil · Answer

I dont know much about wells...but in regards to the asbestos...I expect every single property built between 1920 and 1980 or renovated in that time to have them. That would absolutely not concern me at all.  We dont tear it out, we just lay a new floor over it if we are renovating.

Ned J. · Answer

Assuming you feel totally comfortable with the cost to put in new septic and a new well and have factored that into your offer (I'd get real quotes, not ballparks unless you are a seasoned veteran on those jobs)......I'd come back with 127, 500 and be prepared to walk away.....

Megan Phillips · Answer

@Braden Leonard The dug well is an issue, but I wouldn't immediately assume the E. coli is coming from the septic system. Dug wells are similar to drinking out of a mud puddle, and E. coli can come from any animal in the area (mice, etc). They are just gross, so I agree you should drill a well. On the other hand, E. coli being in a dug well is practically expected because by their very nature, they are a hole in the ground collecting water and have a high level of exposure to potential contamination (and therefore it's really not a big deal...) - they are just going to throw some bleach into it, re-test until it is negative for EC and total coliforms and say "E. coli? what E. coli?"

I would try to have a septic report done as part of your due diligence and see what the state of it is before assuming it needs to be replaced. See if a couple people can inspect it.

I would just put flooring over the asbestos... no need to disturb it if you can go over it without any aesthetic issues.

As far as walking away over 5k... it depends on what actually needs to be done. Drilled well is a definite for me, why not get actual quotes for costs and have the seller split them or take from price.

Mary M. · Answer

The ecoli can be dealt with by either shocking the well or putting in an ultra violet filter - both of those solutions are cost effective and work.