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Here's my situation. If you want to throw in your 2 cents I'd be grateful!
I've been looking in a very RURAL area. There is not much on the market here, and also not many buyers out looking. Still, the home I've found is really my IDEAL home.
It is a 1940s house built very solidly and in good condition, with fairly new roof and furnace. However, in the process of working to prepare the house for market the current owners found that in order to comply with current county code, a new septic system is needed. They have offered to pay for this if the price of the septic becomes part of the final price - which I guess would be good for someone getting a mortgage.
However, I've decided to buy the house for cash. (This isn't the issue at hand, so please don't go after this tangent!)
So -
For a cash buyer,
Are there any advantages/disadvantages to letting the sellers pay for the new septic (including that price in my offer) and have the work done while they are still the homeowners?
Are there any advantages/disadvantages to buying for a lower price and paying for the septic myself, with the work done when I am the homeowner?
Or does it matter at all?
Oh - the owners have gotten an estimate of $6500 for this work.
So, if the seller does it, they could skimp/ choose saving even $1 for a huge quality improvement. However, the contractor may end up finding some other problem while replacing the septic. Since you don't yet own the house, this is their problem.
The opposite is true if you buy the house and take cash and deal with the replacement yourself. I guess it just depends on the risk.
My ideal situation (as the buyer) would be to have the sellers replace the tank, subject to a contractor you both agree on and any "upgrades" (I don't even know if septic systems have one) are paid for by you (therefore you can decide if it's worth it).
You need to discuss this home with the county Department of Health...the department that identified it as imminent danger. You can talk to them via phone or go there around 8am and talk in person.
Take notes and write down who you spoke to. Ask them if there are any alternatives to redoing the septic. Maybe you have access to public water and can hook up to water instead? Maybe you keep the septic and instead drill a new well in a different place?
Maybe you are grandfathered in if such and such applies.
They can also give you a list of septic companies in your area. They usually cannot refer one of them. But you can ask them things like...which 2 companies have most of the work based on the permits you see?
My point is, maybe there is an alternative to getting a new system.
Ask them point blank...what happens if nothing is done for 5 years on this matter? Maybe they say nothing. Maybe they say you have 60 days and if nothing done then you will get daily fines from the county of $200/day. They have the power to make you do these things. Sometimes they don't force you to do things and other times they have short timelines and will force these things to be done else you pay fines and get lien on your property if fines not paid.
Find out of sewer is planned for your area or if it's available now. I heard a story about someone that spent lots of money to fix their septic system only to find out later that sewer was available and would have been much cheaper to connect to sewer.
It sounds like the seller must either replace the septic system ... or move the well, in order to sell the property ... since the 'imminent danger of contamination' issue is publicly documented.
As Sware2Cod suggested, you need to have a face-to-face conversation with the County Health Inspector who made the 'imminent danger' assessment. They may also be able to give you an unbiased assessment of the condition of the drain field and tank, so you can determine the feasibility of simply re-drilling the well vs replacing the septic system.
After this conversation, you will be in a better position to determine if you want to do this or if you want the seller to do it and also have full code approvals before you buy the property.
Under the circumstances, I would avoid the dual-party Realtor situation ... or, at the very least, get a second opinion from a knowledgeable, local Realtor. The Realtor may be absolutely ethical and above-board, but, this situation is likely to require extensive negotiations and assessment of 'other factors, (as referenced in this thread) --- and you want to be absolutely certain that whomever is representing you, has only YOUR best interests at heart. A dual-agent is going to be motivated to find a compromise that makes everyone 'happy,' rather than one that gets you the best deal possible on the house.
The probability is: The county is ordering the change to be made. It will not be able to get title insurance, etc. even if paid cash, until it is done. It may not be possible to even transfer the title to the property, until after the work is completed.
It is apparent, the owner does not have the funds to do the work, until the home is sold which is where the money will come from to make the changes needed.
After being in the real estate brokerage business since 1972 till I retired, I would not touch that home without the following being done.
1: The contract would require that the new septic system or new well be done before closing. An old septic system, may very well need new drain field or tank soon, it may just be O.K. at this time but not for more than a year or two so I would prefer a new septic system.
2: The work to be completed before a certain date by a licensed septic tank installation service approved by me.
3: The septic system to be inspected by county building department, to make sure it is up to code, and clears the required work.
4: I would place the funds in a bank escrow account to pay for the property, so the owner can raise the money to do the work needed. If it is not completed by a certain closing date, the sale to be cancelled and my funds returned to me in full. The cost to set this up, is not expensive.
You will have full control this way. The required work will be completed, before you take possession. Your money is never at risk, as the bank is holding it to give to the escrow agent at the final closing, or return it to you if the new system is not up and approved by a certain date. If needed, with a small addendum, you can extend the closing date if needed.
This is the only way to do it, without putting your money at risk. If the cost to make the improvements goes up if they run into problems, it is not skin off your nose as they say. It will be the sellers responsibility for cost over runs not yours as it would be if you have the work done after closing.
I called the County department in charge of codes regarding septics - in this teeny, sparsely populated county it was the Zoning department. The guy gave me all kinds of good advice - including the fact that the work would have to be completed before the property was transferred. He was very nice and said that he would be the one to come out after a "septic design" was submitted to the county and that I could meet him at the property and he would go over everything with me in person regarding the soil/well/septic. He also gave me names and numbers of 3 septic installers in the area. He also said that the $ amount proposed for the septic work seemed very low to him.
Then I called the Realtor - we've been playing phone tag - I've never gotten to speak with her in person yet after viewing the house - just e-mail. I noted the things that OldTrader above recommended - that I would prefer that the work be done before closing, that I would create an escrow account for this purpose, and the installer and type of installation must be chosen by me.
She e-mailed that she (meaning she, the Realtor, not the seller) has already chosen a septic installation company and that the design was already approved by another person at the County. I phoned back (had to leave a message) that I'd like to see a copy of the installation bid so that I would know who was doing the work and exactly what kind of work they were doing - could she fax it to me.
She just left a message on my phone that she doesn't "normally do that" - meaning show a potential buyer a copy of a bid for work - and that she has already scheduled the work to be done by that installation company.
I'm a little flabbergasted. I don't think I would buy any kind of property - car, dog, or house - knowing that work was going to be done to it without knowing who was doing it or exactly what they were doing.
I'm thinking this is the flaw with dual agency - obviously the sellers have given her permission to work directly with contractors doing work on the house. In what way is she working for me as the buyer? If this bid she's accepted is low, might it not be for incomplete or lower quality work?
The county will not approve the work unless it is done properly. They see the design ahead of time (on paper) and they come out and check the work while it is a big hole, before it is recovered with soil.
As long as there are proper permits and inspections, I don't see where there could be shoddy work.
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