Concerned Parent (sales, real estate, rent)

[fastjohnny]

My son and his fiance purchased a house in Smithshire, IL on contract in May 2011 from a private individual. The contract was generic in that it was downloaded from a "Free Real Estate Contracts" web site.
They are both merely 20 years old and quite "starry eyed" and naive. They did not have the cash for a housing inspector to come in, and neither I nor the other father saw the house before they had signed the contract. It seemed like a fantastic deal - $32,000 at 1.5% interest for 7 years - something almost no one would pass up......to top it off the seller was a family "friend" of sorts.
Upon my first sighting of the home I noticed several items that were in need of repair. I have been in the Plumbing trade for over 20 years and the Electricain trade for over 10 years, so that would not have been such a dilemma for me. He is my son and I am eager to help.
They have been making payments on time for 7 months now, but it seems as though there is always some "new" problem popping up. Does the expression "Money Pit" come to mind? I help them with their issues. What really pisses me off is the fact that every time something has to be repaired it is because the previous owner has haphazardously jerry rigged whatever is now broken in order to get by.

My question is this:
Are there any implied warranties when it comes to real estate? These kids are struggling financially as it is and can't afford to be dumping money into a property that may never be worth what they have to spend on it to bring it up to standard (let alone the idea of any electrical or plumbing codes).

There is a provision in the contract where if they are in default the seller can effectually "evict" them and dissolve the contract. The other provision allows the seller to demand all the monies owed and still evict them.
It is my opinion that this guy sold his money pit to an unsuspecting couple of kids that wanted to be on their own and live the American dream of owning a home. The wool was pulled over their unseeing, inexperienced eyes. Where are the moral responsibilities of the seller spelled out? Nowhere.

Anybody know of anything that can be done?

[chet everett]

Unless you want to try a get a court to say that these kids are not just naive but legally incompetent they are almost certainly stuck.

The standards for real estate sales are pretty strongly in the "buyer beware" category. There is no implied warranty. The potential ability for any buyer to prove that a contact sale offering far below market rate interest rates is unfair to them is non- existent...

[linicx]

The price probably should have been a dead giveaway.

[madpaddy]

Originally Posted by fastjohnny

There is a provision in the contract where if they are in default the seller can effectually "evict" them and dissolve the contract. The other provision allows the seller to demand all the monies owed and still evict them

There must be more clear terms about what happens in a default. Eviction and dissolution are a given. The "all monies owed" clause presumably means any payments in arrears, and perhaps some forward payments if the tenants/buyers breech before they've stayed a certain number of months (12 maybe?).

As others have said, a home purchase is about as buyer-beware as any transaction can be. Your son and his fiance made a poor choice not to have the home inspected. It's not the end of the world. Study the contract more closely, figure out what the actual costs of walking away now or in the future are, and help them make a grown up decision about whether it makes financial sense to stay or not. If not, then help them figure what is the most financial sensible time to exit. They need to choose a path and move forward. Looking backwards is not productive at this point.

Presumably they have to pay rent somewhere if they leave so there are really two questions to consider. 1. Do they see themselves staying in this area for at least 7 years? If yes then 2. Is the house worth whatever repairs it may require in the next 7 years? Unless the house is on the verge of being uninhabitable, I have a hard time believing they were somehow grossly taken advantage of. linicx correctly suggests the purchase price absolutely implies it's a "fixer-upper." They may be "starry eyed" kids, but who isn't a little starry eyed and bite off a little more than they thought with a first home purchase? This could be an actual financial blessing. They have an opportunity to own a home free-and-clear well before they're 30. Most of their peers will still be renting or 20+ years away from paying off a mortgage.

[linicx]

I have a hunch the person holding the contract thinks he can keep his cake and eat it too. Or perhaps he is dreaming of a future windfall. it is too bad dad didn't get to inspect it first.

If they like the house and it is worth the money it might be a smart move to get the balance refinacned through Rural Development or Fanny on a fixed term with smaller payment therby voiding their current contract.

The downside is either entity may require some repairs first. However since they are already living in the building no repairs may be required.

[aragx6]

Originally Posted by linicx

I have a hunch the person holding the contract thinks he can keep his cake and eat it too. Or perhaps he is dreaming of a future windfall. it is too bad dad didn't get to inspect it first.

If they like the house and it is worth the money it might be a smart move to get the balance refinacned through Rural Development or Fanny on a fixed term with smaller payment therby voiding their current contract.

The downside is either entity may require some repairs first. However since they are already living in the building no repairs may be required.

I definitiely agree with the bolded. A good real estate attorney is probably in order as they'll know the options available best.

[cubssoxfan]

Aren't there certain "pre-exsiting" conditions the seller is obligated to disclose? Isn't a seller disclosure legally required?

[linicx]

Realtors provide a check off list for sellers abd they arrange for the appropriate inspections. And they offer a list of extra protections such as mold inspection for the buyer to accept or not.

The one thing IL law does irequire the seller to provide is a smoke dector 12 feet from the bedroom and a radon dector. I believe the state has now added another type of detector - ozone (?) that is not battery operated; it is powered by electricity.